Shein Faces EU Consumer Protection Action - Low-Cost E-Commerce Risks

Shein Under EU Scrutiny for Consumer Protection

Shein, the prominent Chinese e-commerce and fast fashion company, is currently subject to increased examination by the European Union regarding adherence to consumer protection regulations.

This scrutiny follows the initiation of a coordinated action undertaken by the EU’s Consumer Protection Cooperation Network (CPCN).

Directives Under Review

The investigation references several key EU directives, including those concerning Unfair Commercial Practices, Consumer Rights, Unfair Contract Terms, Price Indication, and e-commerce.

However, the precise nature of the CPCN’s concerns regarding Shein’s marketplace remains unspecified at this time.

EU Addresses Surge in Low-Value E-commerce

The announcement of this action coincided with the European Commission’s presentation of a comprehensive package of measures and reforms.

These are designed to address the growing risks associated with the recent increase in low-value e-commerce activity.

Concerns Over Product Safety

During a press conference, EU lawmakers cautioned about a significant influx of inexpensive imports.

These products are reportedly failing to meet the EU’s established standards, potentially creating health and safety hazards for consumers.

Examples of Unsafe Products

Specifically mentioned were unsafe products such as toys containing small, detachable parts—posing a choking hazard—and electrical appliances lacking sufficient insulation.

The presence of harmful chemicals in clothing was also highlighted as a potential risk linked to these low-cost imports.

Compliance Rates and Statistics

Commissioner Michael McGrath emphasized the severity of the situation, stating that testing reveals a high rate of non-compliance.

Up to 96% of products tested and sold on these platforms are not fully compliant with EU rules and safety standards, according to recent evidence.

Growth in Low-Value Consignments

The EU reports a substantial increase in “low-value consignments”—goods valued at €150 or less—entering the market.

Approximately 4.6 billion such consignments arrived, averaging 12 million parcels daily, representing a doubling from 2023 and a tripling from 2022.

Environmental and Competitive Impacts

This surge in ultra-low cost e-commerce is also prompting concerns regarding environmental sustainability and fair competition within the EU.

The multifaceted nature of these issues necessitates a comprehensive strategy.

A Multi-Pronged Approach

This strategy involves leveraging existing legislation, such as the Digital Services Act, Digital Markets Act, General Product Safety Regulation, and Ecodesign rules.

Furthermore, the EU is pursuing legislative reforms and additional regulations, particularly concerning customs duties, to address these challenges effectively.

Safe and Sustainable E-commerce Practices

The European Commission has unveiled a comprehensive strategy, termed “A Comprehensive EU Toolbox for Safe and Sustainable E-commerce.” This proposal addresses significant areas such as customs modernization and specific regulations for imported products.

Furthermore, it emphasizes the need for enhanced consumer protection and stricter competition enforcement within the e-commerce sector.

Consumer Protection and Enforcement

Regarding consumer safeguards, it’s important to recognize that the Commission primarily coordinates efforts through the CPCN. The actual implementation of legal frameworks rests with national authorities in each Member State.

Consequently, the EU’s direct influence is limited, leading to a strong public appeal for increased action by member states.

Environmental Sustainability and Regulation

The Communication also advocates for the swift adoption of the initial action plan under the Ecodesign for Sustainable Products Regulation.

This initiative aims to address the environmental impact resulting from the growth of e-commerce.

Additionally, it encourages EU lawmakers to support a proposed revision to the Waste Framework Directive, specifically focusing on the management of textile waste.

Upcoming Digital Fairness Act

A “digital fairness act” is slated for presentation by the Commission, as announced on Wednesday.

According to McGrath, this act will concentrate on strengthening consumer protection within the digital landscape in a focused manner.

Actions Against Major Platforms

The EU has already initiated actions in this domain, issuing requests for information to Shein and Temu in June of last year.

These requests were made under the Digital Services Act (DSA) following the designation of both platforms as very large online platforms (VLOPs), subjecting them to centralized EU oversight.

Both Shein and Temu have faced consumer protection concerns, with coordinated complaints filed against Temu in May alleging breaches of the DSA.

Ongoing Investigations

Since March 2024, the Commission has been conducting a DSA investigation into AliExpress, another major importer of low-cost goods into the EU.

Since the implementation of the online governance framework, e-commerce has been identified as a key enforcement priority, a point reiterated by EVP Henna Virkkunen.

Prioritizing Online Marketplace Oversight

“We will prioritize and intensify the Commission’s supervision and enforcement of rules applicable to online marketplaces under the Digital Services Act,” stated Virkkunen during a press briefing.

This includes a focus on assessing and mitigating the risks these platforms pose to consumers.

EU Customs Union Reform

A proposal to reform the European Union’s customs union has been under consideration since 2023. This reform would involve the removal of current duty exemptions for packages containing goods valued under €150.

During a recent briefing, Maroš Šefčovič, the Commissioner for Trade and Economic Security, highlighted that the proposal addresses the increasing popularity of e-commerce. He stated it includes “essential measures” that would require greater importer responsibility from online platforms.

He cautioned that the existing system of designating citizens as importers for customs purposes is not effectively safeguarding their interests. Šefčovič also emphasized the necessity of “improving control capabilities.”

He further noted that, given the surge in low-value e-commerce imports, finalizing the customs union reform – and potentially accelerating its implementation to 2026 – is crucial.

The Commission suggests that Member States consider “additional measures,” such as a uniform handling fee for goods shipped directly to consumers. Other potential actions include establishing a dedicated “customs priority control area” for e-commerce products and initiating coordinated efforts to quickly identify and remove hazardous items through product safety inspections.

Šefčovič characterized the Communication as a “call to action,” encouraging EU lawmakers and stakeholders to “collaborate… to guarantee that all citizens benefit from a secure online marketplace.”

BEUC, the European Consumer Organisation, responded to the Commission’s proposal by advocating for “swift and ambitious action.” Agustín Reyna, its Director-General, stated that consumer tests reveal numerous unsafe products, including toys and textiles, are sold online. He asserted that the EU must ensure fair practices to protect consumers and promote decarbonization.

Reyna added that consumer groups support the European Commission and national authorities in launching enforcement actions, referencing ongoing investigations against Temu and the newly announced action against Shein.

Shein was contacted for a statement regarding the CPCN action. Jakub Hera Adamowicz, a company spokesman, provided a statement indicating their commitment to ensuring a secure online shopping experience for European consumers and their willingness to collaborate with the CPC Network and the Commission to address any concerns.

In broader comments concerning the Commission’s proposed toolkit for secure and sustainable e-commerce, Shein expressed its support for “initiatives that enhance trust and safety for European consumers shopping online.” The company also advocated for “a level playing field.”

Shein explained that its on-demand business model aims to minimize waste and inefficiency in materials and unsold inventory, enabling the provision of stylish, high-quality products at affordable prices. The company concluded by stating that its regulatory and compliance teams throughout the EU will work with EU and national government partners to evaluate the recommendations and determine how Shein can contribute to strengthening the industry and improving the online shopping experience for European consumers.