The fierce battle among China's cross-border e-commerce companies for overseas market share is heating up and has now escalated to legal disputes in the courts.
Recent documents filed in the U.S. District Court of Massachusetts reveal that Pinduoduo's subsidiary, Temu, has accused thriving Chinese e-commerce company Shein of monopolizing and "bullying" suppliers in the U.S. by exploiting its market position.
The lawsuit alleges that Shein has held over 75% of the U.S. ultra-fast fashion market share since its entry in 2017. Following Temu's venture into the U.S. market last year, Shein has been accused of pressuring clothing manufacturers into exclusive deals, effectively excluding Temu from the list of suppliers.
Temu argues that Shein's business conduct has led to higher product prices and fewer choices for consumers, hindering the development of the ultra-fast fashion market in the U.S. The lawsuit states:
"Shein has launched a campaign of threats, intimidation, false infringement claims, and attempted to impose unfounded punitive fines to coerce clothing manufacturers into exclusive trade arrangements."
According to data provided by Temu, as of May, Shein had asked approximately 8,388 manufacturers who supply or sell products on its platform to sign exclusive distribution agreements. This move essentially prevents these manufacturers from supplying products to Temu or its platform's sellers. These manufacturers represent 70% to 80% of the total capable of supplying ultra-fast fashion retailers.
Temu believes that Shein has employed at least four strategies to stifle competition. These include imposing fines and other penalties on suppliers who also collaborate with Temu, and compelling suppliers to sign loyalty pledges. Shein has issued public penalty notices and imposed fines beyond legal limits on manufacturers supplying products to Temu.
Temu alleges that due to Shein's actions, more than 10,000 products have been withdrawn from Temu's platform. Temu also points out that Shein is aware that manufacturers need to use its platform to gain access to the U.S. market, and is familiar with the sales volume of its platform, thus being able to pressure manufacturers into not doing business with Temu.
In response, a Shein spokesperson stated in a release that Shein believes there is no legal basis for Temu's lawsuit and that it will vigorously defend its position.
This is yet another lawsuit between Temu and Shein in recent times.
In March of this year, Shein sued Temu for allegedly infringing upon Shein's proprietary trademarks and copyrights. Temu was accused of collaborating with high-profile influencers to impersonate the Shein brand on social media, spreading false propaganda, and growing its market share in the U.S. at the expense of the renowned Shein brand.
