Shein grilled on China relationship, data privacy ahead of IPO

The chair of a powerful House committee is drilling down on Shein’s data privacy practices and its relationship with the Chinese Communist Party as the fast-fashion giant moves closer to a U.S. IPO. 

Reps. Cathy McMorris Rodgers, a Washington Republican who leads the House’s Committee on Energy and Commerce, sent a letter to Shein on Wednesday asking about the user data it collects and the communications it has had with the Chinese government. Rep. Gus Bilirakis, R-Fla., who chairs the panel’s Subcommittee on Innovation, Data and Commerce, co-signed the letter.

The lawmakers sent similar missives to TikTok, Temu and Alibaba. 

“Media reports indicate that Chinese-owned e-commerce marketplaces are increasingly popular in the western world. This is a serious risk for e-commerce, consumer safety, and people’s data privacy and security,” the letter states. “The rise in popularity of apps and marketplaces like, TikTok, TaoBao, Pinduoduo, Temu, Alibaba, AliExpress, and Shein, has resulted in sharp public scrutiny regarding the business practices of these companies.” 

In response, a Shein spokesperson told CNBC it has received the committee’s letter “and will be providing a response.” 

Shein has received numerous letters from members of Congress and local lawmakers across the nation about the use of forced labor in its supply chain, and it is already facing intense scrutiny from public officials who are concerned the retailer is skirting U.S. laws. However, Wednesday’s letter from McMorris Rodgers and Bilirakis differs in both its focus and its bite. 

While the letter touched on Shein’s use of forced labor, it focused primarily on data privacy. Contrary to some of the other elected officials and committees scrutinizing Shein, the Energy and Commerce committee has more heft in its mandate to handle issues related to consumer protections and foreign commerce.

The letter asks Shein what data protection practices it requires from its third-party vendors and service providers and whether it collects biometric, genetic and other health data from users. The lawmakers also asked whether the company collects information on consumers’ religious and political beliefs. 

The letter questioned whether Shein agrees that genocide is occurring in China’s Xinjiang region, primarily against the Uyghur ethnic group, and if it can “unequivocally state” that its supply chain is free of forced labor. 

Earlier this year, when asked whether it stores U.S. data in China, Shein told CNBC that information is stored within Microsoft and Amazon’s cloud services “in data centers and regions located within the United States.”

However, lawmakers are still concerned that data on U.S. consumers can end up in the hands of the Chinese government. While Shein insists that it’s a global company that was founded in China, the bulk of its supply chain is based in the region, and it could be subject to Chinese law. 

“From 2014 to 2017, the Chinese Communist Party (CCP) passed several laws requiring all Chinese tech companies to allow CCP officials access to user data. Further, all Chinese tech companies must comply with the demands of the CCP, which in some cases is a ‘require[ment] to build [their] networks in such a way as where the Chinese government has access,'” the letter states. “Past violations by TikTok, and other Chinese-owned applications, to protect user data, and China’s record of accessing Americans’ information, undercuts any claim of data security.”