Fast-fashion giant Shein has disclosed that its U.S. operations are under investigation by the U.S. Federal Trade Commission, warning investors that the probe could lead to significant financial penalties. The revelation came in documents filed with the Hong Kong Stock Exchange as part of the company’s preparations for an initial public offering.(Reuters)
An FTC spokesperson confirmed that the agency is conducting a consumer protection investigation into the retailer’s practices. While Shein stated it is fully cooperating with regulators, the company did not disclose the specific scope of the probe or when it began. Shein cautioned that any settlement or enforcement action could require substantial monetary payments that may materially impair its financial condition and operating results.
The regulatory scrutiny arrives as Shein faces mounting financial pressure. The company revealed it recently swung to a quarterly loss due to slowing U.S. sales, driven in part by the federal government’s decision to remove the de minimis tariff exemption on small international packages. This marks a sharp turn from 2022, when excitement over Shein’s lean direct-to-consumer business model propelled its valuation to nearly $100 billion.
These expanding legal hurdles have already reshaped Shein’s public listing plans. The company pivoted its IPO strategy to Hong Kong after attempts to list in New York and London stalled over mandatory supply-chain risk disclosures. Chinese regulators reportedly objected to filing language identifying potential risks linked to Uyghur forced labor, an allegation Shein has consistently denied.
The FTC probe adds to broader government scrutiny over the company’s operations across multiple jurisdictions. Shein previously reported isolated instances of child labor within its supply chain to British lawmakers, paid $700,000 to settle a California lawsuit over shipping delays, and remains subject to an investigation by Texas Attorney General Ken Paxton regarding its manufacturing practices.