The leaders of the global fast fashion market, Temu and Shein, often enter the news headlines in a negative context. Criticism of them is constantly growing, although more and more users trust them, and they are making significant efforts to polish their image.
And it seems that this trend is deepening with full force.
Is Temu in breach of the EU Digital Services Act?
On Thursday, a complaint was filed in the European Union against Chinese FMCG e-commerce platform Temu over a potential violation of online content rules.
Under the EU Digital Services Act, online marketplaces and intermediaries are required to combat illegal and harmful content as well as counterfeit products on their platforms.
The pan-European consumer organization BEUC said it had lodged a complaint with the European Commission, and 17 of its members in various countries, including France, Italy and the Netherlands, had also lodged complaints with the relevant national authorities. According to BEUC, Temu, which had 75 million monthly users in the EU as of March, often failed to provide users with important information about sellers on its platform and whether their products met EU product safety requirements. The complaint also says that Temu uses manipulative practices like dark templates to get consumers to spend more than they would like, and that it doesn't have enough information about how it recommends its products.
"Temu thus violates the EU Digital Services Act," said BEUC Director General Monique Goyens in a statement quoted by Reuters. "Products sold on marketplaces, whether online or offline, whether European, American or Chinese, must be safe and comply with European legislation if they are sold to European consumers."
Temu, which entered the EU market just over a year ago, commented that it actively adapts its services to align with local practices and preferences, and that it is committed to fully complying with the laws and regulations of the markets in which it operates .
“As for BEUC's complaint, we take it very seriously and will investigate it thoroughly. We look forward to continuing our dialogue with relevant stakeholders to improve Temu's services to users," the company's statement added.
Do Shein vendors work 75-hour weeks?
The problems do not escape the main competitor of Temu - Shein, which is also about to have new ones. As it prepares for an initial public offering in the US or UK, a new report shows that workers at some of the company's suppliers are still working 75-hour weeks, despite its assurances that it will raise its labor standards. The report, published on Tuesday, detailed a follow-up investigation by the Swiss advocacy group Public Eye after it found in 2021 that workers at sites in Guangzhou, China, were subjected to excessive overtime and poor conditions.
After the backlash that followed the investigation, the platform promised to improve its standards, but the new study by Public Eye, which surveyed 13 workers at six suppliers in China, found a lack of particular progress.
"Irregular working hours and piecemeal pay remain typical of the daily lives of the interviewed workers," the group commented. The interviews were conducted at the end of last summer.
In response to the new revelations, Shein told CNBC, "We don't acknowledge many of the allegations in this report."
However, Public Eye countered that the respondents worked an average of six or seven days a week for 12 hours a day, not including lunch and dinner breaks - in breach of Shein's supplier code of conduct.
"I work every day from 8 am to 10.30 pm and take one day off every month. I can't afford any more days off because it costs too much," Public Eye quoted one worker as saying.
A Shein spokesperson says the company is investing tens of millions of dollars in strengthening governance and compliance in its supply chain.
"The discussion about working hours and wages raised by Public Eye is important to us and we have made significant progress in improving conditions in our ecosystem," he is emphatic.
He said Public Eye's new report was based on a small sample of interviews at six sites, while Shein's supply chain relies on thousands of third-party suppliers and contract manufacturers in China. According to the company, thousands of third-party audits of its suppliers found a low rate of pay violations and showed that workers were paid, on average, more than twice the local minimum wage and 50% more than the Shenzhen wage.
But Public Eye says its investigation casts doubt on factory audits commissioned by Shein, noting that they focused only on monthly pay, not hours worked by employees. Skipping work hours is part of an apparent "deflection", the organization added. According to Public Eye, workers work 75 hours a week instead of the standard 40 hours, and their basic salary, after deducting overtime pay, is only about 2,400 yuan ($330) a month.
The organization also points to other potential problems at Shein's suppliers, including workers who appear to be underage and lax enforcement of smoking bans near fabric warehouses. The group added that Shein used many offshore structures to hide his ownership and avoid taxes. The company registered its headquarters in Singapore in 2019 and has been based there since 2021.
Public Eye's latest report adds to the list of controversies the company is facing, all of which are damaging its reputation and threatening to derail a planned initial public offering in the US, one of its biggest markets. That is why it has recently turned to the UK and the London Stock Exchange as an IPO option.