Following Raft of Consumer Complaints, Shein and Temu Face Early EU Scrutiny of DSA Compliance

Cover Image

Ultra-low-cost e-commerce giants Shein and Temu are facing early scrutiny from the European Union (EU) regarding their compliance with the Digital Services Act (DSA). The EU has sent requests for information to both platforms, seeking details on their measures to meet DSA obligations related to notice and action mechanisms, online interface design, protection of minors, transparency of recommender systems, traceability of traders, and compliance by design.

The DSA is the EU's recently rebooted online rulebook, aiming to raise standards on digital services, including marketplaces, to shrink consumer risks in areas like the sale of illegal or dangerous goods. Shein and Temu have been subject to the regime's general rules since mid-February, but were recently designated as very large online platforms (VLOPs) under the DSA, further increasing their regulatory risk.

Consumer protection groups from around the EU had filed complaints against Temu, alleging the platform is rife with manipulative design tricks that pose risks to kids. The complaints also accused Temu of operating opaque recommender systems and failing to ensure the traceability of traders, arguing there's no way for consumers to know if the products it sells meet EU safety standards.

The EU's requests for information draw on concerns set out in the complaints. The regime allows for penalties of up to 6% of global annual turnover for confirmed breaches, so any compliance failures could end up being costly for the e-tailers. Strict enforcement of higher standards on the marketplaces could even force changes to business models that hinge on driving high volumes of sales.

At the very least, the pair's ultra-low-cost, high-volume approach raises question marks about product quality and safety, so EU enforcement in this area looks like an interesting test case for the DSA.

Shein and Temu have until July 12 to provide the requested information. The EU will then assess next steps, which could entail the formal opening of proceedings if it suspects any infringements of the rules.

A Shein spokesperson confirmed it has received the request for information from the EU, saying the company is "working to promptly address it." "We share the EU's goal of ensuring that consumers in the EU can shop online with peace of mind, and we will continue working closely with the EU to ensure our compliance with the Digital Services Act," they added.

A Temu spokesperson also said: "We are cooperating fully with the EU. We'd also like to reiterate that we are fully committed to complying with all applicable laws and regulations in the markets where we operate."

Image Credits: Sari Montag (opens in a new window) / Flickr (opens in a new window) under a CC BY-SA 2.0 (opens in a new window) license.