EU Launches Investigation into Shein for Illegal Products and Design Issues

EU Investigation into Shein

BRUSSELS, Feb 17 (Reuters) - The EU opened a formal investigation into Chinese online retailer Shein on Tuesday over illegal products and concerns about the platform's potentially addictive design, stepping up scrutiny under the bloc's strict Digital Services Act.

Background of the Investigation

The move under the Act, which requires online platforms to do more to counter illegal and harmful content, came after France urged the EU executive in November to crack down on the sale of child-like sex dolls on Shein's platform.

Shein's Response and Compliance Measures

Shein has, since then, stopped the sale of all sex dolls worldwide.

Concerns Over Addictive Design

The company and its Chinese rival Temu have become the most high-profile symbols of broader concerns over the flow of cheap Chinese products into Europe.

"The Digital Services Act keeps shoppers safe, protects their wellbeing and empowers them with information about the algorithms they are interacting with. We will assess whether Shein is respecting these rules and their responsibility," EU tech chief Henna Virkkunen said in a statement.

The Commission had flagged the possibility of an EU investigation last month.

ADDITIONAL SAFEGUARDS ROLLED OUT, SHEIN SAYS

Shein said it would continue to cooperate with the EU watchdog and that it had invested significantly in measures to strengthen compliance with the DSA, including conducting systemic-risk assessments and mitigation frameworks, and enhancing protection for younger users.

"In addition to enhancement of detection tools, we also accelerated the rollout of additional safeguards around age-restricted products," the company said, including age-verification measures to prevent minors from viewing or purchasing age-restricted content or products.

The European Commission said it would investigate the systems Shein has put in place in the EU to limit the sale of illegal products, including potential child sexual abuse material.

ADDICTIVE DESIGN COULD NEGATIVELY IMPACT USERS

The investigation will also focus on Shein's addictive design, including the award of points or rewards for engagement, that could have a negative impact on users' wellbeing.

The transparency of the recommender systems that Shein uses to propose content and products to users will also come under EU scrutiny.

Temu was charged last year with breaching the DSA for not properly assessing the risks of illegal products sold on its platform. A final EU decision could come this year. There are ongoing EU investigations into its addictive design features and transparency of its recommendation systems, among others.

Companies risk fines as much as 6% of their global annual turnover for DSA violations.

(Reporting by Foo Yun Chee; Editing by Bernadette Baum)