Online fast-fashion retailer Shein will soon face stricter digital regulations from the European Union, the world’s largest trading bloc said in a statement on Friday.
The EU said it formally classified Shein as a “very large online platform” (VLOP) under the Digital Services Act (DSA), which looks to protect online users by creating safer digital spaces.
The European Commission said that because Shein has over 45 million monthly users across its 27 European nations, it is “above the DSA threshold” and will need to comply with stricter requirements by August 2024.
The EU said that Shein will have four months to submit a risk assessment report that includes “mitigation measures” to address the “listing and sale of counterfeit goods, unsafe products, and items that infringe on intellectual property rights.”
The Chinese company has been accused in the past of copying designs from other retailers such as Uniqlo. Yet, that hasn’t stopped it from mulling a potential IPO.
Shein will need to share risk assessment reports every year that evaluate any potential harm to customers, especially those who are underage, the Commission said. Moreover, Shein will need to ensure its risk assessments are externally audited.
The Commission’s latest enforcement comes just a year after it adopted its first designation decisions. Violations of its guidelines may lead to a fine of up to 6% of the company’s annual worldwide revenue, the Commission noted.
Tech giants including Amazon, Meta, and TikTok are also on the Commission’s list. Thus far, 23 companies have been classified as “very large online platforms” under the DSA guidelines.