No recommendation
No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.
(Sharecast News) - The European Commission opened a formal investigation into Shein under the bloc's Digital Services Act (DSA) on Tuesday, stepping up scrutiny of the online retailer over the alleged sale of illegal products, including child-like sex dolls, and concerns about addictive app design and algorithmic transparency.
According to Reuters, the probe would examine whether products on Shein's platform could constitute child sexual abuse material and whether the company had adequate systems in place to prevent the sale of illegal goods within the European Union.
The escalation followed pressure from France, which last year urged Brussels to act over reports of child-like sex dolls being sold on the platform.
Shein had since stopped the sale of all sex dolls worldwide, Reuters reported.
The Commission would also assess whether Shein's platform design encouraged excessive engagement through reward systems and incentives that could negatively affect users' wellbeing.
In addition, regulators would reportedly scrutinise the transparency of Shein's recommender systems - the algorithms used to suggest products to shoppers - and whether the company clearly explained the main parameters behind those systems, as required under EU rules.
EU tech chief Henna Virkkunen said the DSA was designed to protect shoppers and ensure transparency about the algorithms they interact with, adding that regulators would assess whether Shein is respecting its responsibilities under the law, according to Euronews.
Under the DSA, very large online platforms must identify and mitigate systemic risks linked to illegal content and harmful products.
Companies found in breach could face fines of up to 6% of their annual global turnover.
Bloomberg noted that the investigation marked a significant escalation after the Commission last year sought information from Shein about how it protected minors from age-inappropriate content.
Shein said it had invested significantly in compliance measures, including systemic risk assessments, mitigation frameworks and additional safeguards around age-restricted products, such as age-verification tools to prevent minors from viewing or purchasing restricted items.
A spokesperson cited by Bloomberg said protecting minors and reducing harmful content were central to how the company operates.
Reporting by Josh White for Sharecast.com.