EU Hits Temu Owner With Obstruction Case Over Subsidy Probe

The European Commission has formally accused PDD Holdings, the parent of e-commerce marketplace Temu, of obstructing a foreign-subsidies inspection at its Irish subsidiary. The commission issued a Statement of Grounds (SoG) to PDD and WhaleCo, the Dublin-based entity that operates Temu in the EU, alleging the company breached procedural obligations under the bloc's Foreign Subsidies Regulation (FSR).

The inspection at WhaleCo's Dublin premises ran from 2 to 5 December 2025 and was part of a broader probe into whether Temu received subsidies that distort competition in the EU's internal market. The commission said its preliminary view is that Temu did not actively cooperate during the inspection. It claims the marketplace failed to meet requests covering the organisation and management of its European activities, the IT tools used in the EU, and certain books and records tied to its EU business.

Those requests are customary in the early stages of a competition inspection, the commission said. The absence of the information stopped it from examining sources that could be relevant to the investigation.

Under the FSR, the commission can fine a company up to 1% of its total annual turnover for refusing to submit to an inspection or for supplying incomplete records. The SoG sets out the basis on which the commission plans to build a decision. Temu is entitled to review the commission's file and submit a response before any final ruling.

The commission stressed the SoG does not prejudge the outcome voice; the process runs alongside its main investigation into whether Temu received distortive subsidies, which prompted the original inspection.

Temu pushed back. "Temu does not agree with the commission's preliminary findings in its SoG. Temu cooperated fully and complied with all the requests the commission made during the inspection," the company said. "We will analyse and respond to the SoG and trust the commission will reconsider its position. Temu also categorically denies having received any foreign subsidies that distort the internal market."

The obstruction case is the latest regulatory headache for PDD in Europe. In May, the commission imposed a €200m ($233m) penalty on Temu under the Digital Services Act, saying the retailer had failed to properly assess risks linked to illegal products sold on its platform.

Across the Atlantic, Temu faces legal pressure in the US. Last month, Iowa Attorney General Brenna Bird filed a petition in Polk County District Court against PDD Holdings and WhaleCo under the Iowa Consumer Fraud Act, alleging deceptive data collection, routing of user information to China, and consumer fraud.

The FSR is one of the EU's newer competition tools, designed to level the playing field for companies that receive government support outside the bloc. The commission's decision on Temu will hinge on whether the company's cooperation during the Dublin inspection meets the standard the regulator expects.

For PDD, the stakes are material. A fine under the FSR would be calculated on global turnover, not just EU revenue, making the 1% ceiling a potentially significant sum for a group that generated over $130 billion in revenue in 2024. Temu's response to the SoG will be scrutinised for how it addresses the commission's specific allegations about missing records and IT systems.

The commission has not set a timeline for the next step. Temu's written response is due before the commission decides whether to proceed to a formal decision.