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Shein are an e-commerce platform primarily known for ‘fast fashion’ products – competitively priced, made-in-China clothing (though it does sell a range of other consumer goods, too).
The brand was founded in China in 2008 but Chris Xu, an incredibly reserved figure who makes very minimal public appearances. The company has since moved its offices, now being based in Singapore, since that location generally offers a more sophisticated regulatory and financial environment within which a company can grow. However, most of its manufacturing work still takes place in China.
The company has grown significantly to a 2023 revenue of over $30 billion, and has now been officially crowned the world’s largest fashion retailer. Shein has particularly flourished amongst younger generations of online shoppers through targeted social media marketing and a highly ‘gamified’ customer experience.
Shein rarely produces any goods itself, instead acting as a platform for various sellers to market products direct from factory to consumer (with minimal middlemen standing in the way, and therefore minimal extra costs added to the price tag).
Shein is no stranger to legal issues, with the most recent warnings from the EU forming just one link in a chain of previous problems.
For example, last year, we reported (at The Lawyer Portal) on the clash between UNIQLO and Shein in regard to an intellectual property dispute relating to one of their new cross-body shoulder bags. Numerous retailers have come forward with similar concerns over the last few years, with Shein (and other similar retailers, such as Temu) often being criticised for ‘riding on the coattails’ (a concept in IP law with serious legal consequences) of well-known name brands. Social media has fuelled these debates with discussions of Shein or Temu ‘dupes’ (duplicates) of certain products, which invariably poses questions of legality.
Another issue that Shein has encountered has been criticisms of its supply chain. Like many fast fashion, low-cost retailers (including those who maintain a very different business model to Chinese online retailers, such as Primark), Shein have drawn accusations of mistreatment and poor working conditions in its factories.
Specific criticisms have included staff in Guangzhou working 75 hours per week (over the statutory limit according to Chinese labour laws), incredibly low pay (which may be further reduced based on fines based on questionable disciplinary issues), and the use of child labour (which is an ongoing problem within certain developing countries). Shein has insisted it has rigorous processes in place to limit such issues, including an in-house compliance team.
Furthermore, Shein (along with the fast fashion industry as a whole) has been accused of fuelling the ongoing environmental crisis. Fast fashion, by its very nature, has been described as fuelling overconsumption and encouraging individuals to buy more products which are minimally used before being sent to landfill.
Also noted is the fact that many of the products used in the manufacturing process are themselves sometimes harmful to produce (especially to the scale needed to fuel operations at a company of this size). The company responded by opening a new section of its app to trade second-hand goods, although there is still some debate over the extent to which this will make a noticeable impact on the organisation’s sizeable environmental footprint.
The newest round of alleged breaches have been identified by the EU following a lengthy (and ongoing) investigation by the EU consumer rights enforcer. They were also announced by EU justice commissioner Michael McGrath, who said: “It’s now for Shein to step up, respect the rules and bring its practices fully in line with EU consumer standards”. Shein has responded in a statement, saying: “Our priority remains ensuring that European consumers can have a safe, reliable, and enjoyable online shopping experience”.
The breaches in question are numerous, although mostly relate (broadly) to unethical consumer practices in regard to the sale process. This includes ‘fake discounts’ (suggesting an item is on sale, reduced from a higher price, when in fact that price has never been legitimately used), ‘pressure selling’ (the app is known, for example, to include a timer function counting down the seconds to some deals expiring), and deceptive labelling of certain goods.
Shein doubled down on its response by speaking more broadly to the numerous accusations it has faced in other areas (such as those discussed above) too, stating that they have been “working constructively with national consumers authorities and the EU Commission to demonstrate our commitment to complying with EU laws and regulations, and we are continuing to engage in this process to address any concerns”.
There are a number of points for aspiring lawyers to take from this story. This will be particularly relevant for individuals looking to work at top City firms (think Magic Circle or elite US) who are often brought in on disputes matters (contentious work) involving major tech companies or fashion retailers like Shein.
Another way to view this story (especially if you are looking to use it as an example of your commercial awareness in an upcoming application, perhaps for a vacation scheme or pupillage) could be to break it down by practice area.
Shein’s previous legal problems touch on a range of legal practice areas. The ongoing trademark and copyright disputes over various Shein products are pertinent to IP lawyers, the potential worker/labour violations are closely tied to employment law, and environmental concerns are broadly relevant to the concept of ESG, which is something that pervades almost every aspect of legal practice in the modern day.
On this latest set of alleged breaches, there are further areas of law to consider. The interaction between different jurisdictions is key here. When the EU issues declarations of law, advisors need to understand how EU law actually works in regard to the effect this will have on companies who are international by their very nature (something top firms often specialise in dealing with, given their large global network of lawyers).
Furthermore, some students will want to latch onto the issue of consumer rights, and may choose to think about the differences in how various jurisdictions approach that issue. The study of the Consumer Rights Act 2015, for example, is very common within Contract Law modules on undergraduate law or law conversion courses.
Aspiring lawyers will also benefit from taking a step back from the purely legal issues and thinking more from a general ‘business’ perspective, asking questions around how these accusations are likely to affect Shein’s reputation and public perception as a business – these are the kind of considerations that top lawyers keep in mind for their clients.
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