Shein Discloses FTC Consumer Protection Probe Ahead of Hong Kong IPO

Shein, which has received a listing hearing from the Hong Kong Stock Exchange, disclosed in its preliminary prospectus that its US business is facing an investigation by the US Federal Trade Commission (FTC). An FTC spokesperson confirmed that the probe involves consumer protection issues but declined to provide further details.

The FTC is the primary consumer protection agency, tasked with stopping deceptive or unfair business practices. Past FTC investigations have covered hidden fees, misleading pricing, return and refund processes, privacy data protection, and suppression of negative reviews. One of the FTC’s key focus areas is 'dark patterns' – design tricks and psychological tactics such as pre-selected checkboxes, hard-to-find disclosures, and complicated cancellation policies that induce consumers to spend money or share data. In a 2022 report on dark patterns, the FTC cited countdown timers as a common example. Shein has extensively used countdowns, gamified discounts, and flash sales in its app to create a sense of urgency and drive purchases.

After surging during the pandemic, Shein attempted to list in the US but faced strong political opposition over its business practices. It then turned to London and eventually chose Hong Kong. Its Hong Kong listing application was recently approved, though the exact timing of the deal has not been announced.