Temu has agreed to pay $3 million and tighten its data protection and product safety practices to settle a lawsuit brought by the US state of Texas.
Temu will be required to store Texas shoppers’ personal information on American-controlled servers and restrict access to that data from China, following allegations that it exposed customers’ sensitive information to the Chinese government.
The agreement, reached with Texas attorney general Ken Paxton, is the first settlement of its kind involving Temu, which faces similar legal challenges from several other US states.
The lawsuit, filed in February, accused Temu and its parent company PDD Holdings of misleading consumers about the information collected through its shopping app, including the extent to which personal data could be accessed or transferred.
Temu denied the allegations and admitted no wrongdoing as part of the settlement.
Under the agreement, it must limit access to customers’ personal data by individuals and businesses in China, with exceptions for essential activities such as fulfilling orders, preventing fraud and maintaining its platform.
It will also face annual independent security assessments of its shopping app, with penalties of $8 million for each failed annual audit involving serious breaches of the agreed safeguards.
The settlement goes beyond data privacy, placing new obligations on Temu to monitor the safety of products sold through its marketplace.
It must commission annual independent tests for potentially harmful substances, including lead, formaldehyde and PFAS chemicals, in products commonly purchased by Texas shoppers.
Products found to contain dangerous materials above applicable safety limits must be removed within two business days, with affected customers notified and refunded.
Temu must also suspend the responsible seller and associated stores within five business days or face a further $600,000 penalty.
The agreement requires the platform to obtain safety certification from sellers before certain regulated products can be listed for sale.
Texas has also secured provisions that could allow it to benefit from stronger consumer protections or larger settlements agreed with other US states over the next three years.
Temu said it had reached an agreement to resolve the dispute and would continue focusing on customers and businesses in Texas.
In May, the European Commission fined Temu €200 million for failing to properly assess the risks of illegal and dangerous products being sold through its platform.
An investigation under the EU’s Digital Services Act found shortcomings in the retailer’s approach to identifying potentially unsafe goods, particularly children’s toys and electrical products.
Temu disputed the ruling, describing the penalty as disproportionate and arguing that its safety systems had improved since the period examined by regulators.
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