Temu is a name that only started to appear in the fall of 2022. Yet, within a few short years, it has become one of the most downloaded apps globally and threatens the dominance of long-standing ecommerce platforms with its ultra-low price tags. Its success has brought along some major controversies that have put the Chinese-owned online retailer under the spotlight. From forced labor to tax evasions, Temu has been wrapped up in a series of big-time accusations.

To save you time, our experts at Business2Community have organized all the hot controversies Temu has faced or is facing. We’ll also go through the company’s responses and strategies so you get a better understanding of how to deal with challenging situations and how to avoid them in the first place.

Temu Controversy – Key Facts

  • In June 2023, a US House Committee published a report accusing Temu of using forced labor in its production line in the Xinjiang region of China.
  • Two class-action lawsuits were filed in two different states in the US against Temu over its questionable data policies and possible cybersecurity risks.
  • Temu experienced a drop in sales growth towards the end of 2023 following the controversies with other countries passing legislation penalizing fast fashion companies like Temu in 2024.

Temu Controversy: What Are the Allegations?

Since its launch just a few years ago in 2022, Temu has been embroiled in international controversies such as the possible involvement of forced labor in its production chain, poor product quality, data risks, counterfeit products, and more.

Temu’s parent company, PDD Holdings, also owns one of the biggest ecommerce shopping platforms, Pinduoduo, in China. It introduced Temu as the US version of Pinduoduo to capture a larger international market share with its vast selection of clothing items, electronics, home goods, and accessories at incredibly low prices. It directly competes with online retailers and discount stores like Amazon and Walmart, offering the same type of products at lower prices (but with much worse shipping options).

Let’s take a look at how ecommerce rising star’s controversies impact consumers, sellers, and sales volume.

Forced Labor Accusations in the Temu Supply Chain

In June 2023, the US House Select Committee on the Chinese Communist Party published a report detailing concerns about the possible involvement of forced labor in Temu’s supply chain in the Xinjiang region of China. The report stated that “American consumers should know that there is an extremely high risk that Temu’s supply chains are contaminated with forced labor” and that the company did not conduct human rights reviews for its products.

Xinjiang is an autonomous region in China that is home to a large population of Uyghur Muslims. There are allegations from international organizations that this population is targeted for government oppression such as imprisonment and forced labor. At least some of these allegations have proven accurate, at least according to the US government.

Temu’s spokesperson has since denied the accusations, saying that the allegations are “completely ungrounded” and that “The use of forced, penal, or child labor is strictly prohibited”. Further, new sellers have to sign a voluntary agreement before being listed on the Temu website and shopping app.

Alleged Data Risks With the Temu Website and Shopping App

Concerns and speculations surrounding Temu’s privacy practices haven’t ceased ever since it was introduced in the US. In May 2023, Temu’s sister company, Pinduoduo Inc., was taken down by Google over “malware”, sparking debates over possible security threats from Temu.

A class-action lawsuit in Illinois filed in November 2023 stated that the company “bypasses’ phone security systems to read a user’s private messages, make changes to the phone’s settings and track notifications”, posing serious security risks to users since Temu had control over users’ personal information through the app.

Another class action lawsuit was filed in New York that same year regarding the financial information risks of the trending online shop. The lawsuit claims that the platform could sell or leak bank information of its app users.

In response, Temu stated in the court filings that its terms of service, which users must sign when creating an account, banned customers from pursuing class-action lawsuits.

temu arbitration

Temu’s 2,000 Complaints on the Better Business Bureau Site

Better Business Bureau (BBB), a leading US NGO in advancing marketplace trust by giving business ratings in North America, did not accredit Temu as of April 2024. The company only had an average rating of 2.5 on the BBB website with over 2,000 complaints from customers.

Here are a couple of illustrative examples:

temu complaint

temu complaint

These complaints revolve around shipping delays, refund and return policies, and poor product quality. Customers either had issues with the shipping times or did not find the merchandise purchased the same as advertised.

The unresponsive customer service has also meant users were unable to reach help when their parcels did not arrive.

Temu Said to be Using Loopholes to Evade Taxes to Undercut Local Retailers

The same report published by the US House Select Committee on the Chinese Communist Party we looked at earlier also criticized Chinese ecommerce shopping websites like Temu and Shein for evading US tariffs by exploiting loopholes in the law. Under Section 321 of the Tariff Act of 1930, import tariffs are waived for shipments below the value of $800.

These shopping sites’ business model means they have mainly been selling small parcels to individual consumers, effectively exploiting the tax loophole. At that time, Temu was estimated to be worth $100 billion, shipping over 600,000 parcels together with Shein into the country daily.

Policymakers in the US criticized the unfair advantage these overseas retail businesses had over local companies due to their ultra-low pricing. Not only was Temu’s act to manipulate import laws a concern for the US government financially, but it also posed safety risks as the absence of import tariffs meant the government would not be able to collect the most comprehensive and accurate information from the company.

However, it’s hard to blame Temu for the loopholes that were written into the law explicitly and the criticism especially bizarre when it comes from lawmakers who could change the rules.

Temu’s Possible Ties to the Chinese Communist Party

In April 2024, Republican Representative Brian Mast of Florida sent a letter to the Federal Trade Commission (FTC), urging the body to conduct a thorough investigation into any link between Temu and the CCP.

He stated that any company operating in the US should not hide its connections to the CCP and asked the FTC to assess the data risks imposed by the shopping app when users provide personal details.

That same month, GOP Senator Tom Cotton sent a letter to President Biden, asking him to investigate Temu and possibly ban the app across the country due to its questionable privacy practices and links to unethical operations in China. These concerns come at the same time as the controversy over TikTok’s ownership by Chinese-based Bytedance has been raised across both chambers of Congress.

The Consequences of the Temu Controversy

Although Temu successfully became a leading shopping app globally within a short period of time, its business model and production methods have attracted wide-ranging criticism and negative reviews. Controversies around the online shopping platform have reaped attention from customers as well as governing bodies around the world.

Following these controversies, Temu and different governments have responded by launching investigations, changing marketing tactics, or introducing new regulations. Here are the consequences of these controversies and how they affect Temu and its global operations.

Temu Spent Millions of Dollars on Super Bowl Ads After Experiencing a Fall in Sales Growth

Despite experiencing a dramatic growth period in 2022 and early 2023 with over 50% month-over-month growth in sales at its peak, Temu started seeing a decline in sales growth when all the controversies came to light in mid-2023. This hindered shoppers’ confidence in its merchandise and app security.

In December 2023, it even recorded a 12.5% fall in month-over-month observed sales volume, the first time Temu observed a fall in sales since launching in the US just 1.5 years previously.

In a marketing effort to regain people’s trust in the site, Temu spent millions of dollars on 6 Super Bowl ads in 2024, promoting its $10-million giveaway that requires new customers to sign up for a new account on its app to get discounts. The search volume of Temu peaked on Google during the ads, effectively generating new waves of interest in the controversial Chinese-owned company.

New Regulations to Hinder the Growth of Ultra-Fast Fashion

Using the import tariff loopholes and air transport economy by chartering cargo freighters for its parcels, Temu is able to offer the best deal for its products. However, the rise of these cheap shopping shopping sites is threatening traditional retailers like H&M and Zara.

France was one of the first countries to react to the recent disruptions of the traditional retail sector brought about by these trending platforms. In March 2024, lawmakers passed a bill to penalize fast fashion, directly aimed at Chinese brands like Shein and Temu, in an effort to reduce carbon footprints and bring a positive environmental impact. These platforms will no longer be allowed to advertise in the country.

In response to Temu’s tactic to avoid US import tariffs, US senators requested an end to the duty-free treatment in February February 2024 to protect local retailers who can’t compete with Temu’s prices. The senators called it an “out-of-control problem” that “impacts the safety and livelihoods of Americans”.

How to Use Temu Securely 

With all the controversies surrounding the leading ecommerce company, is it still safe to purchase or sell on the trending shopping app?

We’ve conducted a detailed analysis of the safety of using Temu for both sellers and users, giving you an idea before signing yourself up for the fast-growing online retailer.

Temu’s Safety for Sellers

Compared to its Chinese rival Shein, Temu has a much more relaxed approach to attracting new vendors. It does not consider the factory size of its manufacturers, allowing it to absorb many sellers that were let go by Shein in 2023 due to its inability to meet Shein’s requirements.

However, the profit margin for Temu is lower and the platform actively sources new producers for popular products on the website, forcing sellers to drop their prices. Many vendors use the company to sell excess stock as the turnover rates tend to be high.

With the recent controversies and policymakers requesting to sanction the app, the future of Temu remains uncertain, which can be a liability for vendors.

Temu’s Safety for Consumers

Temu is a legit online retailer for affordable clothes, household products, and many other daily items. As a customer, there are a few things you can do to protect your safety and money. To avoid getting poor-quality products, you should always read through the reviews carefully and purchase from vendors with higher ratings and more positive reviews.

Despite the growing concerns about its data risks and company ethics, Temu is an overall secure platform to give your credit card details. Its payment handling process is encrypted. Theoretically, paying on Temu is no different than paying on Amazon or eBay.

In terms of ethical standards, there has not yet been physical evidence to prove or disprove the forced labor claims – it is up to you as a consumer to decide whether the company is socially conscious and worthy to purchase from.

What Can We Learn From the Temu Controversy? 

In 2024, Temu is still caught up in the same forced labor, tax loophole exploitation, and poor reviews accusations that have been surrounding it since its launch. The controversies damaged its sales growth towards the end of 2023.

Instead of regaining the public’s trust by implementing solid actions or disclosing files for transparency, Temu claimed users were not allowed to file class-action lawsuits and only invested more in its massive marketing campaigns. Although the 2024 Super Bowl ads put the shopping website in the spotlight, it did not ease the government’s concerns about its safety.

Understanding customers’ preferences, ethical standards, and legal requirements is important. If you’re interested in moving into the profitable ecommerce world, there are a few big lessons you can learn from Temu. Despite its groundbreaking success, the platform is subject to tighter regulations and possible sanctions around the world as governments hold talks about banning the app. To ensure sustainable operations, you should always play by the rules and deliver what a responsible customer is looking for.

FAQs

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