The news: Shein and Temu face growing regulatory pressure in the US.

• At the state level, Texas Attorney General Ken Paxton is investigating Shein and its affiliates over allegations of forced labor and unsafe materials.
• At the national level, Sen. Tom Cotton (R-Arkansas) called for a federal investigation into possible IP theft and counterfeiting at both Shein and Temu, in a letter to Attorney General Pam Bondi.

The context: Pressure is mounting on Chinese-affiliated ecommerce giants.

• Governments from the US to the EU to Brazil are cracking down on “de minimis” loopholes that let foreign sellers ship goods duty-free. And US shoppers are starting to take notice: Nearly 1 in 5 consumers say shifting US trade policies would make them less likely to buy from international platforms this holiday season, according to Omnisend.
• Shein’s French business is in deepening trouble. Its online marketplace has been disabled since November 5, after the French government said it would suspend access unless the company proved its content complies with French law, following the discovery of “illegal firearms and child-like sex dolls” listed on the site. A hearing on the proposed three-month suspension is set for December 5. Shein also faces a class-action lawsuit from a consortium of French retailers and trade groups representing thousands of companies, accusing the firm of using deceptive promotions and selling products that violate regulatory standards in France and the EU.
• Meanwhile, Chinese tax authorities have ordered major ecommerce platforms—including Temu and Shein—to hand over sellers’ Q3 sales data as part of a broader crackdown on cross-border tax evasion.

Our take: The business model that enabled Chinese-affiliated ecommerce giants to rapidly grow is eroding. As their de minimis advantage slips away and regulators take a harder look, these companies need to adjust quickly. To succeed, they must win on the basics: strengthening their marketplaces, bringing in more local merchants, and giving sellers more direct support. That’s a tough shift, especially with scrutiny of their business practices still building.

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