FTC launches inspection of Temu over false advertising

The Fair Trade Commission recently sent a request for documents to the Chinese online retail platform over allegations of false advertising and unfair business practices.

The logo of Temu, an e-commerce platform owned by PDD Holdings, is seen on a mobile phone. [REUTERS]

Korea’s antitrust regulator has launched an inspection into Chinese e-commerce platform Temu over allegations of false advertising and other unfair business practices.

The decision came as the government broadens its clampdown on the widely popular foreign shopping apps that pose a threat to their local counterparts’ standing.

The Fair Trade Commission (FTC) recently requested that Temu provide documents as part of a probe into potential violations of domestic e-commerce laws and advertisement regulations through false and exaggerated advertisements, according to government and industry officials.

The document-based review has begun before the platform's local subsidiary, Whaleco Korea, was put into full operation after its establishment in February, they added.

The regulator is also looking into Temu's fulfillment of its due responsibilities to protect consumers, as complaints filed against the app have been rising, centered on poor product quality and delivery issues.

Temu has been facing further controversy over its use of cash coupons and multilevel marketing strategies to attract more customers since its advance into the highly competitive Korean market in July of last year.

The move follows the FTC’s on-site inspection of AliExpress Korea last month to look into whether the subsidiary complies with advertising and consumer protection rules.

The agency refused to confirm if any probe into the Chinese platform is ongoing, simply vowing "a stern response to any violations."

In a separate case, the Personal Information Protection Commission also started investigating whether the Korean divisions of AliExpress and Temu have instated proper data processing policies and consent mechanisms while also seeking to determine whether collected data is managed within China or funneled to other countries.

While the Chinese shopping malls tend to provide cheaper deals compared to their Korean counterparts, the quality of their products often comes into question.

Incheon Regional Customs revealed last Friday that some low-priced accessories sold on AliExpress and Temu contain higher-than-permitted levels of cadmium and lead.

Of 404 rings, earrings and bracelets priced between 600 won and 4,000 won (44 cents), 96 pieces, or 24 percent, of the inspected items failed to meet standards and could therefore potentially raise the risk of cancer given that the substances are cancer-causing agents.

BY PARK EUN-JEE, YONHAP [park.eunjee@joongang.co.kr]