Chinese online retailer Temu agrees to data privacy restrictions to settle Texas lawsuit, documents say

By Jody Godoy and David Shepardson

Oct 16 (Reuters) – Chinese online retailer Temu has agreed to settle data privacy claims raised by Texas and will restrict how it handles personal data from shoppers in ​the state, according to documents made public Friday.

Temu faces several lawsuits ‌from US states concerned that the company unlawfully harvests US user data that could be accessed by the Chinese government. Texas is the first to resolve those claims. It is also the first time the company has agreed to keep personal data on US ‌servers ​and restrict when it can be sent to ⁠China, Texas officials said.

Temu also ⁠agreed to conduct annual independent product safety testing to identify products containing dangerous chemicals and materials. Temu must remove any products found to contain dangerous materials, terminate the seller and its affiliated stores, notify affected Texas ​consumers, and issue full refunds.

Texas Attorney General Ken Paxton said the settlement also requires Temu “to implement rigorous new product audits and safety standards to ⁠protect consumers from dangerous materials in products, ⁠including clothing and children’s items.”

He added it will prevent Temu ​from collecting and using Americans’ data.

Temu had more than 82.4 million active users ​in the United States as of September 2023, Paxton’s office said.

Temu ‌will pay $3 million to the state as part of the settlement and Texas said failure to abide by various data security provisions would result in a potential $8 million penalty each year a violation occurs.

Several states sued Temu in ⁠the wake of reports alleging Temu and parent company PDD Holdings used invasive mechanisms in their apps.

Temu, which did not immediately respond to a request for comment, ⁠denied wrongdoing in the ‌settlement documents, and will also be required to hire ⁠a third party cybersecurity auditor to examine the app’s ​code for ‌malware and spyware, one of the main concerns that ​spurred Texas ⁠to sue in February.

Under the terms of the settlement, Temu agreed to send only data necessary to fulfilling a transaction, such as shipping addresses, to China.

Texas alleged that Temu used code that allows an inappropriate level of access to users’ devices. Temu has denied the allegations.

(Reporting by Jody Godoy and David Shepardson, ​Editing by Franklin Paul)