Whaleco Inc., which operates under the name Temu, has been hit with a $2 million penalty due to breaches of the INFORM Consumers Act, legislation aimed at enhancing transparency on online marketplaces. The penalty is the outcome of charges brought by federal regulators who claimed that Temu did not adequately disclose information about its third-party sellers.

The legal action, initiated in a federal court in Boston, marks a significant enforcement of the Act. This law mandates online platforms to provide detailed information about sellers who conduct business at high volumes on their sites.

According to the Justice Department and the Federal Trade Commission, Temu was found deficient in its obligation to provide essential identifying information about its sellers. The lack of complete addresses was a common issue, obscuring the real identities of the sellers from consumers.

Furthermore, the investigation revealed that Temu's mechanisms for reporting issues were not up to mark. The INFORM Consumers Act stipulates that customers should have the ability to lodge complaints through both online and telephonic channels if they suspect fraudulent activities. However, Temu's services in this regard were found to be inconsistent.

Assistant Attorney General Brett A. Shumate emphasized the commitment of the Justice Department to safeguarding American consumers. He stated, "The Justice Department is committed to ensuring American consumers have information about third-party sellers online and mechanisms to report suspicious marketplace behavior."

This penalty serves as a stern warning to other rapidly expanding platforms that legal compliance is not optional. In addition to the financial penalty, Temu is required to overhaul its compliance programs. This includes enhancing seller disclosures, improving its reporting tools, and undergoing federal oversight to prevent future violations.

For consumers, these enforced changes are set to increase transparency and provide more reliable methods for reporting potential fraud. The measures aim to create a safer online shopping environment, reflecting federal efforts to ensure accountability, especially as Temu's U.S. market presence grows, driven by low-cost goods primarily sourced from overseas.

Owned by the Chinese e-commerce giant PDD Holdings, Temu is operated in the U.S. by Boston-based Whaleco Inc. The company has recently come under increased scrutiny from federal agencies, pushing for higher standards of transparency and compliance in the online marketplace sector.