The Chinese-owned company is facing class lawsuits in the US.
With the rapid rise of e-commerce, especially during the pandemic, I’m sure we have all made an online purchase at least once. It could have been a new dress, a pair of shoes, or maybe your pantry staples. With its unbeatable convenience—no need to battle it out on our streets to get to the mall—and seemingly endless deals, the lure of online shopping is near irresistible.
But as in all things that happen on the internet, it pays to be very careful, even if you’re transacting on your go-to platform or with your suking live seller. It also helps to stay in the know of the latest news—scandals, even—on e-commerce. You don’t want to fall prey to malicious activities online, especially with fraudsters becoming more creative by the day.
The app Temu, for example, has found itself in hot water for quite some time now, as it has been accused of intentionally loading dangerous malware and spyware on users’ devices. Talk about creepy. It has also been accused of allowing goods produced with forced labor to be sold on its site—accusations the e-commerce giant denies.
Temu… what?
Temu has become extremely popular in the US, Europe, and also rising in the Philippines. It’s an online marketplace, operated by the Chinese e-commerce company PDD Holdings, that’s not too different from Shopee and Lazada. Temu is an entire mall plus Divisoria or Chatuchak right at your fingertips, selling everything from furniture to your pet’s diapers.
Allegations include loading malware and spyware on users’ devices, which the e-commerce giant denies.
The company first launched in the US in 2022 and later in the UK and the rest of the world, and has steadily gained in popularity since then. The app has become super popular among avid online shoppers for its discounted consumer goods which are mostly shipped to consumers directly from China.
So popular and profitable it has become that it was able to afford six 30-second commercials for this year’s Super Bowl which saw a record 123 million Americans tuned into the nation’s biggest sporting event, as per a BBC report.
Temu is now shipping to over 50 countries and has consistently topped global app download charts, with 152 million Americans using it every month, according to data gathered by analyst SimilarWeb. It’s “Amazon on steroids,” says retail analyst Neil Saunders in the same article.
Unsettling accusations, a slew of class action lawsuits
But as Temu’s popularity grows, so does its infamy. Last year, Temu was criticized for its supply chains, with British and American politicians accusing the e-commerce giant of “allowing goods produced with forced labor to be sold on its site.”
Alicia Kearns MP, head of the UK’s foreign affairs select committee, told the BBC she wanted greater scrutiny of the online marketplace to make sure “consumers are not inadvertently contributing to the Uyghur genocide.” In response, Temu said it “strictly prohibits” the use of forced, penal, or child labour by all its merchants.
Late last year, the states of Arkansas and Illinois filed class action lawsuits against Temu. Arkansas’ state attorney general alleged that the company has the power to steal US consumers’ data and is ‘functionally malware and spyware,’ as reported on PC Mag.
Temu has become so popular and profitable that it was able to afford six 30-second commercials for this year’s Super Bowl, which saw a record 123 million Americans tuned into the nation’s biggest sporting event.
Attorneys for the state of Illinois had similar claims. They allege that Temu collects data “beyond what is necessary for an online shopping app,” including biometric information such as facial characteristics, voiceprints, and fingerprints. The lawsuit quoted experts who said that Temu gains access to “literally everything on your phone,” further alleging that it is able to read private messages, make changes to a phone’s settings, and track notifications.
The Eastern District of New York’s district court also filed an earlier class action lawsuit, alleging that Temu “failed to secure customers’ personal and financial data.” The company was also accused of wiretapping the electronic communications of its website’s visitors. The complaint filed in September 2023 stated that Temu references its access to users’ cameras and microphones whenever they’re using the app.
In response to the class action lawsuit by Illinois, a Temu spokesperson said in an email to Fashion Dive that the allegations are derived from a report by a short-selling firm, which has vested commercial interests in disseminating negative misinformation. “We strongly oppose the allegations contained within it. Furthermore, the same law firm has recently initiated class-action lawsuits against companies such as Amazon and Apple.”
Despite the controversy, analysts expect further expansion for Temu, as reported by the BBC. “We’ll probably see teams start to round out its offer more, perhaps pushing into some slightly higher priced products” predicts Saunders.
The focus will be on grabbing an even bigger slice of the market, according to retail analyst Shaun Reid. “For the next two to three years, their strategy is just to grow brand awareness and market share. They don’t care about profits.”
He added: “That’s exactly what happened with Pinduoduo when it launched in China. They were giving incredibly cheap deals just to grab market share.”
Tightening the noose on online Chinese retailers
In response to the onslaught of affordable goods from China, the European Union is drawing up plans to impose customs duties on cheap goods bought from Chinese online retailers including Temu, Shein, and AliExpress, the Financial Times reported on Wednesday, July 3.
The European Commission later said it will suggest scrapping a current 150 euros ($161) threshold under which items can be bought duty free, the report said.
Under current EU regulations, packages purchased online from a non-EU country are not subject to customs duties if their value is under €150, as per a report on Reuters.
A staggering two billion parcels with a declared value of less than €150 arrived in the EU from outside countries in 2023, according to the Commission, which says “the sheer volumes of e-commerce are testing customs’ limits.” The EU has been discussing abolishing the limit as part of a customs reform project proposed by the Commission in May 2023, but it could seek to expedite its adoption to counter the influx of cheap imports, the FT report added.
Critics of Temu and fast fashion giant Shein in the US bemoan that they use import tax exemption to undercut rivals and avoid customs inspections. This practice helps the two companies offer dresses for as little as $8 and smart watches for $25 to shoppers in all corners of the world, according to Reuters.
In terms of better protecting the privacy of online consumers, Temu and Shein have been ordered to provide information on EU tech rules compliance by July 12, according to a separate report on Reuters. Both companies are subject to tougher requirements under the Digital Services Act such as doing more to tackle illegal and harmful content on their platforms after they were designated as “Very Large Online Platforms” given their large number of users.
The European Commission said it has sent requests for information to the companies, asking how they allow users to notify them of illegal products and manage their online interfaces to prevent users from being deceived or manipulated through the so-called “dark patterns.”
It also asked more details on how the companies protect minors, the transparency of their recommendation systems, the traceability of traders, and compliance by design. “This enforcement action is also based on a complaint submitted to the Commission by consumer organizations. Both Temu and Shein must provide the requested information by 12 July, 2024,” it said in a statement.
Despite the controversies, analysts expect further expansion for Temu.
Temu responded that it was cooperating with the Commission. “We’d also like to reiterate that we are fully committed to complying with all applicable laws and regulations in the markets where we operate,” a spokesperson said in an email.
Shein, on the other hand, said it would continue to work closely with the Commission. “We have received the request for information from the European Commission, and we are working to promptly address it,” a company spokesperson said.
