Temu vs Shein in Court

Chinese e-commerce retailer Temu has taken legal action in Massachusetts, filing a lawsuit against its competitor Shein for alleged violations of U.S. antitrust law. Temu, a subsidiary of popular Chinese e-commerce site Pinduoduo Inc., claims that Shein has engaged in unfair supply chain arrangements that prevent garment makers from working with Temu since its entry into the U.S. market in 2022. 

Both Shein and Temu are rapidly growing online shopping platforms. Shein currently holds the largest market share in the fast fashion segment in the U.S., exceeding 50% according to Temu's complaint. Temu, on the other hand, boasts the highest number of app downloads in the U.S., offering a wide range of competitively priced products, including apparel and household goods. 

Temu's complaint, filed on July 14 in the U.S. District Court for the District of Massachusetts, alleges that Shein has employed a range of tactics such as threats, intimidation, false infringement claims, and baseless fines to force exclusive agreements on clothing manufacturers. Moreover, Shein is accused of penalizing merchants who cooperate with Temu by imposing extrajudicial fines and coercing them to transfer their intellectual property rights to Shein, which could then enforce those rights against other sellers operating on Temu's platform. 

In response to the situation, Temu issued a statement expressing their reluctance to resort to legal action but stating that Shein's escalating attacks have left them with no choice. Temu seeks to protect its own rights, the rights of merchants operating on its platform, and the rights of consumers to access a wide range of affordable products. Shein has yet to provide a comment in response to the allegations, although the company has previously dismissed the case as lacking merit and stated its intention to defend itself. 

In a separate legal battle, Shein had sued Temu in Illinois, claiming deceptive business practices and copyright and trademark violations related to impostor pages. Chinese regulators have recently intensified efforts to crack down on the practice of internet firms in China pressuring retailers, brands, and suppliers to work exclusively with them. Both Shein and Temu have gained significant attention as imports to the U.S. through their platforms have surged. 

Most recently, three U.S. fashion designers filed a lawsuit in California accusing Shein of aggressive copyright infringement that qualifies as racketeering under the Racketeer Influenced and Corrupt Organizations Act (RICO), a law originally designed to combat organized crime. A congressional report published last month raised concerns about the compliance of both companies with regards to preventing the sale of goods produced by forced labor on their platforms. An anonymous coalition of brands and human rights advocates known as "Shut Down Shein" has been lobbying lawmakers to increase scrutiny on the fast fashion site.