DSA: EU Commission designates Shein as Very Large Online Platform

Today, the Commission has formally designated Shein as a Very Large Online Platform (VLOP) under the Digital Services Act (DSA).

Shein is a fashion online retailer with an average of more than 45 million monthly users in the European Union. This user number, which Shein has communicated to the Commission, is above the DSA threshold for designation as a VLOP.

Following today’s designation as a VLOP, Shein will have to comply with the most stringent rules under the DSA within four months of its notification (i.e. by the end of August 2024), such as the obligation to adopt specific measures to empower and protect users online, including minors, and duly assess and mitigate any systemic risks stemming from their services.

More specifically, these additional obligations include:

More diligent surveillance of illegal products

• Shein needs to diligently analyse the specific systemic risks with regard to the dissemination of illegal content and products and from the design or functioning of its service and its related systems. Risk assessment reports will have to be provided to the Commission 4 months after the notification of the formal designation and thereafter one a year.
• Shein must put in place mitigation measures to address risks, such as the listing and sale of counterfeit goods, unsafe products, and items that infringe on intellectual property rights. These measures can include adapting the terms of service, enhancing user interface design for better reporting and detection of suspicious listings, improving moderation processes to swiftly remove illegal items, and refining its algorithms to prevent the promotion and sale of prohibited goods.
• Shein must reinforce its internal processes, resources, testing, documentation, and supervision of any of the activities linked to the detection of systemic risks.

Enhanced Consumer Protection Measures

• The yearly risk assessment reports by Shein must specifically evaluate any potential adverse effects on consumer health and safety, with an emphasis on the physical and mental well-being of underage users.
• Shein is required to structure its platform, including user interfaces, recommendation algorithms, and terms of service, to mitigate and prevent risks to consumer safety and well-being. Measures must be implemented to protect consumers from purchasing unsafe or illegal goods, with particular focus on preventing the sale and distribution of products that could be harmful to minors. This includes incorporating robust age assurance systems to restrict the purchase of age-restricted items.

More transparency and accountability

• Shein needs to ensure that its risk assessments and compliance with all the DSA obligations are externally and independently audited every year.
• Shein needs to publish repositories of all the ads served on its interface.
• Shein will have to give access to publicly available data to researchers, including to vetted researchers designated by Digital Services Coordinators.
• Shein needs to comply with transparency requirements, including the publication of transparency reports on content moderation decisions and risk management every six months, in addition to reports on the systemic risks and audit results once a year.
• Shein has to appoint a compliance function and be subject to an external independent audit every year.

General DSA applicability to online platforms and marketplaces

Since 17 February 2024, all online platform, including the online marketplace service of Shein, already have to comply with the general obligations under the DSA. These general provisions include the obligations for online marketplaces to:

• Ensure the traceability of traders on their platforms;
• Design their interface in a manner which facilitates traders’ compliance with their legal obligations under EU law;
• Inform consumers of their purchase of an illegal product, the moment they become aware of the product’s illegality.

Since 17 February 2024, the DSA also requires all online platforms, including marketplaces, to:

• Provide user-friendly mechanisms to allow users or entities to notify illegal content;
• Prioritise the treatment of notices submitted by so-called “trusted flaggers”;
• Provide statements of reasons to users when their content is restricted or removed;
• Provide an internal complaint-handling system for users to appeal content moderation decisions;
• Redesign their systems to ensure a high level of privacy, security, and safety of minors;
• Ensure that their interfaces are not designed in a way that deceives or manipulates the users;
• Clearly label advertisement on their interfaces;
• Stop presenting targeted advertisement based on profiling of sensitive data (such as ethnic origin, political opinions or sexual orientation), or targeted at minors;
• Have clear terms and conditions and act in a diligent, objective and proportionate manner when applying them;
• Publish once a year transparency reports on their content moderation processes.

Next Steps

Following its designation as a VLOP, the Commission will be competent to supervise Shein’s compliance with the DSA in cooperation with the Irish Digital Services Coordinator.

The Commission services will carefully monitor the application of the DSA rules and obligations by the platform, especially concerning measures to guarantee consumer protection and address the dissemination of illegal products. The Commission services are ready to engage closely with Shein to ensure these are properly addressed.

Background

This designation comes a year after the Commission adopted the first designation decisions, and illustrates how the Commission continues to closely monitor the market developments. The Commission has now designated 23 VLOPs and search engines (VLOSEs) under the DSA.

On 25 April 2023, the Commission designated the first 19 Very Large Operating Platforms (VLOPs) and Very Large Online Search Engines (VLOSEs). Starting from the end of August, these VLOPs and VLOSEs had to comply with the additional obligations under Section 5 of the DSA. On 20 December 2023, three additional VLOPs were designated. For them, the additional obligations will become binding at the end of April.  By 17 February 2024, all online intermediaries and platforms, with exceptions for small and microenterprises, had to comply with the general obligations introduced by the DSA.

The supervision and enforcement of the DSA is shared between the Commission and Digital Services Coordinators, which had to be designated by Member States by 17 February 2024.

More information

• EU Official Journal text on the DSA
• Q&A on the Digital Services Act
• Guidance on the counting of user numbers
• Very large online platforms and search engines under the DSA

Source – EU Commission