Europe Declares War on C-Commerce: Ali and Temu Under Fire for Overwhelming Online Market

Europe Declares War on C-Commerce: Ali and Temu Under Fire for Overwhelming Online Market

October 31, 2024 Catherine Williams - Chief Editor Tech

Investigation conducted after 19 days of request for information
Fines could reach up to 3 trillion won

Ali Express and TikTok were also investigated.
Following electric vehicles, China follows platform regulations

Enlarge photo Temu. [사진 = 연합뉴스]

The European Union (EU) has set its sights on ‘C-commerce’ following Chinese electric vehicles.

According to Bloomberg News on the 30th (local time), the European Commission plans to take formal procedures to investigate Chinese e-commerce company Temu. It has been 19 days since the EU requested Temu to provide information on the 11th, saying, “Please provide information on the sale of illegal products and measures to deal with them.”

It is known that Temu submitted relevant information, but it appears that it was not enough to resolve the EU Commission’s concerns. Bloomberg reported, “The launch of the Temu investigation will be announced soon,” and “As the EU Commission leadership change approaches, the start date may be delayed somewhat.”

This investigation is a measure taken under the Digital Services Act (DSA). It states that platforms with more than 45 million users in the EU must make efforts to prevent the spread of false information and illegal and harmful products and content online. If it is proven that the platform did not make prevention efforts, a fine of up to 6% of annual sales may be imposed.

Accordingly, Temu may have to pay up to $2.4 billion (about 3.3 trillion won) in fines. Temu recorded sales of $20 billion (about 27.6 trillion won) in the first half of this year alone. If the fine becomes a reality, it is expected to disrupt Temu’s European market strategy.

Temu moved his main stage to Europe as the United States strengthened regulations against China. The Wall Street Journal (WSJ) pointed out, “Temu reduced its U.S. marketing and began targeting Europe,” and added, “The passage of the TikTok forced sale law sounded an alarm for Temu’s U.S. business.”

According to market research firm ECDB, nearly half of Temu product transactions came from the United States (43.3%), but the share of British and European countries such as the United Kingdom (6.8%), France (5.8%), and Germany (5.6%) is also increasing. Accordingly, voices have grown in the EU calling for caution against C-commerce.

C-commerce. [사진 = 연합뉴스] Enlarge photo C-commerce. [사진 = 연합뉴스]

Last July, the tariff-free rule for imports under 150 euros (about 220,000 won) was abolished. The EU also did not hide the fact that it was a measure targeting C-commerce companies such as Ali, Temu, and Shein. Eric Marmer, chief spokesman for the European Commission, pointed out that “the distribution industry has suffered enormous damage due to the influx of ultra-low-price products from China.”

The EU is also examining AliExpress and TikTok for violations of the DSA. It’s even targeting Chinese video platforms. This is part of the suspicion that Chinese companies may have a negative impact not only on the economy but also on security. Last April, the U.S. House of Representatives also passed the TikTok Forced Sale Act, saying, “Personal information could flow to China.”

China appears to be embarrassed as the trade war front expands to Europe. Earlier, when the EU raised tariffs on Chinese electric vehicles to a maximum of 45.3%, it protested but left open the possibility of negotiation. China’s Ministry of Commerce said, “We hope to avoid escalation of trade friction by finding a solution acceptable to both sides.”

It is also taking aim at the fact that the interests of EU member states are sharply intertwined. According to Reuters, China’s Ministry of Commerce ordered automakers to stop large-scale investments in EU member states that supported tariff increases. Among EU member states, 10 countries, including France, Italy, and Poland, supported the tariff increase.

Diplomat, an American diplomatic magazine, pointed out that “the EU is playing an important role in China’s strategy in a situation where competition between the US and China is intensifying,” and that “the EU is also highly dependent on China as 52% of its strategic products are supplied from China.”