The European Commission’s recent enforcement action against Temu under the Digital Services Act (DSA) is a clear signal that regulators expect very large online platforms (VLOPs) to take meaningful responsibility for the risks created by their ecosystems. But while the regulatory obligation sits squarely with the platform, the commercial reality is likely to look rather different.
What happened?
On 31 October 2025, the European Commission opened formal proceedings against Temu, focusing in particular on its obligation to assess and mitigate risks linked to illegal products sold on its platform. The Commission has now issued a non-compliance decision, accompanied by a reported 200 million Euro fine.
At the heart of the decision is a relatively straightforward point: Temu failed to adequately analyse, identify and assess the systemic risks associated with the dissemination of illegal products. Under the DSA, VLOPs (those with more than 45 million monthly EU users) must, broadly, carry out risk assessments and implement proportionate mitigation measures against systemic risks. Those risks extend well beyond illegal content, encompassing fundamental rights, consumer protection, public health and the protection of minors.
Temu now has until 28 August to submit an action plan under Article 75 of the DSA. Failure to comply could result in ongoing penalty payments.
Regulatory liability vs commercial reality
The decision reinforces that, as a matter of public law, responsibility for DSA compliance sits with the selling platform. The obligations to assess systemic risks and implement mitigation measures are not delegated to individual sellers.
The DSA preserves a “safe harbour” model for hosting providers. Marketplaces may not be automatically liable for illegal products listed by sellers, provided that they comply with core obligations such as “Know Your Business Customer” checks and act expeditiously to remove unlawful listings once notified. Sellers, meanwhile, remain directly responsible for the legality and compliance of their products.
This split in regulatory liability creates a natural incentive for platforms to look downstream and reallocate risk contractually.
Expect tougher seller terms
Against this backdrop, we may see platforms revisiting their seller terms to better manage their DSA exposure. In practical terms, that may include:
- Expanded warranties: Sellers being required to give more detailed and robust warranties around product legality, safety and regulatory compliance (including compliance with EU consumer protection and product safety rules);
- Broader indemnities: Platforms seeking indemnities covering regulatory fines, enforcement costs and third-party claims arising from illegal or non-compliant products;
- Enhanced audit and information rights: Increased rights for platforms to request documentation, conduct audits, and verify compliance with applicable laws. This aligns with the DSA’s emphasis on demonstrable risk assessment and mitigation;
- Stricter onboarding and Know Your Business Customer processes: More detailed information requirements at onboarding stage and ongoing obligations to keep information up to date, supporting compliance with “Know Your Business Customer” requirements; and
- Quicker suspension and termination triggers: Lower thresholds for suspending or removing sellers where compliance concerns arise, enabling platforms to react swiftly in line with their DSA obligations.
Why this matters for businesses
For marketplaces, the key challenge will be balancing regulatory compliance with maintaining a commercially viable seller ecosystem. Overly onerous terms risk deterring sellers or pushing them to competing platforms.
Sellers may therefore anticipate increased scrutiny, greater contractual risk and less tolerance for compliance failures. Businesses selling via marketplaces could expect:
- more extensive due diligence at onboarding;
- ongoing monitoring and audit demands; and
- materially increased contractual exposure, particularly through indemnities.
A shift in risk allocation
The Temu decision is therefore not just about regulatory enforcement. It highlights how risk is likely to be allocated across digital marketplaces.
While the DSA places the regulatory burden on platforms, the commercial response is likely to involve a rebalancing of that burden through contract. In effect, platforms may remain the first line of regulatory accountability but will increasingly look to ensure that the economic consequences of non-compliance sit further down the supply chain.
For both platforms and sellers, it may be worth reviewing contractual terms with that in mind.
