Dive Brief:
- Temu is accusing fast fashion rival Shein of violating United States antitrust laws in an alleged scheme to lock up its supply chain, according to court records viewed by Fashion Dive.
- In a legal complaint filed Friday, attorneys for Temu allege that Shein “engaged in a campaign of threats, intimidation and false assertions of infringement” against Temu and assert that Shein engaged in bullying tactics to coerce manufacturers into avoiding business with Temu.
- Earlier this year, Shein sued Temu, claiming it was mimicking Shein on social media and in web ads to trick customers into downloading the Temu app.
Dive Insight:
Attorneys for Temu argue that Shein’s behavior “harms consumers and competition by raising prices to consumers, restricting choice and innovation, and impairing the expansion of the ultrafast fashion market in the United States.”
The complaint, filed in the U.S. District Court for the District of Massachusetts, states that Shein has retaliated against Temu with exclusionary conduct to lock up its supply chain and prevent Temu from using some of its manufacturers. Though a Chinese company, Temu’s U.S. HQ is in Boston.
Temu attorneys also allege Shein forces manufacturers to sign loyalty oaths to Shein and avoid business with Temu, but the oaths do not mention other competitors, per the complaint. Additionally, Temu claims that Shein imposes fines on manufacturers that work with Temu, and that Shein sends false notices of copyright infringement on Temu’s products.
The complaint centers on sections one and two of the Sherman Antitrust Act of 1890, which make it illegal to attempt to monopolize any part of trade or commerce and create any restraints on trade, and the Clayton Antitrust Act of 1914, which makes illegal certain business practice that are conducive to forming monopolies. Temu also argues Shein violated the Massachusetts Consumer Protection Law,of 1967, which allows the state’s attorney general and consumers to take legal action against unfair or deceptive conduct in the marketplace.
“It should be noted that since our launch in September 2022, Temu has been the target of Shein’s unlawful exclusionary tactics, including, but not limited to, forcing exclusive-dealing arrangements on Temu’s merchants, threatening and thwarting merchants from engaging with Temu, and punishing merchants for engaging with Temu by imposing extrajudicial fines,” a Temu spokesperson said in an email to Fashion Dive. “Even worse, Shein unilaterally changed its contract with merchants, forcing merchants to purportedly assign their IP rights to Shein, so that Shein can enforce its ill-gotten rights against the very same merchants on the Temu platform.
“For a long time, we have exercised significant restraint and refrained from pursuing legal actions. However, Shein’s escalating attacks leave us no choice but to take legal measures to defend our rights and the rights of those merchants doing business on Temu, as well as the consumers' rights to a wide variety of affordable products. Our legal measures aim to bring the other party back to the rule-based fair competition, which will benefit all participants in the ecosystem, including consumers, suppliers, and service providers.”
Legal complaints only represent the plaintiff’s point of view. “We believe this lawsuit is without merit and we will vigorously defend ourselves,” a Shein spokesperson said in an email to Fashion Dive.
Boies Schiller Flexner LLP and Shapiro Haber & Urmy LLP are representing Temu in the complaint.
Temu and Shein have been under increased pressure as of late. The fast fashion competitors are being investigated by a U.S. House Select Committee for their labor practices, and both were recently found to avoid certain tariffs on their shipments to the U.S. because of their low-priced products.
Last week, Shein was sued by a group of independent designers, alleging that it had “produced, distributed, and sold exact copies of their creative work.” The lawsuit was brought under the civil portion of the racketeering law known as the Racketeer Influenced and Corrupt Organization Act, or RICO.
Update: This story has been updated to include a quote from a Temu spokesperson.
