US Reviews Shein’s Everlane Buyout Over Security Concerns

The review adds to the regulatory challenges facing Shein, the China-founded fast-fashion company, in the U.S. The CFIUS review is being led by the Treasury Department and involves several U.S. government agencies.

Shein still has major operations in China even after moving its headquarters to Singapore. The company remains subject to Chinese regulators and also relies heavily on the U.S. market for sales.

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The CFIUS review is focused on possible national security concerns related to Shein acquiring a company that handles Americans' personal data. The outcome of the review is still unclear.

Lawyers involved in CFIUS reviews said national security concerns in consumer deals can involve customer data, tracking cookies, or programs that identify military service members. The specific concerns in Shein's case have not been disclosed.

Shein's IPO filing lists U.S. regulatory risks but does not specifically mention CFIUS. Although the Everlane deal is small compared with Shein's expected valuation of up to $27 billion, the acquisition has faced criticism in the U.S. over concerns about Everlane's sustainability and supply chain values.

Shein has faced several legal and regulatory challenges in the U.S. Texas Attorney General Ken Paxton sued the company in February, alleging it sold unsafe products and exposed Americans' personal data to China's government. Shein has denied the allegations and is fighting the case.

The Federal Trade Commission is also investigating Shein's U.S. operations for possible consumer protection violations. Shein has said it is cooperating with the investigation.

Shein also dropped earlier plans for a New York listing after facing criticism from U.S. lawmakers over its ties to China.

A Shein spokesperson said the company is “committed to complying with all applicable laws and regulations in the markets where we operate.” The Treasury didn’t respond to a request for comment. Cfius reviews are confidential.

Shein voluntarily initiated the review at that time, which is unusual as companies typically seek Cfius approval before a transaction closes, the people said. Clearance by Cfius usually prevents future challenges but the body also has the power to block, unwind or impose conditions on transactions it determines threaten US national security. 

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