Temu’s dark underbelly

Chinese online retail giant Temu is accused of using manipulative practices, including dark patterns, to trick consumers into spending more than they want.

Over the last few weeks, Temu has been under fire in South Africa about its alleged questionable activities, including dodging customs and other taxes.

Trade and industry minister Ebrahim Patel said the government wanted to confront online retail platforms that use tariff loopholes to undermine locally produced goods.

The minister said Temu and Shein’s dominance was one of the local textile industry’s biggest import-related challenges.

National Clothing Retail Federation executive director Michael Lawrence said they flagged suspicious practices by Temu and Shein with the South African Revenue Service (SARS).

Lawrence alleged that Shein and Temu, or their local agent, exploited tax and customs loopholes to cheaply import their products into South Africa.

By avoiding tax, they can undercut local retailers, putting thousands of local jobs on the line and limiting tax collection.

Local online retailers, including Takealot Group CEO Frederik Zietsman, have also raised concerns about “new players” not adhering to tax regulations.

Zietsman said they were engaging with governmental and non-governmental bodies to tackle the issue.

Temu denied the allegations, saying it is committed to complying with local laws and regulations in the markets where it operates.

“For South Africa, the displayed prices of goods on Temu South Africa do not include import duties and taxes,” it said.

“Applicable taxes will be imposed by local authorities on customers upon the arrival of the package.”

European concerns

However, concerns about Temu are not only being raised by South African authorities, companies, and civil organisations.

Numerous international organisations have taken exception to Temu’s business practices, including the European consumer organisation BEUC.

BEUC is an umbrella group for 45 independent consumer organisations from 31 countries. Its main role is to represent them and defend the interests of European consumers.

Last week, it filed complaints with authorities against Temu for failing to protect consumers and using manipulative practices which are illegal under recent EU legislation.

“The online marketplace is rife with manipulative techniques — dark patterns — to get consumers to spend more than they might originally want to,” it said.

Temu also failed to provide crucial information to consumers about product sellers and complicated the process of closing down their accounts.

“Temu breaches the EU’s new online content law, the Digital Services Act, and must now be investigated by authorities,” the BEUC said.

Temu hit back, saying it is committed to full compliance with the laws and regulations of the markets where it operates.

“We have listened carefully to feedback from customers, regulatory bodies, and consumer advocacy groups,” it said.

“We aim not just to meet the minimum legal requirements but to exceed them by adhering to the highest standards of best practices.”

“To achieve this, we work closely with our third-party sellers, regulators, consumer groups, and other stakeholders.”

US House concerns

Congressman Mike Gallagher

US House lawmakers have warned there was a high likelihood that some of Temu’s products were made using forced labour in the Xinjiang Uyghur Autonomous Region of China.

Last year, a US House Select Committee report said Temu was doing basically nothing to keep its supply chains free from slave labour.

“Temu conducts no audits and reports and has no compliance system to affirmatively examine and ensure compliance with the Uyghur Forced Labour Protection Act,” it said.

The only measure Temu takes to ensure that it is not shipping goods that are produced with forced labour in violation of U.S. law is that its suppliers agree to boilerplate terms and conditions that prohibit the use of forced labour.

US lawmakers have called upon the company to get independent verification that its suppliers were abiding by this code of conduct.

Congressman Mike Gallagher added that Temu and Shein were building empires around the de minimis loophole in the United States’ import rules.

He added that Temu was dodging import taxes and evading scrutiny on the millions of goods they sell to Americans. It aligns with accusations about its South African practices.

Temu said it demands strict compliance with all regulatory standards and reserves the right to sever ties with any business that breaches its third-party code of conduct or the law.

“As for the concern about forced labour in product compliance, Temu takes this issue seriously,” a spokesperson for the company told MyBroadband.

“Temu’s standards and practices align with those of major U.S. e-commerce platforms, such as Amazon, eBay, and Etsy, rendering any allegations completely ungrounded.”

Temu said allegations that it achieves its competitive pricing through exploitative labour practices were unfounded.

Temu’s parent company, PDD Holdings, which has another online shopping app Pinduoduo, has engaged in overzealous and potentially illegal monitoring of users’ online activity.

In 2023, Pinduoduo was removed from the Google Play Store after versions of the app on other platforms were found to contain malware.

The malware allegedly allowed Pinduoduo to gain access to data from other apps, prevented users from uninstalling the app, and bypassed Google Play’s update-verification process.

Temu has denied these allegations. It said it is upfront about how it uses data to run its platform and improve the user’s experience.

Temu also said it collects the minimum amount of information necessary to complete orders, process payments, communicate with users, and make product recommendations.

However, reports suggest that the team working on the exploits were transferred to Temu.

Temu is also facing a class action lawsuit in Australia for allegedly tracking users’ browser activity extensively by injecting JavaScript code for spyware in websites.