Chinese fast-fashion giants Temu and Shein are in the crosshairs of EU regulators who have demanded detailed explanations on how these companies comply with stringent online content regulations.
The European Commission has set a deadline of July 12, 2024, for both companies to provide comprehensive information on their adherence to the Digital Services Act (DSA).
In April and May respectively, Shein and Temu, have been designated as Very Large Online Platforms (VLOPs) as both platforms currently cater to more than 45 million users in the European Union.
This classification from the EU subjects the two e-commerce companies to strict requirements aimed at curbing illegal and harmful content on their platforms.
EU regulators are particularly focused on how these companies manage user notifications of illegal products, the design of their online interfaces to prevent deceptive practices, and measures to protect minors.
This photo illustration shows the Shein app on the App Store reflected in the Temu logo, in Washington, DC, on February 23, 2023. Photo by STEFANI REYNOLDS/AFP via Getty Images
What The EU Is Asking from Temu and Shein
The European Commission has requested detailed measures from Temu and Shein regarding their compliance with several DSA obligations.
These include the 'Notice and Action mechanism,' which allows users to notify illegal products, and ensures that online interfaces do not deceive or manipulate users through so-called 'dark patterns.'
The companies must also demonstrate the transparency of their recommendation systems, traceability of traders, and overall compliance by design.
These rules also require diligent assessment and mitigation of systemic risks related to illegal content and products, such as counterfeit goods and unsafe items.
Additionally, the two companies must enhance their moderation processes, adapt their terms of service, and improve user interface to detect and prevent illegal listings.
Non-compliance with the DSA can have severe financial implications. Violations can result in fines amounting to as much as 6% of a company's global turnover.
Moreover, if Temu and Shein fail to provide accurate, complete, and non-misleading information, the European Commission can impose periodic penalty payments.
The enforcement action against Temu and Shein stems from complaints lodged by consumer bodies. The European Consumer Organization has raised significant concerns about Temu, stating, "Temu does not guarantee its users a safe, predictable, and trustworthy online environment as the law requires."
The complaint highlights issues such as manipulative techniques, lack of trader traceability, and overall platform opacity.
Amazon Looks to Challenge Temu and Shein
In related news, Amazon plans to launch a new section dedicated to low-priced fashion and lifestyle items, directly competing with Temu and Shein, CNBC reports.
This new storefront will allow Chinese sellers to ship products directly to US consumers, featuring unbranded items, many priced under $20. Amazon aims to deliver these products within 9 to 11 days from China to the US, positioning itself aggressively against the rising influence of Temu and Shein in the American market.
