Shein Designated as Very Large Online Platform (VLOP) Under Digital Services Act: good news for IP right holders?
In a significant move by the European Commission, Shein, the popular online fast-fashion retailer, has been formally designated as a Very Large Online Platform (VLOP) under the Digital Services Act (DSA). This designation carries several implications not only for Shein but also for its millions of users across the European Union and for holders of intellectual property rights. Let's delve into what this designation means and how it will impact Shein and its operations moving forward.
DSA? On 19 October 2022, the EU legislature adopted Regulation (EU) 2022/2065 (‘Digital Services Act’) in order to set out harmonised rules for a safe, predictable and trusted online environment that facilitates innovation and in which fundamental rights are effectively protected. To that end, a series of obligations are imposed on providers of so-called ‘intermediary’ services concerning transparency reporting, designation of points of contact and mechanisms for notification of illegal content. The DSA has become applicable on 17 February 2024 to all online platforms, regardless of their size. Since 25 August 2023, however, the DSA already applied to providers of very large online platforms (VLOPs) and of very large online search engines (VLOSE) already.
Understanding the Designation: Shein's designation as a VLOP stems from its staggering user base, boasting an average of more than 45 million monthly users within the EU. This surpasses the threshold set by the DSA for VLOP designation, prompting the European Commission to enforce more stringent regulations on the platform and imposing additional responsibilities.
Key Obligations Imposed on Shein: Following its designation, Shein is obligated to adhere to a set of comprehensive rules outlined under the DSA, including:
Surveillance of Illegal and Counterfeit Products: Shein must conduct thorough analyses of systemic risks related to the dissemination of unsafe or counterfeit products. Measures such as enhancing moderation processes and refining algorithms to prevent the sale of prohibited goods or items that infringe intellectual property rights are required.
Enhanced Consumer Protection Measures: The platform is mandated to structure its interface and algorithms to mitigate risks to consumer safety, particularly focusing on protecting minors from harmful products.
Transparency and Accountability: Shein is required to undergo external audits of its compliance with DSA obligations and publish transparency reports on content moderation decisions and risk management. Additionally, the platform must provide access to publicly available data to designated researchers.
Supervision and Enforcement: The European Commission, in collaboration with the Irish Digital Services Coordinator, will oversee Shein's compliance with the DSA.
Implications for Shein: For Shein, this designation implies a new era of regulatory compliance and heightened responsibility towards its users and towards IP right holders. The platform will need to implement robust measures to ensure user safety, uphold transparency standards and avoid the offering of counterfeit products on its platform.
