Investigation launched into Chinese e‑commerce giants by European Commission

The European Commission has begun an investigation into the compliance of Chinese e-commerce giants Shein and Temu with the requirements of the Digital Services Act. According to the EC, both platforms must fulfil additional obligations related to consumer protection and operational transparency.

China has found a new effective way to expand in Europe. The Polish Economic Institute, in its latest weekly edition, highlights the increasing role of Chinese trading platforms in Western markets. According to the institute experts, "The European Commission is scrutinising e-commerce giants Temu and Shein, from whom it has requested information to demonstrate their compliance with the Digital Services Act (DSA) requirements."

The report’s authors explain that the EC has labelled Temu and Shein as VLOPs (Very Large Online Platforms), which entails additional obligations for these platforms.

According to the institute analysis, "The European Commission is demanding additional information regarding the fulfilment of obligations concerning the non-use of user-manipulating interfaces, the protection of minors, transparency of recommendation systems, traceability of sellers, and enabling users to report illegal products."

Experts emphasise that "The EC's actions are the result of a complaint filed by consumer organisations."

The Institute points to the dynamic growth of Chinese trading platforms in Western markets. As the report reads, "In just one year, Shein increased its revenue by 43%, from €21,37 billion GBP in 2022 to 30,87 billion GBP in 2023."

An aggressive marketing strategy combined with extremely low prices has made the company a leading player in the fast fashion sector with over 45 million users in the EU and higher sales in Europe than H&M or Zara, which operate in the same market segment, the report's authors emphasise.

In the case of the Temu platform, experts note that "it directly connects Chinese manufacturers with consumers, eliminating intermediaries." As they explain, "this is part of a new strategy by Chinese platforms to produce, sell, and market cheap products, completely bypassing Western competitors."

Institute analysts highlight potential threats associated with the expansion of Chinese platforms. As they write, "The expansion of Chinese platforms brings an influx of cheap products, whose low price may result from human rights violations and non-compliance with environmental standards." In response to these threats, PIE informs that "The EC plans to impose tariffs on products bought from Chinese sellers. Specifically, the EC is working on removing the 155 GBP threshold, below which products can be purchased without tariffs."

PIE experts cite data illustrating the scale of the problem: "Last year, over 2 billion products below this threshold were imported into the EU." Additionally, they report, "In recent years, EU member states have recorded an increase (as much as 50% more reports from 2022 to 2023) in the number of dangerous products within the EU—primarily cosmetics, electronics, clothing, and toys that do not meet European safety standards."

In conclusion of their analysis, institute experts states: "The platforms' practices violate national and EU regulations and exploit various legal loopholes, making the actions proposed by the EC necessary."

At the same time, experts point to potential difficulties in implementing new regulations. "Unfortunately, member states may not agree to the introduction of new regulations, as their customs services are already overburdened with tasks related to the influx of e-commerce shipments," they conclude.