Temu and AliExpress could be hitting regulatory walls in South Korea.
According to Pulse News, a South Korean business publication, South Korea’s Fair Trade Commission (FTC) has begun investigating the two companies, owned by PDD Holdings and Alibaba Group, respectively.
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Pulse News reported the investigations will analyze both companies’ terms and conditions to determine whether they infringe on consumers’ privacy by collecting and distributing information about them unnecessarily.
In April, The Korea Times reported that South Korea’s watchdog had also opened an investigation into Temu over false advertising and other unfair business practices. It will also focus on whether Temu appropriately protects its consumers in South Korea.
According to KED Global, a South Korean news outlet, as of March, AliExpress had nearly 9 million monthly active users (MAUs) and Temu had over 8 million MAUs. The two have started gain traction on Korea’s Coupang, which has over 30 million MAUs.
South Korea is not the only government scrutinizing Temu, AliExpress and competitor Shein. Reporting by The Korea Times, Reuters and other outlets has not mentioned Shein as a target for the South Korean FTC, but the company does face probes from other governments.
Temu may be named a very large online platform (VLOP) under the European Union’s Digital Services Act in the near future. AliExpress already has VLOP status, as do Shein and Amazon. The threshold is 45 million MAUs or more in the EU bloc. In March, Temu reported it had about 75 million users in the EU.
That designation ensures that VLOPs must comply with a stricter set of rules for their services, taking into account consumer well being and more.
Regulators in the U.S. are also keeping their eye on Temu, Shein and other marketplace companies. Politicians like Marco Rubio and Sherrod Brown have called for the U.S. to reevaluate the de minimis provision that allows the companies to import low-priced, direct-to-consumer shipments without taxes, tariffs or scrutiny by customs.
Temu and Shein have both started to establish U.S. logistics relationships and marketplaces, which could help them bypass some of the regulatory scrutiny they seem to receive in the country.
Even as they face scrutiny, Shein, AliExpress and Temu continue to grow their user bases globally for their ultra-low prices and gamified shopping experiences.