“Investors want to better understand one of the most critical assets of a company: its people,” Securities and Exchange Commission (“SEC”) Chair Gary Gensler stated earlier this month amid an ongoing conversation about adding mandated “human capital” disclosures to the existing list of things that publicly-traded companies are required to report. In a string of tweets in mid-August, Gensler revealed that he has called on SEC staff “to propose recommendations for the Commission’s consideration on human capital disclosures,” which he stated “could include a number of metrics, such as workforce turnover, skills and development training, compensation, benefits, workforce demographics including [gender and racial] diversity, and health and safety.” 

In addition to consumers looking to get a handle on climate-related risks that companies are facing, which Gensler said in a London City Week speech in June that he is seeking staff recommendations for (namely “around governance, strategy, and risk management related to climate risk”), the SEC chair stated that a focus on mandatory uniform disclosures related to public companies’ work forces would also be beneficial in a number of ways for companies and consumers, alike. “Disclosure helps companies raise money. It helps the efficient allocation of capital across the market,” he stated. “And it helps investors place their money in the companies that fit their investing needs.”

Should the SEC adopt uniform disclosure requirements for publicly-listed companies in line with a larger focus on bringing standards for Environmental, social and corporate governance (“ESG”) reporting into the picture, it would not be the first time that the stock market regulator showed interest in this arena. Around this time last year, the SEC issued new rules under Regulation S-K that require companies to include “a description of [their] human capital resources” in their annual corporate filings “to the extent such disclosures would be material to an understanding of the registrant’s business.” 

Specifically, the current SEC rule on human capital requires public companies to provide a “description of [their] human capital resources, including the number of persons employed by the registrant, and any human capital measures or objectives that the registrant focuses on in managing the business (such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the development, attraction and retention of personnel).” The immediate result of that disclosure mandate, which went into effect in November 2020, was less than earth-shattering, Intelligize discovered. The data provider revealed in April that most companies made a “sincere effort to fulfill the scantly defined disclosure obligation.” At the same time, however, most of those entities “capitalized on the fact that the new rule does not call for specific metrics,” and thus, few actually “provided meaningful numbers about their human capital, even when they had those numbers at hand.

In a report of its own, Seyfarth Shaw LLP reviewed proxy statement human capital management disclosures by companies in the retail space and found that they primarily “focused on culture, recruitment and retention, and talent development programs,” with “many of the companies in this category including some type of numbers on employee diversity and inclusion.”

A more detailed approach to the SEC’s currently limited rule, complete with uniform reporting metrics, appears to be on the horizon based on a number of statements from Gensler over the past few months.   

Not a New Concern

The push to get companies to reveal uniform data on diversity, staff compensation and employee turnover that is otherwise largely unavailable to the public in order to enable individuals to make investment decisions – including by more easily comparing companies based on these metrics – comes as shareholders have taken to seeking such information from public giants, such as Nike and Walmart. “Ten shareholder proposals to disclose ‘EEO-1’ data revealing a company’s workforce race, ethnicity, and binary gender makeup – or to produce diversity, equity and inclusion reports similar to that data – have gone to a shareholder vote as of June 1,” Bloomberg reported early this summer, noting that that number is “likely to increase as public companies face increased pressure from investors, customers, and even their own employees.” 

Bloomberg notes that “companies with at least 100 employees, as well as some federal contractors, are already required to submit annual EEO-1 reports on the race, ethnicity, and binary gender of multiple categories of employees,” but the government and most companies keep that information confidential. 

In light of rising attention from employees, consumers, and regulators in the ESG sphere, including the role of companies’ labor forces, Tucker Ellis attorney Daniel Messeloff says that “the days when management [for publicly-traded companies] could make decisions regarding human capital completely behind closed doors, with no risk and with complete disregard for the implications of those decisions in terms of diversity, pay equity, employee safety and the like are gone.” 

Regardless of whether the SEC does, in fact, implement with more stringent human capital disclosure requirements, companies are, nonetheless, being urged to consider – sooner rather than later – how they plan to handle rising pushes for more transparency when it comes to their work forces. To date, many companies have pushed back against making the bulk of this information public on the basis that “such data could prove embarrassing, create legal risks or be exploited by labor unions,” per Reuters

All the while, Seyfarth Shaw LLP attorneys Giovanna Ferrari, Jennifer Kraft, and Ameena Majid state that while SEC’s rulemaking process will “take years to play out, the risk calculation equation for organizations is shifting,” with ESG issues playing a larger role than ever before, including in providing value for a company. “How an organization delivers value and develops trust with its stakeholders hinges, in part, on authentic action and how it reshapes the conversation with their stakeholders,” they note, asserting that in this vein, the “disclosure of more quantitative and qualitative information on what has been historically seen as the softer side of a business is [coming] front and center.”

An updated version of the Bangladesh Accord will get a two-year term, following months-long back-and-forth between international brands and retailers, and local trade unions, in furtherance of the aim of “working towards a safe and healthy garment and textile industry in Bangladesh.” Primarily governing factories producing Ready-Made Garments, such as those used by H&M and Zara’s parent company Inditex, which have signed on to the latest version of the pact, the newly-adopted agreement extends the Accord, which was originally formed on the heels of the deadly collapse of the Rana Plaza factory in Dhaka, Bangladesh in April 2013. 

Slated to take effect on September 1 and remain in force for just over two years, the newly-named International Accord for Health and Safety in the Textile and Garment Industry “contains many of the hallmarks of the original [accord], including the ability to subject retailers to legal action if their factories fail to meet labor safety standards,” according to the New York Times’ Elizabeth Paton. Specifically, the new pact continues to emphasize “respect for freedom of association, independent administration and implementation, a high level of transparency, provisions to ensure remediation is financially feasible, Safety Committee training and worker awareness program, and a credible, independent complaints mechanism,” the Accord asserts on its website.

The original Accord boasted some 200 signatories, with the follow up “transition” agreement in 2018 drawing the support of upwards of 50 signatories across the globe, ranging from American Eagle and Tommy Hilfiger and Calvin Klein-owner PVH to ASOS, Mango, and H&M, among others. 

Beyond upholding principles from the previous agreements, new features have been added to the most recent version of the pact, including commitments “to focus on the health and safety program in Bangladesh, and on building a credible industry wide compliance and accountability mechanism, and expand the work of the International Accord based on feasibility studies,” an “option to expand the scope of the agreement to address human rights due diligence, and an optional streamlined arbitration process to enforce the Accord’s terms.” 

To date, Accord-specific dispute resolutions have been handled by way of a two-step dispute system, in which claims were “first heard by a committee comprised of representatives from global trade unions and brands and chaired by a representative from the International Labor Organization.” After that, “Parties wishing to appeal the committee’s decisions can do so before the Permanent Court of Arbitration in The Hague,” according to Freshfields Bruckhaus Deringer LLP attorneys Boris Dzida, Satya Staes Polet, Jean-François Gerard and Ludovica Mascaretti. 

In connection with that system, two arbitration proceedings were initiated in 2016 by IndustriALL and UNI, trade union-parties to the Accord, which alleged that unnamed fashion retailers that were also members of the Accord had breached the tenets of the agreement by failing to compel their suppliers to improve the safety of their factories within the mandatory deadlines and failing to help cover the costs to do so. The Permanent Court of Arbitration for The Hague (“PAC”) revealed in July 2018 that these two landmark proceedings had been officially resolved. According to the PAC, the fashion brands had met “all terms of the settlements, including paying more than $2.3 million towards remediating unsafe conditions in Bangladesh ready-made garment factories,” a sum that would be distributed to the eligible factories. 

It is worth noting that in furtherance of the proceedings and subsequent settlements, the PAC shot down the unions’ request to publicly identify the brands and suppliers at issue. The PAC held that the names of these brands must remain confidential and that only limited information on the procedure and its progress would reach the public domain, in accordance with Article 19 of the Bangladesh Accord, which requires the Accord’s Steering Committee to publish and regularly update information on progress under the Accord, but also states that information linking specific brands to specific suppliers will be kept confidential. The new International Accord maintains similar confidentiality language, stating that, among other things, “information linking specific companies to specific factories will be kept confidential.”

Speaking about the settlements at the time, Christy Hoffman, General Secretary of UNI Global Union, stated, “These cases prove the Accord’s power to hold companies accountable and make work safer across the supply chain.” Jenny Holdcroft, Assistant General Secretary of IndustriALL Global Union, echoed that sentiment, asserting that “prior to the Accord, a settlement of this size and scope on supply chain worker safety was unthinkable.” 

At the same time, the settlement has prompted lawyers for brands to caution their clients about the potential for liability. “Companies that are considering signing the new [2018] agreement – either because they are original signatories or would like to get involved now – should take note of the potentially far-reaching impact of commitments undertaken under the Accord and of a recent decision by the PAC confirming the binding effect of the commitments and the Accord’s own ground-breaking dispute resolution mechanism,” Herbert Smith Freehills LLP attorneys Patricia Nacimiento, Antony Crockett and Alessandro Covi stated. 

In furtherance of the arbitration model set out in the new pact, the International Accord states that the Steering Committee will adopt a new “Dispute Resolution Process to specify the timelines and procedures involved when disputes are presented to [it], with the aim to establish a fair and efficient process.” Until a new process is adopted, the Committee “shall follow the timelines and procedures established under the 2013 Bangladesh Accord for resolving disputes.” 

In all likelihood, and given the rising importance of ESG, including in the apparel space, the Accord’s Committee very well may see an increasing number and variety of labor and other ESG-related disputes. “To date, some experts have questioned whether arbitration is the appropriate forum to resolve such disputes,” per Nacimiento, Crockett and Covi, who note that “it remains essential that arbitrators and arbitration counsel become more familiar with ESG regulation and standards and respond proactively to adopt appropriate arbitration procedures for ESG-related disputes, [as] this will help to ensure that arbitration remains an effective forum for resolving disputes in this fast-growing area.” 

Chinese fast fashion giant Shein made headlines early this month for allegedly failing to adhere to the reporting requirements imposed by modern slavery laws in the United Kingdom and Australia. In light of the enduring harms tied to modern supply chains, including reports of rampant wage and labor violations in connection with garment, footwear, and accessories manufacturing, and given the mainstreaming of the movement pushing for transparency and ethical production across industries, a number of developed economies have enacted legislation in recent years that mandates qualifying companies to exercise oversight into their supply chains and report on their efforts to root out instances of human rights abuses. 

The advent of these relatively novel laws has been welcomed by lawmakers and consumers, alike, but the recent allegations against Shein paired with the outcome of a vote against a heightened anti-slavery law in Australia raise questions about their effectiveness. Against that background, here is a look at how Australia’s Modern Slavery law has developed since its initial passage in late 2018, and what more needs to be done.

When the Australian government introduced its Modern Slavery bill to parliament in 2018, it heralded the legislation as the start of a “race to the top.” Three years later, it has turned out to be less a race, however, than a meander. The bill required companies with annual revenues greater than $100 million to report on action they take to ensure their supply chains are free of slave labor. The premise was that transparency and accountability were enough to drive reform. “Business feedback indicates the primary driver for compliance will be investor pressure and reputational costs and benefits,” a government spokeswoman said at the time. “This will drive compliance more effectively than legislated penalties and encourage a business-led race to the top.” 

The bill was passed in December 2018, but so far, according to research published last month by the Australian Council of Superannuation Investors, most companies are engaged in a “race to the middle,” disclosing only the minimum and not wishing to reveal more than their key peers, thereby, raising the question of whether more could be done? 

The answer is yes, but the possibilities and pitfalls are shown by a private member’s bill that passed the Senate this week. Proposed by South Australian independent senator Rex Patrick, the Customs Amendment (Banning Goods Produced By Forced Labor) Bill 2021 would, if enacted, amend federal customs regulations to prohibit the import of any goods made using forced labor. The bill passed the Senate on August 23 with support from the Labor Party, the Greens and One Nation senators. Not a landslide vote, though, Coalition senators voted against the bill, despite the proposed legislation reflecting the recommendations of a inquiry chaired by Liberal senator Eric Abetz, who said Patrick’s bill was “worthy of consideration and support, in principle.” 

Without government support the bill will not pass the House of Representatives to become law. Nonetheless, it is worth considering why senators as disparate as the Greens and One Nation have backed it. 

The call for a stronger approach

Patrick began with less expansive ambitions than the legislation currently maintains, introducing a bill in December 2020 to ban the import of goods from China produced by Uyghur forced labor. This came in response to mounting evidence of the Chinese government’s detention of more than a million Uyghurs (and other ethnic minorities) in the western province of Xinjiang, forcing them to manufacture goods that are ultimately sold by Western companies.

The bill was referred to the Senate Standing Committee on Foreign Affairs, Defense and Trade, chaired Abetz, which considered about 60 submissions, and in June, recommended (among other things) amending the Customs Act and other legislation “to prohibit the import of any goods made wholly or in part with forced labor, regardless of geographic origin.” 

The Committee’s inquiry report statedThe committee endorses without reservation the objectives of the bill. The state-sponsored forced labor to which the Uyghur people are being subjected by the Chinese dictatorship is a grave human rights violation. It is incumbent on the government to take steps to ensure that Australian businesses and consumers are not in any way complicit in these egregious abuses.

Slavery is all around us

Patrick’s revised bill reflects this sentiment. While the Chinese government may be detaining up to a million Uyghurs, the anti-slavery organization Walk Free Foundation estimates globally about 4 million people are forced to work by state authorities, with an additional 21 million people exploited in private supply chains. The foundation estimates each year goods worth more than $350 billion imported into G20 countries are at at-risk of having been produced, at least in part, by forced labor.

And no country or industry is untouched by modern slavery. The estimate for imports into Australia, alone, is $12 billion a year. It is highly likely at some stage you’ve bought something that has been made with exploited labor. It might have been clothing made in China. Or it might have canned tuna from Thailandcotton milled in India. Or chocolate made from cacao farmed West Africa.

Australia’s Modern Slavery Act has been part of international moves to make companies accountable for the conditions of workers in the global supply chains from which they profit. This law requires reporting entities to submit an annual “Modern Slavery Statement” to a public register. The law, however, has been criticized for lacking any real bite. After all, it lacks any real penalty for noncompliance, and instead, relies on the fear of being “named and shamed” — and as the research from the Australian Council of Superannuation Investors suggests, this does not seem to be enough. 

How did the government respond?

So, why did the government oppose Patrick’s bill? In the words of Abetz, speaking in the Senate on Monday, “my heart says yes to this bill, but my head says not yet.” The government’s hesitancy is understandable. If passed, the law will require every Australian company — not just the big ones — to prove that any goods it imports are slave-free, which is a sizable leap from what is currently required.

Some large corporations are already struggling with how to adhere to the spirit and less strenuous requirements of the Modern Slavery Act. Many small- and medium-sized enterprises and not-for-profits may not have the expertise or resources to comply. But even if this particular bill is not right, the issues with Australia’s current response to modern slavery cannot be ignored. Senator Patrick’s bill may not become law. But it has helped shine a light on the deficiencies with the current law and shown there is broad community support for stronger action.

Katherine Christ is a Senior Lecturer in Accounting at the University of South Australia. Kyla Raby is a PhD Candidate researching the role of consumers in eradicating modern slavery in supply chains at the University of South Australia. (This article was initially published by the Conversation; intro courtesy of TFL)

Last summer, revelations that garment workers in Leicester, a city in central England, who were making trendy wares destined for Boohoo – whose marquee brand introduces 100 new styles to its e-commerce site on a daily basis – were being paid as little as £3.50 ($4.39) per hour to do so made headlines around the world, shedding light on the ugly underbelly of one of the market’s hottest mass-market fashion companies. In response to widespread media attention and at least one major shareholder offloading the majority of its position in the company, the Manchester-based retailer vowed to clean up its act. 

Among other things, the beleaguered retail group – which owns Nasty Gal, PrettyLittleThing, and its namesake Boohoo label, among others, such as the recently-acquired high street brand Debenhams – announced last month that it would adopt a new audit model aimed at cracking down on abuses within its supply chain. “Suppliers are visited more often, and subcontracts have been removed,” the company said in a statement on July 30 of its improved efforts. Beyond that, “Products can only be purchased from the approved supplier list, [and] required whistleblower helplines are in place at all suppliers.” 

Yet, Boohoo’s supply chain is still rife with issues, according to a new report, which claims that the 15-year-old company’s new “audit and enforcement approach to clamping down on workforce exploitation is not working due to the fact that factory bosses are getting really creative and innovative in how they hide it.” 

In connection with an ongoing investigation, British anti-slavery non-profit Hope of Justice revealed that in at least one Boohoo supplier factory, laborers are paid a minimum wage, at least initially and according to their payment documentation. The alleged problem, however, is that such pay is swiftly cut, and laborers are assigned an amount of money they have to “withdraw in cash and return to the factory,” Sky News reports. At least one individual working in a Boohoo supplier factory says that she has repaid “hundreds of pounds” since the factory began clawing back workers’ pay earlier this year.  

Before Boohoo’s audit crackdown, the same unnamed individual says that she was earning £5.50 per hour, noting that this new system began after Boohoo insisted that staff were paid the minimum wage, which – as of 2021 – ranges from which ranges from £4.62 and £8.91 depending on an individual’s age. In the wake of these new allegations, Boohoo Group says that it is investigating whether its crackdown on labor exploitation has driven poverty-pay offenses further underground.

Shein’s Labor Issues

Boohoo is not the only fast fashion brand in hot water over its labor conditions as of late. Burgeoning Chinese fast fashion empire Shein is not only facing flak for allegedly failing to make public disclosures about working conditions along its supply chain that are required by modern slavery laws in the United Kingdom and Australia; “until recently,” the company “stated on its website that conditions in the factories it uses were certified by international labor standards bodies” when no such certification exists. 

In a report on Friday, Reuters revealed that by failing to “provide a statement on a searchable link available on a prominent place on its home page, dated to a financial year and signed by a director, outlining the steps it is taking to prevent modern slavery in its supply chain,” Guangzhou, China-headquartered Shein is running afoul of the UK’s Modern Slavery Act 2015, which requires that, among other things, qualifying companies prepare – and make publicly available – an annual statement of the steps taken to ensure slavery and human trafficking are absent from their operations and supply chains.

Shein is also allegedly failing to abide by similar rules in Australia, which requires certain qualifying companies to file an annual statement with the Department of Home Affairs and Australian Border Force for publication that describes the risks of modern slavery in their own business and supply chains, and that clearly states what they are doing to help combat those risks.

Both Boohoo and Shein have garnered consumer pushback as a result of their labor exploitation, particularly given growing consumer awareness of – and demand for transparency when it comes to – the supply chain issues that are commonly tied to fast fashion, and other types of apparel manufacturing, as well. While there is a growing prioritization of sustainability-centric wares and businesses in the fashion space, at least in principle, among younger consumers, the market for fast fashion as a whole is growing, nonetheless, with Business Research Company putting the value of fast fashion in 2020 at $25.09 billion in 2020, and an expected total value of $30.58 billion by the end of 2021 and $39.84 billion by the end of 2025. 

The London-based market research puts the Asia Pacific region as contributing the greatest percentage of sales in the fast fashion market (29.7 percent) as of 2020, followed by North America and Western Europe. Going forward, it expects that South America and the Middle East will be fastest-growing regions in terms of fast fashion sales, followed by Africa and Eastern Europe. 

Meanwhile, in the U.S., Earnest Research cited growth of 15 percent in the domestic fast fashion market between January and mid-June 2021. Despite enduring interest among millennial and Gen-Z consumers in slower more “sustainable” fashion, the market research firm expects that the leaders in the space, including the likes of Shein, will grow further in light of the rising penetration of online apparel sales, and mobile-first models. The affordability of their wares, particularly in the novelty-driven Instagram era, and the scale of sizing (Shein offers a much broader range of sizes than most apparel retailers) is also slated to help these brands continue to see significant growth going forward. 

5 Questions for Retailers

With increasing attention being paid to the workings of retailers’ supply chains, which have also come under the microscope in connection with allegations of human rights abuses in Xinjiang, China, and in light of the “vast scope of raw material and products and the range of sourcing, production, and manufacturing geographies” that tend to comprise a retailer’s supply chains, DLA Piper attorneys Laura Ford, Jonathan Eatough and Daniel D’Ambrosio state that “retail business will be among those most exposed to increasing liability in this space.” In addition to regulatory issues, brands are also likely to face “increasingly sophisticated investor demands driven by evolving sustainability risk disclosure requirements for investors, shareholders and lenders.”

With that in mind, and although retail businesses will almost certainly have supply chain due diligence protocols in place, Ford, Eatough, and D’Ambrosio, nonetheless, encourage them to consider these five key questions as they evolve their approach …

Strategy and governance: Does the company’s sourcing strategy align with its overall corporate strategy, and is this reflected in supply chain and sourcing policies and risk protocols?

Risk protocols and prioritization: Are risk protocols effective to identify potential misconduct at both tier one and lower tiers of the supply chain in line with internationally recognized standards and best practice?

Sourcing contracts: Are compliance protocols being passed down to subcontractors as required under mandatory contract provisions and are context-specific key performance indicators used to enable more flexible objectives to be set and managed outside strict contractual requirements. For instance, positive incentives to drive continuous improvement or specify remedial outcomes as well as punitive measures for failure to perform to a minimum acceptable standard?

Incident response and crisis management: Are incidents flagged and investigated even where they arise beyond direct sourcing relationships?

Disclosure: Is disclosure framed by reference to the overall sustainable sourcing strategy and prioritization of risks to ensure a consistent and factual narrative used to manage stakeholder relationships, especially in response to incident reporting?

Shein – the fast fashion retailer that surpassed Amazon as the most downloaded shopping app in the U.S. in May – is not only facing flak for allegedly infringing other companies’ trademarks, it is coming under fire for failing to make “public disclosures about working conditions along its supply chain that are required by law in the United Kingdom, and until recently, falsely stated on its website that conditions in the factories it uses were certified by international labor standards bodies,” according to Reuters, marking the latest issues with the stunning rise of the burgeoning Chinese fashion empire. 

In a report on Friday, Reuters revealed that by failing to “provide a statement on a searchable link available on a prominent place on its home page, dated to a financial year and signed by a director, outlining the steps it is taking to prevent modern slavery in its supply chain,” Guangzhou, China-headquartered Shein is running afoul of the UK’s Modern Slavery Act 2015 (“MSA”), which requires that, among other things, qualifying companies prepare – and make publicly available – an annual statement of the steps taken to ensure slavery and human trafficking are absent from their operations and supply chains.

Specifically, the MSA requires qualifying companies to disclose their policies on slavery and human trafficking; details of the due diligence processes they undertake in relation to their business and supply chains; the effectiveness in ensuring that slavery and human trafficking is not occurring in their business or supply chains; and the training provided to staff. Alternatively, companies are required to declare if steps have not been taken.

Modern Slavery Reporting

While privately-held Shein does not publicly disclose its annual revenues, analysts have estimated that it generates sales of at least $5 billion per year, which would put the company in the crosshairs of the MSA, which applies to commercial organizations with an annual global turnover of at least £36 million ($50.05 million) that do business in the UK. The MSA also requires that foreign companies that do business in the UK, and foreign subsidiaries of UK companies that produce goods and services sold or used in the UK, comply with the law. 

A spokesperson for Shein told Reuters that the company is in the process of finalizing statements required by UK law, stating, “We are developing comprehensive policies, which we will post on our website in the next couple of weeks.” 

To date, the requirements of the MSA are not backed by “any meaningful sanctions,” per Eversheds Sutherland counsel Vadim Chaban, and instead, the UK government “takes the view that the companies that fail to take action will face commercial pressure to do so, as reputational damage and competitive disadvantage could be significant.” The government can, however, seek injunctive relief for any businesses that fail to meet their obligations under the MSA. 

In light of increased attention to the risks of modern slavery among regulators, the lack of monetary penalties for companies that fail to comply with the MSA appears to be changing, as UK foreign secretary Dominic Raab confirmed early this year that the UK government, for one, intends to “introduce fines for businesses that do not comply with their transparency obligations.” According to a note from Pinsent Masons partner Sean Elson, “The UK government’s move to introduce new financial penalties for non-compliance with the requirements of the Modern Slavery Act is part of a package of measures it announced to address alleged human rights abuses in Xinjiang, China.” The impending changes are expected to go beyond reporting and impact “suppliers, where there is sufficient evidence of human rights violations in any of their supply chains.”

Outside of the UK, Reuters found that Shein also failed to abide by similar rules in Australia, which came into effect in 2018, and classify companies doing business in the country that have annual consolidated revenues of at least $100 million as “reporting entities,” and require them to file an annual statement with the Department of Home Affairs and Australian Border Force for publication that describes the risks of modern slavery in their own business and supply chains, and that clearly states what they are doing to help combat those risks. Much like with the UK’s MSA, the law in Australia also currently lacks financial penalties for noncompliance, although Mills Oakley attorneys Luke Geary and Georgia Davis state that “under a similar law, which is yet to commence, there may be fines of up to $1.1 million.”

The Australian modern slavery law does, however, enable the Minister of the Department of Home Affairs to request that “a reporting entity provide an explanation for its failure to comply, and/or require the entity to undertake specified remedial action, within a set time,” and if the entity fails to adequately company, “the Minister may publish the identity of the entity, as well as details of their failure to comply.”

Infringement Suits

The labor reports come as Shein has made a steady – and largely quiet – climb to the top of the fast fashion totem pole with its $11 dead-ringers for Cult Gaia’s hot-selling Serita dress, lookalike Marine Serre tops for $8, and its copycat versions of Gucci, Dior, and Bottega Veneta bags all for less than $30, all of which are aimed at millennial and Gen-Z consumers in the West.

The Financial Times reported in June that Dr Martens-owner Airwair had filed suit against Shein in a California federal court in late 2020, accusing Shein of manufacturing and marketing counterfeit footwear. At the same time, court dockets in the U.S. show that the burgeoning fast fashion brand and/or corporate entity Zoetop Business Co. have been named in a number of trademark and copyright infringement lawsuits in recent years by big names like Levi’s and Ugg-owner Deckers Outdoor Corp. and indie creatives like Katie Thierjung and Kjersti Faret, with most of those suits following the traditional course and quietly settling out of court. 

Most recently, Shein was named in a trademark infringement and unfair competition lawsuit by Ralph Lauren, with the American fashion brand accusing Zoetop Business Co. of offering up apparel that includes trademarks that are “substantially indistinguishable and/or confusingly similar to one or more of Ralph Lauren’s marks,” namely, its famous polo player logo. According to Ralph Lauren’s March 2021 complaint, Zoetop’s infringement is “willful, deliberate, and intended to confuse the public and to injure Ralph Lauren” and in an “effort to exploit Ralph Lauren’s goodwill and the reputation of genuine Ralph Lauren products” for its own gain. 

As for Shein’s notoriously low profile, which “is perhaps expected in times of geopolitical tensions and heightened regulatory scrutiny over China-related tech companies around the world,” as TechCrunch worded it this spring, that is slowly starting to fade thanks to a combination of infringement lawsuits, alleged labor reporting missteps, and of course, the sheer level fo demand for its wares among trend-happy consumers around the world.

In terms of what that demand looks like, data consultancy Earnest Research puts it ahead of the likes of traditional fast fashion entities, such as H&M, Zara, Forever 21, ASOS, and Topshop, as well as even faster fashion names like Fashion Nova, Boohoo, Missguided, and PrettyLittleThing in terms of market share in the U.S., noting that the U.S. fast fashion market as a whole grew by 15 percent between January and mid-June 2021. According to New York-based Earnest’s data, Shein grew nearly 160 percent during that same period, which suggests that, among other things, “the brand’s mobile-first strategy has resonated with the post-Covid consumer.”