Shein faces new EU digital regulations as a Very Large Online Platform

The European Commission has recognized Shein as a Very Large Online Platform (VLOP) under the Digital Services Act (DSA). As a result, the Chinese e-commerce platform must adhere to the strictest regulatory requirements stipulated by the law.

Shein has a four-month window to align with the European Union's mandates, with the deadline set for the end of August 2024.

As an online fashion retailer, Shein attracts an average of over 45 million users monthly in the EU. This figure, reported by Shein to the Commission, surpasses the DSA's threshold for being classified as a VLOP.

Therefore, on Friday, 26th April 2024, the EC officially acknowledged Shein as a VLOP. This designation imposes a series of stringent regulations.

According to the statement on the EU institution's website, Shein must implement specific actions to enhance the protection and position of online consumers, including minors, and proactively identify and mitigate any systemic risks emanating from their services.

Risk assessment reports, which are subject to independent and external audits, should be submitted to the EC four months post-notification of formal recognition and then on an annual basis. These annual reports from Shein must particularly focus on identifying any potential adverse impacts on consumer health and safety, emphasizing the physical and mental well-being of young users.

Moreover, Shein is tasked with ensuring the prevention of sales involving counterfeit, hazardous products that infringe on intellectual property rights. To achieve this, it is essential to enhance moderation processes, refine algorithms, and institute solid age verification mechanisms to limit access to age-restricted items.

Shein is also expected to observe transparency requirements, which include biannually publishing reports detailing content moderation and risk management decisions and an annual report on systemic risks and audit results.

Furthermore, the company must appoint a dedicated compliance officer and undergo an independent external audit on a yearly basis.

Following Shein's designation as a VLOP, the EC, in collaboration with the Irish digital services coordinator, will oversee Shein's adherence to the DSA.

The Commission's services will vigilantly oversee the implementation of the regulations and Shein's compliance with the DSA obligations—especially those aimed at consumer protection and curbing the distribution of illegal items. They are also poised to work closely with Shein to ensure effective enforcement of these provisions.

Within the past year, the EC has designated 23 VLOPs and Very Large Search Engines (VLOSE) under the DSA.

Shein, a Chinese online marketplace, offers a wide range of products including clothes, accessories, electronic gadgets, and home decor at competitive prices. Established in 2008, it topped the charts as the most downloaded mobile shopping app in 2021, according to Bloomberg.