In recent years, the e-commerce market in Europe has been dominated by large Chinese sales platforms, tempting consumers with exceptionally low prices and a wide range of products, which, unfortunately, are often of poor quality or do not match the offer. One such platform is the Chinese Temu, which has found itself in the crosshairs of the European Commission. With a share of over 10% of the 450 million consumers in the EU, Temu meets the criteria for recognition as a very large online platform, the operation of which (and its control) must comply with the provisions of Regulation (EU) 2022/2065, the so-called Digital Services Act.

The irregularities in Temu’s operation

The Commission has initiated proceedings against the provider Temu on suspicion of violating the provisions of the Regulation. It has identified irregularities in the operation of this platform, including activities aimed at increasing sales by manipulating consumers, such as false product reviews, false discounts giving the impression that a given product is much cheaper than it is, persuading consumers to make purchases, including by convincing them that stocks of goods are limited and forcing consumers to participate in games that provide access to the platform.

The allegations also concern providing incomplete and incorrect information on matters such as the right to return goods and hiding one’s contact details, making it difficult for consumers to send questions or complaints. As a result of the investigation, the Commission asked the supplier Temu to explain the detected infringements.

The Commission’s broad supervisory powers

To determine whether a violation of the law has occurred, auditors have a wide range of means at their disposal. Not only can they ask the supplier to provide explanations, but they can also inspect their premises. To perform their duties, auditors may conduct any necessary activities at the premises of the supplier or any other person, which may include entering any premises and means of transport, accessing documents, sealing any premises, books, or registers, taking extracts from them, or asking questions of the supplier’s representatives or staff, as well as requesting information from auditors.

During the proceedings, authorized professional representatives may also provide information on behalf of their clients. However, their clients remain fully responsible for the information provided if it proves incomplete, incorrect, or misleading.

What are the penalties for violating regulations concerning digital services?

Violating the regulations may result in severe sanctions, such as fines and periodic penalty payments. The Commission may, through a decision, impose fines on a supplier, the amount of which may not exceed 6% of its total worldwide annual turnover in the previous financial year, if the Commission finds that the supplier has intentionally or negligently infringed the provisions of the Regulation or has failed to comply with an obligation or an interim measure imposed on it, e.g., an order to cease the infringement or to remove it. The Commission may also impose fines on a supplier or other natural or legal person, the amount of which may not exceed 1% of the total annual income or worldwide turnover achieved in the previous financial year if they have, intentionally or negligently, performed actions such as providing incorrect, incomplete or misleading information, failing to respond to a request for clarification or information, or refusing to submit themselves to an inspection.

In addition, the Commission may adopt a decision imposing periodic penalty payments, the daily amount of which may not exceed 5% of the average daily income or worldwide annual turnover achieved in the previous financial year, calculated from a date determined in the decision. This is supposed to compel entities to provide correct and complete information, submit themselves to inspections, or comply with commitments or interim measures. The Commission’s decisions may be subject to review by the Court of Justice of the European Union.