Federal regulators just handed Temu a $2 million wake-up call, with the fast-rising e-commerce giant becoming the first-ever target of the enforcement of a new law designed to bring transparency to online marketplaces. The U.S. Department of Justice, working with the Federal Trade Commission (“FTC”), announced that online retailer Temu will pay $2 million in civil penalties to settle allegations that it violated the INFORM Consumers Act. The settlement, entered as a stipulated order by the U.S. District Court for the District of Massachusetts, marks the first enforcement action under the law.
The INFORM Consumers Act: Congress passed the INFORM Consumers Act in 2022 to curb the sale of counterfeit and unsafe goods through third-party sellers on online marketplaces. The law, which took effect on June 27, 2023, requires platforms like Temu to disclose the identity and contact information of “high-volume” sellers – those with at least 200 transactions and $5,000 in revenue within a 12-month period. It also obligates platforms to provide accessible mechanisms for consumers to report suspicious activity, both electronically and by phone.
These requirements are intended to increase transparency, deter fraudulent sellers, and give consumers tools to verify who they are buying from.
Allegations & the Aftermath
According to the complaint, Temu – operated by Whaleco, Inc., doing business as Temu – failed to comply with both of the law’s core obligations. First, the company did not adequately disclose required seller information, such as physical addresses, in a clear and conspicuous manner across all versions of its marketplace. In some cases, consumers had to scroll through multiple screens or click vague links like “See all” to find seller details. Seller information was unavailable on Temu’s mobile website until at least September 19, 2023, and missing from “gamified” shopping listings until around June 28, 2024.
Second, Temu did not provide a telephonic mechanism for reporting suspicious activity until January 2024, months after the law’s effective date. Even once added, the callback feature required navigating through multiple menus and links, making it difficult to use. Reporting options were also absent from gamified shopping experiences until November 2024.
The government alleged these failures violated the INFORM Act and constituted unfair or deceptive practices under Section 5 of the FTC Act.
Under the stipulated order, Temu agreed to pay $2 million in civil penalties and to implement compliance measures to ensure future adherence. These measures require Temu to provide a telephonic reporting mechanism with specified usability features and to make seller identity disclosures – covering names, physical addresses, and messaging options – clear and conspicuous across all interfaces, including its desktop site, mobile app, and gamified shopping listings.
“The Justice Department is committed to ensuring American consumers have information about third-party sellers online and mechanisms to report suspicious marketplace behavior,” said Brett A. Shumate, Assistant Attorney General for the DOJ’s Civil Division.
A Temu spokesperson told TFL, “Throughout the FTC’s investigation, we worked closely with the agency, studied its feedback carefully, and made substantial efforts to address the issues identified. It was a rigorous undertaking, but we believe such scrutiny and dialogue are ultimately constructive for our long-term development. We will continue striving to uphold high standards and to be a responsible corporate citizen in the U.S.”
THE BIGGER PICTURE: The action underscores regulators’ growing scrutiny of fast-rising marketplaces, particularly those relying on overseas sellers and aggressive discounting. Temu, which launched in the U.S. in 2022, has rapidly gained attention with viral marketing and low pricing. But its expansion has also drawn scrutiny from lawmakers, watchdog groups, and now federal regulators.
The $2 million penalty – though modest compared to Temu’s scale – signals that the DOJ and FTC intend to use the INFORM Act to hold marketplaces accountable. For consumers, the case highlights both the risks of opaque e-commerce platforms and the government’s efforts to strengthen transparency in online shopping.
The case is United States of America v. Whaleco, Inc., d/b/a Temu, 1:25-cv-12466 (D. Mass).
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