Iowa and OK Sue Temu Over Consumer Fraud, Data Collection Harvesting

Axel Dash

Des Moines, Iowa - In the wake of the biggest online buying boom in U.S. history, and a strong upward trend in the USVI to buy more products online, the State of Iowa Attorney General’s Office has filed a lawsuit against online marketplace Temu, accusing the company of violating the Iowa Consumer Fraud Act through deceptive marketing, misleading pricing practices, data collection, and intellectual property violations. The State of Oklahoma has filed a lawsuit against Temu alleging the company engages in unlawful data collection and deceptive business practices.  

Temu operates as a private subsidiary of PDD Holdings and is a publicly traded company (NASDAQ:PDD). It does not have individual shareholders of its own, instead, it is backed by a mix of institutional investors like BlackRock and Vanguard. It was founded in 2022 by Chinese billionaire Colin Huang, who remains its largest single shareholder. 

According to the Iowa lawsuit, Temu markets itself as a low-cost online shopping platform, using slogans such as “Shop Like a Billionaire” to attract consumers. The State of Iowa alleges that behind those savings, the company engages in deceptive business practices that mislead Iowa shoppers while harvesting consumer data. 

Among the allegations, the State of Iowa claims Temu misrepresents the quality of products sold on its platform, uses deceptive sign-up practices, and advertises prices in a misleading manner. The lawsuit also alleges that consumer data collected through the platform could be accessible to the Chinese Communist Party, raising concerns about user privacy and security.

The State of Iowa accuses Temu of failing to respect intellectual property rights by allowing unauthorized sales of products featuring protected trademarks, including University of Iowa Hawkeyes merchandise and apparel associated with The Iowa Wave Shirt. Proceeds from officially licensed The Iowa Wave Shirt merchandise support pediatric cancer and illness research at the University of Iowa Health Care Stead Family Children’s Hospital. 

“Iowans are always searching for good deals and ways to save money,” Attorney General Brenna Bird said in a statement. “Temu says they are a way to ‘shop like a billionaire’ and get good value for little money, but the goods are substandard and not as advertised. Worse than that, they can siphon Iowans’ information to the Chinese government. Temu is violating Iowa’s Consumer Fraud Act, and we’re holding them responsible.”

As with all civil litigation, the allegations contained in the lawsuit have not yet been proven in court, and Temu will have an opportunity to respond to the claims through the legal process. 

Oklahoma’s AG has also filed a lawsuit that outlines several major violations under the Oklahoma Consumer Protection Act, against Temu for unlawful collection of data, claiming Temu secretly infiltrates devices to harvest sensitive data - including precise locations, microphone and camera access, and activity on other apps. The suit alleges Temu utilizes “bait-and-switch” reward programs that promise prizes and rewards to users who invite friends, which are never delivered.  

Oklahoma also alleges that Temu fails to disclose its use of forced labor from ethnic minorities in China.

Temu has publicly denied the allegations. A company spokesperson stated that the retailer intends to defend itself vigorously, adding that it remains focused on helping consumers access affordable products while assisting local sellers in growing their businesses.

As of this publication date there have been no lawsuits filed against Temu by the USVI.