Chinese e-commerce giant Shein has revealed that its US business is undergoing investigation by the Federal Trade Commission (FTC) ahead of its Hong Kong IPO, the company said in its documents.
The fast-fashion platform did not specify what the cause of the probe is but underlined that it cannot predict the probable outcome of the investigation and the timing of such outcome.
"We are actively cooperating with the FTC … Although it is possible that we may reach a settlement with the FTC in connection with the investigation," Shein stated in the IPO documents.
The popular e-commerce firm added that it cannot rule out the possibility that the outcome could occur in the near term and may require some hefty monetary payments.
“The outcome of the investigation, whether in settlement or otherwise, may require us to make significant monetary payments that could have a material adverse effect on our financial condition and results of operations,” the document highlighted.
The FTC, America's premier consumer protection agency with a mission to stop "deceptive or unfair business practices", has previously launched a probe into companies for practices like suppressing bad reviews, hidden fees or evasive rates, shipping and refund practices and issues related to privacy and data, among many other concerns.
One of the FTC's primary areas of focus is "dark patterns," which it describes as “design tricks and psychological tactics, such as pre-checked boxes, hard-to-find-and read disclosures, and confusing cancellation policies” to make consumers more willing to surrender their money or data.
On its applicarion, Shein has often resorted to tactics like countdown timers, gamified discounts and flash sales, among others to manufacture a sense of urgency and prompt consumers to spend.
The platform rose to global popularity after the Covid-19 pandemic, and has attempted an IPO in the US and UK before ultimately shifting to Hong Kong after massive political pushback over its business practices. While the Hong Kong listing was recently greenlit, the timeline is still unclear.
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