Shein Subject To Most Stringent EU Digital Rules

Singapore-based fast-fashion company Shein is to be subjected to the European Union’s strictest level of digital regulations under the Digital Services Act (DSA) that came into effect last year after soaring user figures put it over a key threshold, regulators have said.

The Chinese-founded company reported having more than 45 million average monthly users in the EU, categorising it as a “very large online platform” or VLOP, along with the tech industry’s biggest companies including Amazon, AliExpress, Meta, and TikTok.

Such platforms must comply with strict rules including taking specific measures to protect online users and assessing and mitigating “sytemic risks” from its services, such as limiting the sale of illegal or counterfeit products.

The obligations include adjusting a service’s user interfaces and recommendation algorithms to prevent risks to consumer safety and well-being and filing annual risk-assessment reports that evaluate potential harm to consumers, especially children, the European Commission said in disclosing the company’s designation on Friday.

User threshold

Shein, which still largely relies on manufacturers in China for its low-cost goods such as $15 (£12) dresses and $3 T-shirts, has seen its popularity surge through social media partnerships with online influencers and celebrities and recently reported having 108 million monthly active users in the EU.

The firm said it would “work constructively” to “deliver a safe and compliant environment for our online community”.

“We share the Commission’s ambition to ensure consumers in the EU can shop online with peace of mind, and we are committed to playing our part,” said Shein global head of public affairs Leonard Lin in a statement.

“We also share a commitment to the principles of transparency and accountability that are at the core of the DSA.”

‘Stringent rules’

“Following today’s designation as a VLOP, Shein will have to comply with the most stringent rules under the DSA within four months of its notification (i.e. by the end of August 2024),” the Commission said in a statement.

At the end of the notification period Shein will have to submit a risk assessment report and will be obliged to bring in mitigation measures against “the listing and sale of counterfeit goods, unsafe products, and items that infringe on intellectual property rights”, the Commission said.

Shein filed for a US public offering late last year and was valued at $66bn in 2023.