July 28, 2026
dimarik/Depositphotos.com
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.
BrainTrust
Neil Saunders
Managing Director, GlobalData
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Cathy Hotka
Principal, Cathy Hotka & Associates
Recent Discussions
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?
Poll
Neither Shein nor the FTC has disclosed what is being investigated, so we can only 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 hugely destabilizing 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.
Oh, nothing that a Ballroom Fund contribution can’t fix!
Yes, I think it’s clear they have challenges, but before asking if they’re irreversible, perhaps we should be looking at it from the other direction: are – were? – they really in a strong position to begin with? A company that sells flashy goods cheaply is always going to be dependent on a lot of tenuous factors – novelty, preferential relationships, catching competitors offguard – that are easy to lose, and hard to get back once lost.
Shein built it’s US advantage on two things: rock bottom prices enabled by de minimis and a shopping experience engineered to keep you buying. The first has been largely gutted, and now there’s an FTC investigation on top of that. That’s a lot of headwinds hitting at once, and it raises questions about where the model goes from here.
There may be headwinds for Shein, but they aren’t from consumers. Shein and Temu are still wildly popular.
I think the FTC investigation is only one piece of a much larger challenge. Shein built a highly successful business by making trend-driven fashion incredibly affordable just as social media accelerated consumers’ appetite for constant newness.
Today, the economics are changing. The loss of de minimis, tariffs, increasing regulatory scrutiny, and growing concerns about the environmental impact of disposable fashion all put pressure on the model that fueled its growth. If consumers can no longer buy five items for the price of one elsewhere, the question becomes what keeps them coming back.
Shein’s business model has been at risk ever since the day it was founded on the premise of skirting the de minimis rules. It was crazy for that advantage to last as long as it did. Then there’s labor questions. Then there’s sustainability questions. The funny thing is, they could have won on the speed to market advantage alone. They wouldn’t have gotten as big as they did as fast as they did, but they also wouldn’t be facing the headwinds they are now facing. Level playing fields are where we find the true long term winners.
With this administration and its FTC, one must wonder what the real objectives are. “The reasoning behind the allegations remains unclear.” Shein does almost twice as much business in Europe as in the U.S. I am sure Shein is using the same “tactics”. Have the European authorities peeped?
Trust is the most valuable asset a retailer can own, and one of the easiest to lose. While the outcome of the FTC investigation remains to be seen, it’s another reminder that growth and low prices alone are no longer enough, customers, investors and regulators increasingly expect transparency and accountability.
For me, the brands that will thrive over the long term are those that build trust into every part of the customer experience, from sourcing and pricing to communication and service.
The piece around “dark patterns” is really a conversation about influence. Great marketing should make decisions easier by creating clarity and confidence not by exploiting urgency, confusion or cognitive bias. Great marketing should make decisions easier, not manipulate them.
This isn’t an isolated US action. France passed disclosure and surcharge laws targeting ultra-fast fashion in June. The EU imposed a $629 million fine on AliExpress under a design-liability standard, not just content violations. The FTC probe fits a pattern: regulators on both sides of the Atlantic are converging on the same target, the app-level mechanics that manufacture urgency. Countdown timers and gamified discounts aren’t accidents of app design, they’re the product. I flagged in 2021 that Shein’s transparency gap would eventually catch up with it. That moment has arrived, and it’s arriving everywhere at once. Shein’s real vulnerability isn’t the fine. It’s a business model built for a regulatory environment that no longer exists.
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Neither Shein nor the FTC has disclosed what is being investigated, so we can only 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 hugely destabilizing 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.
Oh, nothing that a Ballroom Fund contribution can’t fix!
Yes, I think it’s clear they have challenges, but before asking if they’re irreversible, perhaps we should be looking at it from the other direction: are – were? – they really in a strong position to begin with? A company that sells flashy goods cheaply is always going to be dependent on a lot of tenuous factors – novelty, preferential relationships, catching competitors offguard – that are easy to lose, and hard to get back once lost.
Shein built it’s US advantage on two things: rock bottom prices enabled by de minimis and a shopping experience engineered to keep you buying. The first has been largely gutted, and now there’s an FTC investigation on top of that. That’s a lot of headwinds hitting at once, and it raises questions about where the model goes from here.
There may be headwinds for Shein, but they aren’t from consumers. Shein and Temu are still wildly popular.
I think the FTC investigation is only one piece of a much larger challenge. Shein built a highly successful business by making trend-driven fashion incredibly affordable just as social media accelerated consumers’ appetite for constant newness.
Today, the economics are changing. The loss of de minimis, tariffs, increasing regulatory scrutiny, and growing concerns about the environmental impact of disposable fashion all put pressure on the model that fueled its growth. If consumers can no longer buy five items for the price of one elsewhere, the question becomes what keeps them coming back.
Shein’s business model has been at risk ever since the day it was founded on the premise of skirting the de minimis rules. It was crazy for that advantage to last as long as it did. Then there’s labor questions. Then there’s sustainability questions. The funny thing is, they could have won on the speed to market advantage alone. They wouldn’t have gotten as big as they did as fast as they did, but they also wouldn’t be facing the headwinds they are now facing. Level playing fields are where we find the true long term winners.
With this administration and its FTC, one must wonder what the real objectives are. “The reasoning behind the allegations remains unclear.” Shein does almost twice as much business in Europe as in the U.S. I am sure Shein is using the same “tactics”. Have the European authorities peeped?
Trust is the most valuable asset a retailer can own, and one of the easiest to lose. While the outcome of the FTC investigation remains to be seen, it’s another reminder that growth and low prices alone are no longer enough, customers, investors and regulators increasingly expect transparency and accountability.
For me, the brands that will thrive over the long term are those that build trust into every part of the customer experience, from sourcing and pricing to communication and service.
The piece around “dark patterns” is really a conversation about influence. Great marketing should make decisions easier by creating clarity and confidence not by exploiting urgency, confusion or cognitive bias. Great marketing should make decisions easier, not manipulate them.
This isn’t an isolated US action. France passed disclosure and surcharge laws targeting ultra-fast fashion in June. The EU imposed a $629 million fine on AliExpress under a design-liability standard, not just content violations. The FTC probe fits a pattern: regulators on both sides of the Atlantic are converging on the same target, the app-level mechanics that manufacture urgency. Countdown timers and gamified discounts aren’t accidents of app design, they’re the product. I flagged in 2021 that Shein’s transparency gap would eventually catch up with it. That moment has arrived, and it’s arriving everywhere at once. Shein’s real vulnerability isn’t the fine. It’s a business model built for a regulatory environment that no longer exists.