Temu‘s European headquarters in Dublin were raided by EU regulators last week on concerns about potential Chinese state subsidies granted to the online retailer, a subsidiary of China’s e-commerce giant PDD Holdings, a person familiar with the matter said on Wednesday.

Temu did not immediately respond to requests for comment.

The raid comes amid increasing concern within the EU over cheap imports from China, as low-value e-commerce shipments have flooded into the bloc thanks to a customs waiver on parcels worth less than 150 euros, which European retailers say gives platforms like Temu and Shein an unfair advantage. The EU executive plans to scrap that duty exemption by the end of next year.

The European Commission’s Foreign Subsidies Regulation (FSR) takes aim at unfair foreign aid for companies with the goal of reining in competition from non-EU companies subsidised by their governments. The Commission can impose fines of up to 10% of a company’s annual aggregated turnover for breaches.

“We can confirm that the Commission has carried out an unannounced inspection at the premises of a company active in the e-commerce sector in the EU, under the Foreign Subsidies Regulation,” a Commission spokesperson said.

The Commission did not name the company or say where the raid took place.”

“Temu has drawn in tens of millions of shoppers globally to its online store selling everything from smartphones to duvet covers and leggings at rock-bottom prices, prompting Amazon to launch rival “Amazon Haul”.

The platform, whose tagline is “shop like a billionaire”, already has around 116 million average monthly users in the EU, according to Temu’s latest transparency report, despite only launching in the market in April 2023.

Raids are usually carried out when EU regulators have evidence of violations, either from whistleblowers or from their own investigations. They can lead to companies offering concessions or cooperating in return for reduced fines.

It is not Temu’s first run-in with European authorities. The Commission last year opened an investigation into Temu under the Digital Services Act, its regulation governing online platforms, and in July announced preliminary findings that Temu is not doing enough to prevent the sale of illegal products through its platform.

Foreign subsidies may take the form of zero-interest loans and other below-cost financing, tax breaks, or preferential tax treatment, among others.

China’s trade surplus topped $1 trillion for the first time in November, with manufacturers redirecting more goods to non-U.S. markets due to tariffs, fuelling an export surge to Europe, Australia and Southeast Asia.