Shein disclosed Tuesday that its U.S. business is under investigation by the Federal Trade Commission, revealing the probe in documents filed with the entity that operates the Hong Kong Stock Exchange in connection with its planned initial public offering.
Shein offered no details about the nature of the FTC’s inquiry, and the filing appears to mark the probe’s first public disclosure. “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, we currently cannot predict the probable outcome of the investigation and the timing of such outcome, and we cannot rule out that such outcome could occur in the near term,” the company said in the filing
An FTC spokesperson offered no comment, and Shein left a CNBC inquiry for additional details unanswered. The company also warned that any resolution — whether a settlement or another outcome — could carry a significant financial cost. “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,” Shein said. The FTC serves as the country’s primary watchdog against consumer harm, charged with rooting out deceptive and unfair conduct in the marketplace.
Past FTC enforcement actions have targeted practices ranging from hidden fees and deceptive pricing to problematic shipping and refund policies and data-privacy violations; the agency has also trained its sights on so-called dark patterns, a category of interface design the FTC says is engineered to nudge people into parting with money or personal information. The agency has previously cited countdown timers as one example of a dark pattern. On its app, Shein deploys tools such as countdown timers, gamified discount mechanics, and limited-time flash sales as pressure tactics designed to accelerate buying decisions.