EU Commission: Shein underestimates its own risks

The platform Shein, operated by Infinite Styles Services, reportedly has 108 million monthly users in the European Union. Consequently, the company faces significant obligations. "Illegal products are prohibited in the EU – regardless of whether they are on a store shelf or an online marketplace," stated EU Commission Vice-President Henna Virkkunen, responsible for enforcing the Digital Services Act, on Tuesday afternoon, marking the initiation of formal investigative proceedings for alleged violations of three key regulations.

EU Commission officials now state that the operator has significantly underestimated the risks posed by its marketplace. Therefore, a formal investigation under the Digital Services Act (DSA) has been launched against the marketplace operator, primarily known as a fashion retailer. The investigation will examine whether the operator has adequately fulfilled its general due diligence obligations as required by European law. This does not concern individual cases that may be criminally relevant. Such individual cases are the responsibility of national law enforcement agencies, as seen in the case of child-like sex dolls or weapons that were sold via Shein and are currently occupying the French judiciary. Rather, the EU Commission is concerned with whether the Shein operator effectively combats the distribution of illegal goods within the EU.

The proceedings aim to clarify whether, for instance, product safety measures are effectively preventing the offering of toxic children's toys, cosmetics, or clothing containing harmful substances such as lead. A typical industry standard includes hashing product images to prevent the re-uploading of content once identified as problematic and to block sellers in the future. Furthermore, platforms use block lists for descriptions and common rephrasing, as well as interfaces to the systems of market surveillance authorities in the EU.

Platform could encourage risky user behavior

A second aspect concerns whether features such as reward mechanisms or bonus systems are being used improperly and whether the platform has addressed potential problems and effectively countered their consequences. The suspicion is that Shein uses certain features that are addictive or encourage users to engage in risky behavior, according to Commission circles.

Additionally, the EU Commission sees a potential violation in the recommendation logic that users encounter on Shein. The DSA requires, among other things, that the essential criteria for any form of recommendation system on the largest platforms be disclosed. Here, there is a suspicion that Shein has not complied with this requirement. Furthermore, the Digital Services Act also mandates that users be offered an easily accessible alternative sorting option that is not based on profiling, i.e., exploiting user behavioral data.

Protection of minors not yet part of the proceedings

Potential existing problems with the protection of minors are not part of the investigation now initiated. However, the Irish DSC authority has also sent an information request to the marketplace operator today regarding this matter. A decision will then be made on whether there is also a prima facie case for formal proceedings against Shein in this regard.

Since Shein was classified as a "very large online platform" (VLOP) in April 2024, the EU Commission has requested information from the operator three times so far. Shein is under close scrutiny through several EU instruments. The initiation of formal investigative proceedings against Shein had been long awaited. Whether this procedure will ultimately result in a formal penalty is not yet foreseeable. For other providers, outcomes have ranged from self-commitments to rectify shortcomings to penalty notices.

(kbe)