The European Union plans to take action against illegal and dangerous products sold on retail marketplaces like Temu, Shein, and Amazon Marketplace.
New reforms would require these online marketplaces, which serve millions of customers in Europe, to disclose more information on EU-bound packages in order to better control and inspect them, the Financial Times reported Saturday, citing a draft proposal.
The amount of low-value packages imported by the EU has quadrupled to €4.6 billion worth, the overwhelming majority of which are from China, according to the document.
“The surging volume of products that are unsafe, counterfeit, or otherwise noncompliant leads to serious safety and health risks for consumers, has an unsustainable impact on the environment, and fuels unfair competition for legitimate businesses, with a significant impact on competitiveness in different sectors,” the proposal states.
Temu and Shein have been on the EU’s radar under the Digital Services Act (DSA), which aims to curb the sale of illegal and harmful products. Amazon is also listed as a “very large online platform” under this law.
Last June, the European Commission demanded details on what the two Chinese-founded platforms are doing to address the issue. Both companies said they were cooperating with the EU.
The bloc is also considering closing the tax loophole that benefits cheap fast-fashion retailers like Shein and Temu, allowing them to ship packages without import duties that apply to higher-value (over €150) packages. These changes come amid heightened concerns over the multibillion-dollar counterfeit goods industry.
So far, online marketplaces have been exempt from liability for goods sold on their platform by third-party vendors unless this is done deliberately or without promptly being detected.
The new proposal would require shipments to undergo customs checks and assume a possible handling fee for each package, something that could significantly change the business model of these online marketplaces, which have relied on the ease of trade to drive prices down.
Customs data from the 27 national authorities will be pooled to set up a new central EU customs authority (EUCA), the FT reported.
Marketplaces up against EU rules
While Singapore-headquartered Shein has been around for almost two decades, Temu is a relatively new player that’s quickly risen to fame (including at the Super Bowl two years ago).
The platform, owned by PDD Holdings, has grown thanks to its ultracheap pricing on clothes, furniture, stationery, and more. Its cofounder Chen Lei admitted that it was facing stiff competition despite gathering fans and luring them away from well-known sites like eBay and Amazon.
In October, the EU started a probe against Temu over concerns that the platform wasn’t safe enough for its 90-million-plus monthly active users. Temu, which only launched in Europe last April, weeds out illegal products often, but they reappear, making it hard to stem the problem.
Moreover, the platform’s design could be “potentially addictive” and harmful to users’ well-being, per the investigation.
“There is a real suspicion that not enough is done—not in an effective way—to really prevent the dissemination of illegal products,” an EU Commission official said, according to Wired.
A report by the Toy Industries of Europe (TIE) revealed that 80% of the toys it bought from 10 different marketplaces, including Amazon, Shein, and Temu, didn’t meet the EU’s safety standard. TIE proposed the EU recognize marketplaces as economic operators so they can be held legally accountable.
Amazon and the EU declined to comment on the draft proposal, and representatives at Shein and Temu didn’t immediately return Fortune’s request for comment.
