Dive Brief:
- Temu has filed another legal complaint against its fast fashion rival Shein, this time claiming Shein made Temu the “target of malicious and unlawful conduct intended to thwart [its] success,” according to court documents filed Wednesday.
- Attorneys for Temu allege that Shein's "efforts to illegally interfere with Temu's business" constitute an abuse of the U.S. legal process and infringe on Temu's intellectual property rights, according to the filing.
- This new complaint claims that Shein, which reportedly filed a confidential initial public offering in the U.S. last month, created a multi-faceted scheme to “eliminate the competitive threat posed by Temu.”
Dive Insight:
Temu had previously sued Shein over a similar issue, claiming Shein violated U.S. antitrust laws in an alleged scheme to lock up its supply chain by bullying its suppliers into avoiding business with Temu. However, in October, both Shein and Temu agreed to dismiss that case along with a separate case in which Shein sued Temu for allegedly mimicking it on social media, among other claims.
It further alleges that Shein coerced thousands of its suppliers into signing adhesion contracts, allowing it to seize the suppliers’ worldwide intellectual property rights; using the allegedly seized IP to obtain improper copyright registrations; instigating copyright infringement lawsuits against Temu; and attempting to keep suppliers from doing business with Temu “through Exclusive-Dealing Agreements, mafia-style intimidation of suppliers, and anticompetitive pricing floor requirements.”
Filed in the U.S. District Court for the District of Columbia, the complaint states Shein “carried out a campaign to shore up its public image and deceive U.S. regulators and intellectual property agencies located here in the Nation’s Capital.”
Both Shein and Temu are under investigation by a congressional committee over their compliance with the Uyghur Forced Labor Prevention Act, but when Shein spent $600,000 on lobbying efforts in Q2, it was seen as an effort to gain the trust of lawmakers before the potential IPO.
It further claims that ahead of Temu’s planned Super Bowl 2024 ad campaign, Shein “resorted to even more desperate and coercive measures, including physical detention of merchants who dare to work with Temu, personal threats, and illegal seizures of merchants’ personal devices to obtain access to the merchants’ Temu accounts and Temu’s confidential information and trade secrets.”
Temu’s Super Bowl ad in February 2023, with the tagline “Shop Like a Millionaire,” brought a surge of visitors to Temu.
“Shein’s behind-the-scenes campaign to prevent competition and thwart Temu’s success exposes its public campaign as a fraud and a farce,” the complaint states. “The truth is that Shein’s interpretation of ‘protecting intellectual property’ is illegally seizing, fabricating, and weaponizing intellectual property rights to block competition. And if Shein claims to ‘empower entrepreneurs,’ then someone should ask the ‘entrepreneurs’ that Shein has bullied, intimidated, and even detained in its offices until they swore allegiance to Shein—and Shein alone.”
In an email to Fashion Dive, a Temu spokesperson said Shein’s actions were “too exaggerated,” and “we had no choice but to sue them."
“We believe this lawsuit is without merit and we will vigorously defend ourselves,” a Shein spokesperson said in an email to Fashion Dive.
Temu is also facing legal action. Two class action lawsuits were filed against the fast fashion company this year, one alleging Temu “failed to comply with security standards and allowed its customers’ financial information to be compromised,” and another which alleged Temu misled consumers about the scope and reach of its data access and collection and intentionally loaded dangerous malware and spyware onto users’ devices.
Shein is facing multiple legal complaints over alleged copyright and IP violations. One such complaint was brought under the civil portion of the racketeering law known as the Racketeer Influenced and Corrupt Organization Act, or RICO.
Shein was founded in 2012 and gained increased popularity in the fast fashion space in 2020, whereas Temu launched in September 2022.
