Chinese e-commerce companies Temu and Shein have grown quickly, challenging retail giants like Zara, H&M, and Amazon recently. They attract budget-conscious consumers with low-cost, fast-delivery products, becoming strong competitors in Europe and the U.S. fashion markets. However, new EU regulations targeting major digital platforms place Temu under scrutiny for its consumer protection and data privacy practices.
The Rise of Temu and Shein in Global E-Commerce
Temu, owned by China’s Pinduoduo, and Shein have shaken the fast-fashion industry by providing extensive product selections at significantly lower prices. These brands leverage agile supply chains and direct-to-consumer models to expedite manufacturing and delivery processes. Their low prices and wide range of trendy clothing have captured market share, challenging brands like Zara and H&M. Temu and Shein also target younger audiences with strong social media marketing and influencer partnerships, increasing visibility and appeal.
EU’s Digital Services Act and the Investigation
In response to the growing influence of massive online platforms, the EU introduced the Digital Services Act (DSA), a comprehensive regulatory framework aimed at enforcing stringent compliance among large digital platforms. Specifically, the DSA focuses on core areas such as consumer protection, fair competition, and data privacy. Consequently, Temu, which was recently classified as a “very large online platform” under the DSA, now faces stricter accountability standards. As a result, it must ensure transparency in its algorithms and, furthermore, take effective measures to prevent illegal product sales.
The European Commission is investigating Temu over concerns about non-compliant goods reaching consumers and inadequate measures against returning rogue sellers. The inquiry examines Temu’s consumer data privacy practices, focusing on how user data is protected and managed securely. Investigators also review potential design features that may promote excessive shopping and raise consumer protection concerns. These issues highlight risks, as some sellers reportedly evade penalties or rejoin the platform, potentially affecting consumer safety.
The Impact of Potential Violations and EU Actions
Should Temu be found in violation of the DSA, it could face substantial financial penalties. This would set a precedent for other non-European e-commerce platforms operating in the region, encouraging greater adherence to EU regulations. For brands like Zara and H&M, this investigation may present a potential advantage by curbing Temu’s reach and leveling the playing field in terms of regulatory compliance.
Moving Forward: A Competitive Landscape
The EU’s increased regulatory oversight indicates a broader commitment to consumer safety and fair competition. While platforms like Temu and Shein may continue their rapid expansion, the EU’s actions could shape the future of e-commerce by encouraging safer, more transparent practices.
