Chinese e-commerce company Temu faces stricter EU online content rules after exceeding a key user threshold, the European Commission announced Friday.
Shares in PDD Holdings, owner of Temu, fell 1.3% in premarket trading.
The commission’s decision means that Temu will now join companies like Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:META), and TikTok.
Under the EU's Digital Services Act (DSA), platforms with over 45 million users are classified as very large online platforms (VLOPs) and must take additional measures to combat illegal and harmful content, including counterfeit products.
Temu, which entered the EU market in April last year, averaged 75 million monthly active users in the EU for the six months ending March 31.
"Following today's designation as a VLOP, Temu will have to comply with the most stringent rules under the DSA within four months of its notification (that is by the end of September 2024)," the EU executive arm, which acts as the EU tech regulator, stated.
DSA obligations for VLOPs include assessing and mitigating systemic risks related to their services, such as the sale of counterfeit goods, unsafe or illegal products, and intellectual property infringements.
Violation of DSA rules can result in fines of up to 6% of a company's global annual turnover.