When consumers purchase counterfeit or substandard goods on e-commerce platforms but find no effective channels to file complaints, what should they expect? The U.S. Federal Trade Commission (FTC) recently imposed a $2 million fine on Whaleco, the overseas operator of PDD Holdings' cross-border e-commerce platform Temu, for failing to adequately safeguard consumers' right to report violations. This marks the first enforcement action under the INFORM Consumers Act since its implementation and serves as a compliance warning for other cross-border e-commerce platforms.
Violations and Penalty Details
The FTC's announcement clearly stated that Temu failed to provide consumers with necessary information and tools to identify and report stolen, counterfeit, or unsafe products, violating provisions of the INFORM Consumers Act. The law, which took effect on June 27, 2023, aims to enhance transparency in online transactions by requiring platforms to offer accessible reporting channels and mandate disclosure of high-volume third-party sellers' identities and contact information.
Specifically, FTC complaints revealed that Temu had long lacked a telephone reporting option, while existing reporting mechanisms were difficult to locate and use. Although the platform introduced a product reporting feature in November 2024, it was buried within a "gamified shopping experience" and not prominently displayed, failing to meet legal requirements. This obfuscation of reporting channels significantly increased consumer difficulties in seeking redress.
Compliance Requirements and Long-Term Implications
Under the settlement agreement (pending district court approval), Temu (Whaleco, Inc.) must implement the following compliance measures, which also represent key focus areas for cross-border e-commerce platforms:
- $2 million civil penalty: A direct financial consequence for violations and a clear warning signal.
- Prominent reporting channels: Platforms must provide clearly visible electronic and telephone reporting options on all product pages (including mobile and app interfaces), with streamlined telephone reporting processes.
- Seller information disclosure: High-volume third-party sellers' names, addresses, and direct contact information must be conspicuously displayed on product listings or transaction records.
The FTC emphasized that Temu failed to integrate reporting functionality within its gamified shopping interface for 17 months and didn't place reporting options in visible locations, hindering effective consumer feedback. Additionally, the platform didn't fully display third-party sellers' names, physical addresses, and contact details, exacerbating information asymmetry risks. More critically, Temu hadn't completed technical adjustments nearly seven months after the law took effect nor proactively submitted a compliance plan to the FTC, triggering stringent regulatory action.
Platform Response and Regulatory Stance
Regarding the penalty, a Temu spokesperson stated: "Throughout the FTC's investigation, we cooperated closely, carefully studied their feedback, and made substantive efforts to address identified issues." However, FTC Bureau of Consumer Protection Director Samuel Levine adopted a firmer position: "As one of the most recognized online marketplaces, Temu has an obligation to comply with this law. Today's action serves notice to all online platforms that INFORM Act violations may result in significant consequences, including civil penalties."
Compliance Insights from a Data Perspective
From an analytical viewpoint, Temu's case highlights both challenges and opportunities for cross-border e-commerce compliance:
- Data transparency: Platforms require robust data collection and analysis systems to promptly identify and address violations while providing consumers with comprehensive disclosures.
- User experience optimization: Reporting process design directly impacts consumer redress efficiency, necessitating continuous improvement through data analysis.
- Risk management: Comprehensive systems must verify third-party seller credentials and monitor platform merchandise.
- Technological investment: Compliance demands sustained technical upgrades to meet evolving regulatory requirements.
Ultimately, Temu's penalty transcends mere financial consequences—it represents a critical compliance lesson. For all cross-border e-commerce platforms, regulatory adherence isn't just a legal mandate but the foundation for consumer trust and sustainable growth. Only through genuine compliance commitment can platforms achieve lasting success in competitive markets.