Singapore-headquartered fast fashion group Shein has been ordered by the Irish consumer watchdog to rectify several practices on its platform that potentially breach European Union (EU) law.
The issues include fake discounts, pressure selling tactics, and unclear information regarding consumer rights.
Shein, which ships cheap garments made in Chinese factories directly to shoppers around the world, has one month to propose commitments on how they will address the identified consumer law issues.
The investigation is being carried out through the European Commission’s Consumer Protection Cooperation Network, which is co-led by the Competition and Consumer Protection Commission (CCPC) in Ireland and its counterparts in Belgium, France, and the Netherlands.
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Issues identified include “fake discounts” where the group pretends to offer better deals by showing price reductions that are not based on the actual prior prices, as required by EU law.
It has also been found to engage in “pressure tactics”, where it uses false deadlines to put pressure on consumers to make purchases.
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Shein has also been found to display “incomplete and incorrect information” about a consumer’s rights to return goods and receive refunds.
“We have been working constructively with national consumers authorities and the EU Commission to demonstrate our commitment to complying with EU laws and regulations, and we are continuing to engage in this process to address any concerns,” a Shein spokeswoman said.
The investigation has also identified the use of “deceptive product labels” that suggest the product “offers something special” when in fact the relevant feature is required by law.
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Other issues include “misleading claims”, where false or deceptive information is given about the sustainability benefits of certain products, as well as “hidden contact details”, where it is made difficult for consumers to contact Shein with questions or complaints.
Information has also been requested to assess the company’s compliance with further obligations including those around product rankings, ratings and reviews, and third-party sellers.
Depending on the company’s reply, the investigators said they may enter a dialogue with the company.
If it fails to address the concerns identified, national authorities can investigate further and may take enforcement measures to ensure compliance, which may include fines based on its annual turnover in the relevant member states.
CCPC Commission member Patrick Kenny said consumers “should be allowed to shop without being put under pressure by fake deadlines or misled by fake discounts”.
“They also need clear information about how consumers can contact the company, how to return an item and receive a refund,” he said.
“In this case, we have identified several practices that could mislead consumers or undermine their consumer rights.
“E-retailers and online marketplaces have a legal obligation to provide transparent and honest information about the products they sell, and consumers’ rights around returns.
“The CCPC takes any breaches of the law very seriously and looks forward to constructive engagement with Shein during the course of this investigation.”
Shein’s net profit shrank by almost 40 per cent to $1 billion (€880 million) last year as it suffered a difficult final quarter and battled competition from rival Temu. FBI director Kash Patel has shares in Shein worth between $1 million and $5 million.
