EU Implements Strict Regulations on Shein for Online Marketplaces

Written By : Leah De-Graft Takyi
 

Shein, the ultra-fast fashion ecommerce giant that has taken the online shopping world by storm, is set to face increased governance rules under the European Union’s Digital Services Act (DSA). The Commission announced on Friday that Shein has surpassed the threshold of 45 million monthly users in the EU, qualifying it as a Very Large Online Platform (VLOP) under the DSA.

This designation is significant as it places Shein under the strictest level of online governance, requiring the marketplace to identify and mitigate systemic risks such as the sale of counterfeit or illegal goods, or other harmful content that could impact consumers’ well-being. In addition to these obligations, VLOPs are required to publish an ads library and provide access to platform data to external researchers studying systemic risk.

Shein now joins a group of roughly two dozen platforms designated as VLOPs or Very Large Online Search Engines (VLOSE) by the EU. Other VLOPs include AliExpress, Amazon, Booking.com, and Zalando. While Shein was already subject to the DSA’s general obligations, being named a VLOP increases the regulatory risk for the fast-fashion giant. The EU expects Shein to submit its first risk assessment report within four months.

Failure to comply with the DSA could result in penalties of up to 6% of global annual turnover. While the maximum fine does not increase for VLOPs, the additional obligations imposed on them raise the level of regulatory risk they face. The Commission has not yet found any platforms in breach of the DSA, so the actual enforcement of penalties remains to be seen.

Shein, known for its vast range of fashion-focused goods at affordable prices, has been expanding into other lifestyle and homeware categories. This expansion has made the marketplace popular with young users, but it also increases regulatory risks related to child protection and marketplace safety. The EU emphasized the importance of consumer protection and addressing the dissemination of illegal products in its press release accompanying Shein’s VLOP designation.

Prior to being designated a VLOP, oversight of Shein’s compliance with the DSA fell to the Irish Digital Services Coordinator (IDSC) due to its EMEA HQ location in Dublin. However, the Commission will now take on the oversight of Shein’s compliance with the subset of DSA rules that apply to VLOPs.

As Shein navigates these new governance rules and obligations, the fashion ecommerce giant will need to ensure it meets the EU’s standards for consumer protection and marketplace safety. The Commission stands ready to engage with Shein to address any compliance issues and uphold the integrity of the online platform.