Brussels has fired a warning shot at Chinese e-commerce dominance. In a dramatic escalation of trade tensions, European Commission officials conducted an unannounced inspection of Temu’s headquarters in Dublin last week.
This EU raid on Temu signals a pivotal shift in how the bloc handles low-cost foreign imports. Regulators are investigating whether the platform, a subsidiary of PDD Holdings, is utilizing unfair state subsidies to undercut European competitors.
Investigating State Handouts
The inspection was executed under the Foreign Subsidies Regulation (FSR). This legal framework empowers the EU to scrutinize non-European companies suspected of receiving government aid that distorts the single market.
While the Commission’s spokesperson did not explicitly name the target, they confirmed an inspection occurred at a company within the e-commerce sector.
Regulators are specifically looking for evidence of financial advantages provided by Beijing, such as:
-
Zero-interest government loans.
-
Financing provided below market cost.
-
Preferential tax treatments.
If the investigation proves that state cash is fueling Temu’s operations, the consequences will be severe. The Commission holds the authority to levy fines reaching 10% of the company’s annual aggregated turnover.
The High Cost of Cheap Goods
This regulatory strike comes as European markets struggle to absorb a surge of inexpensive Chinese exports.
Since launching in the EU in April 2023, Temu has amassed approximately 116 million monthly users. Its aggressive pricing strategy—encapsulated by the slogan “Shop like a billionaire”—has disrupted the retail landscape. Consequently, major players like Amazon have been forced to develop discount rivals to survive.
However, critics argue this growth isn’t organic. Beyond subsidies, European retailers point to a customs loophole that exempts parcels valued under 150 euros from duty fees. Reports indicate the EU plans to close this exemption by late 2026 to restore competitive balance.
A History of Regulatory Clashes
The EU raid on Temu is merely the latest chapter in an ongoing standoff between Brussels and the e-commerce giant.
Last year, the Commission launched a separate probe under the Digital Services Act (DSA). Preliminary findings released in July suggested the platform failed to adequately block illegal goods from its marketplace.
Furthermore, the timing of this raid is significant. In November, China’s trade surplus exceeded $1 trillion. Facing stiff tariffs in the United States, Chinese manufacturers are aggressively redirecting inventory toward Europe.
Typically, the Commission only authorizes unannounced inspections when it possesses credible intelligence, often gathered from whistleblowers, suggesting serious violations are taking place.
__________________________________________________________________________________________________________________________________
