The EU refers to Temu as a “very large online platform”. What does this mean for the Chinese online retailer? – TradingView News

The European Commission announced on Friday that it has designated Temu, an online shopping platform owned by PDD Holdings, as a very large online platform (VLOP) under the Digital Services Act (DSA).

The designation requires Temu to comply with strict European Union regulations within four months, putting it in the same category as Amazon, Meta Platforms and TikTok.

Systemic risks and regulatory compliance

As VLOP, Temu will need to assess and mitigate systemic risks associated with its services.

These include the display and sale of counterfeit goods, dangerous or illegal products, and items that infringe intellectual property rights.

The European Commission stressed that it will closely monitor Temu’s compliance with the regulations, particularly in its efforts to protect consumers and curb the sale of illegal products.

Temu’s rival Shein received the same designation last month, underscoring the EU’s strict approach to regulating large online platforms.

User base and designation impact

Temu, which entered the EU market in April 2023, has quickly amassed a significant user base, averaging 75 million monthly active users in the EU in the six months ending March 31, 2024.

This user base exceeds the DSA threshold of 45 million users, resulting in a VLOP designation.

“Following today’s designation, VLOP Temu will be required to comply with the most stringent rules set out in the DSA within four months of notification,” the European Commission said.

This means Temu must comply with these regulations by the end of September 2024.

Financial consequences of non-compliance

DSA’s VLOP responsibilities are broad and include stringent measures to assess and mitigate systemic risk.

Companies must ensure that they do not facilitate the sale of counterfeit goods, dangerous or illegal products, or items that infringe intellectual property rights.

Failure to comply with the DSA can result in severe penalties, including fines of up to 6% of a company’s total annual turnover.

Temu’s rapid growth in the European market underlines its significant impact on the e-commerce landscape in the region.

However, this growth comes with increased scrutiny and regulatory expectations.

The designation by the European Commission aims to ensure that large online platforms such as Temu operate within a framework that prioritizes consumer safety and market fairness.