As the European Union Commission continues to gather evidence for its formal proceedings to determine whether Temu may have breached the Digital Services Act, the fast-fashion giant has said it is in talks to join the EU’s “Memorandum of Understanding on the sale of counterfeit goods on the internet.”
Owned by the Chinese e-commerce giant Pinduoduo, the shopping platform Temu debuted in the U.S. in 2022 and forged into select European countries last year. The app was downloaded more than 47 million times globally last month. Temu is said to generate nearly 500 million monthly visits to its site.
The investigation is looking into “areas linked to the sale of illegal products, the potentially addictive design of the service, the systems used to recommend purchases to users, as well as data access for researchers,” according to the EU. Among the aspects that are being put under the microscope, so to speak, are the systems that Temu has in place to limit the sale of non-compliant products in the EU, the risks tied to Temu’s addictive design of the service, and the company’s compliance with the DSA obligations in terms of how it recommends content and products. With more than 45 million monthly active users in the EU, Temu was designated a VLOP (very large online platform) at the end of May.
Earlier this week Temu addressed the probe, saying that Temu “will cooperate fully with regulators to support our shared goal of a safe, trusted marketplace for consumers.” In a statement, the company said it takes its “obligations under the DSA seriously, continuously investing to strengthen our compliance system and safeguard consumer interests on our platform.”
A Temu spokesperson said Tuesday, “Counterfeiting is an industrywide challenge, and we believe that collaborative efforts are essential to advancing our shared goals of protecting consumers and rights holders.”
Counterfeit products cost the international economy more than $500 billion annually, according to the U.S. Chamber of Commerce.
Up to 6 percent of EU imports were counterfeit products in 2019, representing nearly 119 billion euros in value, according to a report released earlier this year by the European Commission. In terms of clothing, the sector lost approximately 12 billion euros in sales accounting for 5.2 percent of the total EU sales. That figure also resulted in 160,000 fewer people being employed in the apparel industry.
To try to offset that, there are recommendations for EU stakeholders and member states to expedite collaboration and transparency, as a way to deal with the age-old problem of knockoffs. In the EU, counterfeiting is known to take its toll on small and medium enterprises, causing 34 percent of those affected to be more likely to fail than larger companies.
Should Temu join companies like the Vestiaire Collective by signing the MOU on the online sales of counterfeits, the rock-bottom-price fashion platform would be encouraged to apply for the EU’s Digital Services Act’s “trusted flagger status” and participate in “the modernization of the MOU.” The EU is calling for more market surveillance to detect and fight counterfeiting and increased use of AI systems including blockchain and content recognition technology to enhance traceability and detection of counterfeit and pirated products.
