July 28, 2026
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Is Shein in Trouble in the US as the FTC Investigates its Business Practices?
Recent headlines haven’t been altogether kind to fast fashion company Shein, with the China-based fast fashion brand having recently disclosed a $99 million quarterly loss — tied to the end of the de minimis exemption as well as tariff pressures, in addition to other headwinds — and ongoing concern about its loss of valuation over the course of the past few years.
Now, another roadblock has been placed in the retailer’s path, according to CNBC’s Gabrielle Fonrouge, with news emerging that Shein is under investigation by the Federal Trade Commission (FTC) regarding its U.S. business. In documents related to its upcoming Hong Kong IPO, Shein disclosed that the FTC was probing stateside business operations — but the reasoning behind the investigation remains unclear.
“We are actively cooperating with the FTC… Although it is possible that we may reach a settlement with the FTC in connection with the investigation, we currently cannot predict the probable outcome of the investigation and the timing of such outcome, and we cannot rule out that such outcome could occur in the near term,” Shein wrote in said documents, also noting that the possibility of having to make monetary settlement was in play.
Shein says it's under investigation by the Federal Trade Commission as it prepares for Hong Kong IPO https://t.co/g724gnBxGz
— CNBC (@CNBC) July 28, 2026
And while the FTC did not respond to request for comment from the news outlet, Fonrouge did speculate that the concerns being probed could be linked to so-called “dark patterns” — described as “design tricks and psychological tactics, such as pre-checked boxes, hard-to-find-and read disclosures, and confusing cancellation policies” which are leveraged to create an incitement to buy — which Shein has been accused of deploying.
“Shein is known to offer countdown timers, gamified discounts and flash sales, among other tactics, on its app to create a sense of urgency and get consumers to spend,” Fonrouge wrote.
“In a 2022 report explaining dark practices, the FTC referenced countdown timers in general as one example of a common dark pattern,” she added.
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Discussion Questions
In your opinion, will Shein continue to face declining fortunes in the U.S. market? Which factor will be the most damaging to its operations stateside?
Do you believe the FTC investigation will result in substantive findings against Shein? Will the alleged “dark patterns” be the crux of the probe?
What can Shein do, if anything, to improve its current standing with American shoppers (and lawmakers)? Are competitors growing in influence?
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Neither Shein nor the FTC has disclosed what is being investigated, so it is hard to speculate. However, given the FTC’s general remit and that we know this is focused on consumer protection, the case is likely concerning misleading discounts or gamification that creates artificial urgency. General marketplace compliance could be another contender. There is a financial threat from a fine or settlement, which Shein is obliged to flag in its IPO filing, but I don’t see this as material given the size of the business. The potentially more disruptive outcome would be any changes that need to be made to the business model.
The timing of this could not be worse for Shein as it prepares to go public in Hong Kong. The FTC investigation is yet another hit that this company has taken ever since the end of the de minimis exemption. Whether or not the FTC investigation results in any significant damage/fine is yet to be seen, but it’s terrible from a perception standpoint, and their business results reflect the serious headwinds its facing. The best thing Shein can do in the short-term is to try to regain positive sales and profitability performance, but this won’t be easy.
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Neither Shein nor the FTC has disclosed what is being investigated, so it is hard to speculate. However, given the FTC’s general remit and that we know this is focused on consumer protection, the case is likely concerning misleading discounts or gamification that creates artificial urgency. General marketplace compliance could be another contender. There is a financial threat from a fine or settlement, which Shein is obliged to flag in its IPO filing, but I don’t see this as material given the size of the business. The potentially more disruptive outcome would be any changes that need to be made to the business model.
The timing of this could not be worse for Shein as it prepares to go public in Hong Kong. The FTC investigation is yet another hit that this company has taken ever since the end of the de minimis exemption. Whether or not the FTC investigation results in any significant damage/fine is yet to be seen, but it’s terrible from a perception standpoint, and their business results reflect the serious headwinds its facing. The best thing Shein can do in the short-term is to try to regain positive sales and profitability performance, but this won’t be easy.