Shein has rapidly grown into one of the world’s largest online fast fashion retailers, offering ultra-low prices and an ever-changing catalogue of trendy clothing. Its ability to produce and distribute garments at an unprecedented speed has made it a dominant force in the industry. However, this business model has come under scrutiny, particularly in the European Union (EU), where regulators have raised concerns about its marketing practices. EU consumer laws are designed to ensure fair competition and prevent deceptive advertising.
The Consumer Protection Cooperation (CPC) Network, alongside the European Commission, recently investigated Shein’s sales tactics, uncovering misleading discounts, pressure-selling techniques, and questionable sustainability claims. These findings highlight broader concerns about transparency in retail and the growing enforcement of consumer protection laws. As regulatory oversight increases, e-commerce and fast fashion brands must navigate legal risks while maintaining consumer trust.
The Key Allegations Against Shein
- Fake Discounts: Regulators found that Shein artificially inflated original prices to make discounts appear more significant than they actually were. This practice deceives consumers into believing they are getting an exceptional bargain when, in reality, the discount is exaggerated. Misleading pricing tactics like this violate EU consumer protection laws designed to ensure fair advertising and prevent manipulative sales strategies.
- Pressure-Selling Tactics: Shein reportedly used countdown timers, flash sale warnings, and “limited stock” alerts to create a false sense of urgency, pressuring consumers to make impulse purchases. These tactics make shoppers feel they must act quickly, preventing them from making informed decisions. Such methods can be particularly concerning when customers end up purchasing items they wouldn’t have otherwise bought, leading to buyer’s remorse or unnecessary spending.
- Greenwashing: The brand marketed certain products as “sustainable” without providing verifiable evidence to support those claims. Given the rising consumer preference for ethically sourced and environmentally responsible products, falsely portraying items as eco-friendly can significantly damage trust. The lack of transparency in sustainability claims raises concerns about misleading advertising and the broader issue of greenwashing within the fashion industry.
- Opaque Refund & Return Policies: Customers reported difficulty in understanding and accessing Shein’s refund and return policies, leading to frustration and distrust. The process was often unclear, making it hard for consumers to determine their rights regarding product returns. Insufficient customer service and a lack of accessible dispute resolution mechanisms further exacerbated these concerns, leaving shoppers feeling misled when trying to return items or claim refunds.
Each of these allegations highlights critical areas where misleading advertising and sales strategies can harm consumer trust.
What actions are regulators taking against Shein?
The CPC Network has given Shein one month to address these concerns and propose corrective measures. If the company fails to comply, it could face fines based on its annual turnover in EU member states. This enforcement action reflects a broader push to hold fast fashion brands accountable for misleading consumers.
Beyond financial penalties, Shein’s reputation is at stake. Increased scrutiny from regulators and negative media coverage could impact consumer trust and brand loyalty. The case also highlights the growing regulatory focus on e-commerce platforms, with authorities taking stronger action against misleading advertising and unethical business practices.
Lessons for E-commerce, Retail & Risk Management
1. Audit Pricing
Ensure discount strategies are legitimate by maintaining transparency in original pricing. Avoid artificially inflating prices before applying discounts, as this can mislead consumers into thinking they are getting a better deal than they actually are. Brands should conduct internal reviews of pricing policies to confirm compliance with consumer protection laws and prevent accusations of deceptive advertising.
2. Verify Sustainability Claims
All environmental claims should be backed by credible evidence, such as third-party certifications or detailed reports on sustainable practices. Companies should avoid vague or misleading language when marketing eco-friendly products and clearly define what makes an item sustainable. Regular audits of materials, manufacturing processes, and supply chains can help ensure authenticity in sustainability messaging.
3. Improve Transparency in Refund Policies
Refund and return processes should be easy to access and clearly outlined for customers. Complicated or hidden policies create frustration and erode consumer trust. Companies should provide upfront details on return eligibility, timeframes, and refund processing methods, ensuring that customer service teams are equipped to handle inquiries efficiently.
4. Avoid Pressure-Selling Tactics
Ethical marketing should prioritise consumer empowerment rather than manipulation. The use of countdown timers, “limited stock” warnings, and other urgency-driven tactics can create unnecessary pressure, leading to impulse purchases that may result in dissatisfaction or high return rates. Instead, brands should focus on genuine value propositions and transparent product availability.
5. Conduct Due Diligence on Marketing
Companies must regularly assess their marketing strategies to ensure compliance with consumer protection laws. This includes verifying the accuracy of promotional claims, ensuring price comparisons are truthful, and making sure advertisements do not exploit consumer psychology in misleading ways. Internal teams or third-party auditors can help maintain ethical standards in advertising.
6. Adapt to Stronger Regulatory Enforcement
With increasing scrutiny from regulators, brands must stay updated on evolving fraud prevention measures and legal requirements. This involves keeping track of changes in consumer protection laws, adjusting business practices accordingly, and proactively addressing potential compliance issues. Failing to adapt could result in fines, lawsuits, or reputational damage.
By following these principles, businesses can strengthen their credibility, maintain consumer trust, and avoid legal pitfalls.
What role does due diligence play in corporate compliance?
For businesses operating in e-commerce, retail, risk management, and investigative assessments are crucial in maintaining ethical practices. Conducting reputation monitoring, verifying marketing claims, and ensuring supply chain transparency can help brands avoid regulatory violations. Due diligence plays a vital role in ensuring that companies comply with EU consumer laws, particularly in industries where misleading advertising and unethical business practices are prevalent.
Retailers must take proactive steps to mitigate financial risks and safeguard their credibility. This includes conducting thorough audits of their pricing strategies, ensuring that sustainability claims are backed by verifiable evidence, and maintaining transparency in refund and return policies. By implementing robust compliance measures, businesses can protect themselves from legal penalties and reputational damage.
Written by
Julia Ducret | Due Diligence Analyst
