Shein FTC investigation disclosed ahead of Hong Kong IPO
Shein said the FTC is investigating its U.S. business, adding a regulatory risk as the fast-fashion company pursues a Hong Kong listing.
By Maya Lindqvist · Senior Technology Correspondent
3 min read
Shein disclosed a Shein FTC investigation into its U.S. operations in documents tied to its planned Hong Kong initial public offering. The disclosure adds a U.S. regulatory issue to the fast-fashion retailer’s listing effort, which has already shifted away from earlier plans to go public in the U.S. and London, according to CNBC.
The Chinese-founded company did not state what the Federal Trade Commission is examining. CNBC reported that the disclosure appears to be the first public acknowledgment of the probe.
Shein said in the filing with the operator of the Hong Kong Stock Exchange that it is cooperating with the FTC. The company said a settlement is possible, but it cannot forecast the timing or outcome of the investigation.
Shein also warned that the matter could lead to large payments, either through a settlement or another result, and that such costs could hurt its financial condition and operating results. CNBC said Shein and the FTC did not immediately respond to requests for more information.
What is the FTC investigating Shein for?
The filing does not identify the conduct under review. The FTC is the main U.S. agency for consumer protection and works to stop unfair or deceptive business practices, according to the agency.
CNBC noted that the FTC has previously examined companies over hidden fees, misleading pricing, suppressed negative reviews, shipping and refund practices, and privacy or data issues. Those examples do not establish the focus of the Shein inquiry.
The FTC has also targeted what it calls “dark patterns,” a term it uses for design choices that push people toward spending money or sharing data. In a 2022 report, the agency cited practices such as pre-checked boxes, hard-to-read disclosures, confusing cancellation policies and countdown timers as examples of tactics that can mislead consumers.
CNBC reported that Shein’s app has used countdown timers, gamified discounts and flash sales, features designed to create urgency and encourage purchases. The filing does not say whether any of those practices are part of the FTC review.
How the probe fits into Shein’s IPO plans
An initial public offering is the process by which a private company sells shares to public investors for the first time. Shein is preparing for a Hong Kong IPO after earlier attempts to list elsewhere ran into obstacles, CNBC reported.
The retailer had previously sought a U.S. listing, then turned its attention to London and later Hong Kong after political resistance over its business practices, according to CNBC. Its Hong Kong listing has been approved, though the timing of its first day of trading remains unclear.
Shein rose quickly after the Covid-19 pandemic and became one of the best-known names in online fast fashion. The FTC disclosure gives prospective investors another risk to weigh as the company moves through the Hong Kong listing process.
This story draws on original reporting from CNBC.