Shein disclosed that its U.S. business is under investigation by the Federal Trade Commission in documents filed with the entity that operates the Hong Kong Stock Exchange. The Chinese-founded fast fashion company did not specify what the FTC is investigating, but the disclosure appears to be the first time the probe was made public. The FTC is the U.S.'s leading consumer protection agency with a mission to stop deceptive or unfair business practices.
Shein States Cooperation with FTC and Settlement Possibility
Shein wrote in the filing that it is actively cooperating with the FTC. The company stated it currently cannot predict the probable outcome of the investigation and the timing of such outcome, and cannot rule out that such outcome could occur in the near term. Shein added that the outcome of the investigation, whether in settlement or otherwise, may require the company to make significant monetary payments that could have a material adverse effect on its financial condition and results of operations. The company noted that although it is possible that it may reach a settlement with the FTC in connection with the investigation, it cannot predict whether this will occur.
FTC Focuses on Dark Patterns and Consumer Protection
The FTC has previously investigated companies for practices like suppressing bad reviews, hidden fees or misleading prices, shipping and refund practices and issues related to privacy and data, among many other issues. One of the FTC's 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 give up their money or data. In a 2022 report explaining dark practices, the FTC referenced countdown timers in general as one example of a common dark pattern.
Shein Uses Countdown Timers and Gamified Discounts
Shein is known to offer countdown timers, gamified discounts and flash sales, among other tactics, on its app to create a sense of urgency and get consumers to spend. These app features align with examples the FTC cited in its 2022 report on dark patterns.
Shein's Hong Kong IPO Recently Approved
Shein rose to global prominence after the Covid-19 pandemic and previously tried to go public in the U.S., but turned its ambitions to London and ultimately Hong Kong after facing extreme political pushback over its business practices. The company's listing in Hong Kong was recently approved, but it is unclear when it will start trading.
FAQ
What did Shein disclose in its Hong Kong IPO filing?
Shein disclosed that its U.S. business is under investigation by the Federal Trade Commission in documents filed with the entity that operates the Hong Kong Stock Exchange. The company did not specify what the FTC is investigating, but stated this appears to be the first time the probe was made public.
What are dark patterns according to the FTC?
The FTC describes dark patterns 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 give up their money or data. In a 2022 report, the FTC referenced countdown timers as one example of a common dark pattern.
When will Shein start trading in Hong Kong?
Shein's listing in Hong Kong was recently approved, but it is unclear when the company will start trading. No specific trading start date has been confirmed in the source documents.
