EU hits Temu with formal obstruction charges over Dublin raid, escalating subsidy probe

EU charges Temu with obstructing a Dublin raid. The real test is the regulation itself.

On July 31, the European Commission sent a formal Statement of Grounds to PDD Holdings, parent of online marketplace Temu, and its subsidiary WhaleCo Technology, alleging they obstructed an unannounced inspection at WhaleCo's Dublin offices last December 1. Investigators raided the premises between December 2 and 5, 2025, seeking evidence for a separate probe into whether Temu received foreign subsidies that distort competition in the EU's internal market 2.

The Commission preliminarily found that Temu failed to comply with requests covering the organization and management of its EU operations, its IT systems, and specific books and records tied to its European activities 3. The withheld material, the Commission said, prevented investigators from reviewing sources that could be relevant to the probe 2.

Temu rejected the accusations. The company said it "cooperated fully and complied with all the requests the commission made during the inspection" and "categorically" denied receiving foreign subsidies that distort the internal market 2.

The real story is not the fine. It is whether the EU's newest regulatory instrument works when its target refuses to cooperate.

The charges invoke the Foreign Subsidies Regulation, a 2023 instrument designed to close what the EU described as a "regulatory gap" 3. EU state-aid rules scrutinize subsidies granted by member states. Subsidies from non-EU governments, including China's, historically fell outside that framework. The FSR was built to catch them 3.

The Commission's enforcement powers under the FSR look strong on paper. It can conduct inspections, request and examine information from any source, and assess whether foreign subsidies distort the single market 4. Companies that intentionally or negligently fail to cooperate face fines of up to 1% of aggregate annual turnover 41.

But the Temu case exposes a structural tension. The FSR's investigative power depends on companies handing over their books when asked. If a company stonewalls, the Commission can levy an obstruction fine, but the underlying investigation into whether distortive subsidies exist can stall without the evidence that was withheld. The obstruction case and the subsidy probe run on separate tracks. A company that absorbs the obstruction penalty may still keep the subsidy question unresolved 1.

That calculation is not abstract. Temu has 130 million users in the 27-nation EU, nearly a third of the bloc's population 2. A fine capped at 1% of PDD Holdings' annual turnover may be a manageable cost if it keeps the deeper subsidy investigation from reaching conclusions.

Every non-EU company operating in Europe will be watching what happens next. The Commission has opened other cases under the FSR, including an in-depth investigation into JD.com's proposed acquisition of CECONOMY in May 2026 5. But the Temu case raises a question the FSR has not yet had to answer: what happens when enforcement depends on cooperation a company refuses to give?

The Commission has stressed that a Statement of Grounds is the first procedural step and does not prejudge the outcome 3. Temu has the right to access the Commission's file and respond before any final decision is adopted 1.

The FSR can punish non-cooperation. It cannot manufacture the evidence a company withholds. Whether that distinction matters for the broader subsidy probe will define whether the instrument has teeth or just a fine schedule.