Temu to Pay $2 Million Fine to Settle Federal Consumer Protection Compliant

Chinese low-cost online retailer Temu has agreed to pay $2 million to settle allegations that it failed to provide shoppers with the information needed to avoid or report fake or unsafe goods, federal regulators said.

The Federal Trade Commission (FTC) announced on Sept. 5 that Boston-headquartered firm WhaleCo, which operates as Temu in the United States, will pay the penalty to resolve alleged violations of the INFORM Consumers Act of 2023. The law mandates that online marketplaces must disclose detailed seller information to buyers and provide clear, accessible reporting tools on product listing pages for any third-party seller making at least 200 sales and generating $5,000 or more in revenue over a 12-month period.

The agency said this marks its first enforcement action under the 2023 statute.

“The INFORM Act is designed to ensure consumers have the information and tools they need to not only report suspicious activity to online marketplaces, but to directly identify and contact high-volume, third party sellers in many cases,” said Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection.

“Temu, one of the most recognizable online marketplaces, is responsible for complying with the Act,” he continued. “Today’s action serves as a reminder to online marketplaces that violating the INFORM Act can result in serious consequences, including civil penalties.”

Under the proposed settlement, which is pending court approval, Temu must also put measures in place to ensure compliance with the consumer protection law going forward.

If approved, the settlement would resolve an FTC complaint alleging that Temu failed to provide an easy-to-use means for buyers to report suspicious marketplace activity by phone. Regulators said when the company finally introduced a phone option in early 2024, it was difficult to locate and use.

The FTC also took issue with the lack of required disclosures and reporting options in Temu’s “gamified” shopping features, where users can play games to win freebies and discounts. According to the complaint, Temu did not add the necessary tools to these features until late 2024, and even then, the options were not displayed in a clear or prominent manner as required by law.

Temu said it had cooperated with the agency and taken steps to address the concerns.

“Throughout the FTC’s investigation, we worked closely with the agency, studied its feedback carefully, and made substantial efforts to address the issues identified,” the company said in an emailed statement to The Epoch Times. “It was a rigorous undertaking, but we believe such scrutiny and dialogue are ultimately constructive for our long-term development. We will continue striving to uphold high standards and to be a responsible corporate citizen in the United States.”

Temu, one of the most downloaded shopping apps in the United States, also faces growing scrutiny at the state level.

In June, the State of Nebraska sued the company over a range of alleged issues, including malware risks, fake reviews, unauthorized charges, and data harvesting. The state lawsuit highlighted the Chinese communist regime’s national intelligence and cyber security laws, stating that as a Chinese-owned company, Temu’s data collection practices are subject to those measures that require Chinese firms to provide user data to Chinese authorities upon request.

“Once Nebraskans download the Temu app, they lose all control over their personal data, which may ultimately end up in the hands of a hostile foreign power,” Nebraska Attorney General Mike Higers said when announcing the lawsuit. A state investigation, he said, concluded that Temu’s mobile app “secretly installs malware” that gives the company “unrestricted access to essentially everything” on a user’s phone.

Nebraska’s case was followed by a lawsuit from Arkansas, which did not conduct its own investigation into Temu’s software but instead relied on findings from third-party research institutions and other sources.

A more recent lawsuit, brought in July by the State of Kentucky, raised similar claims, accusing Temu of collecting and exploiting personal data without consent. That complaint also alleged that the company profits from fake product listings and counterfeit goods, including knockoff University of Kentucky and Louisville Slugger merchandise.

Temu has dismissed Kentucky’s accusations as “totally unfounded” and based on “misinformation circulated online.” The company provided largely identical responses to the two earlier litigations.