Shein has filed a lawsuit against rival Temu, accusing the platform of engaging in widespread counterfeiting, intellectual property theft, and fraudulent practices. The lawsuit, filed on Monday in Washington, D.C., federal court, marks the latest chapter in a contentious rivalry that has already seen both companies trade legal blows over accusations of unethical business practices.
Shein, a Chinese-linked fast-fashion giant, alleges in its complaint that Temu, owned by PDD Holdings, has built its business by encouraging its sellers to steal designs and pass them off as original products. According to the suit, Temu's practices are not just unethical but also unsustainable, as the company reportedly loses money on every sale. The complaint states that Temu attracts consumers with promises of extremely low prices, but these prices are so low that the company must subsidize each sale, leading to significant financial losses.
"Temu is not profiting from the sale of these products, which are priced so low that Temu must subsidize each sale, losing money on every transaction," Shein alleges in the lawsuit. The company claims that Temu can only minimize these losses by encouraging sellers to infringe on the intellectual property rights of others, selling counterfeit or substandard goods.
This legal action comes at a time when Shein itself is under fire from various brands and independent artists who accuse it of similar behavior. Companies like Levi Strauss and H&M have taken legal action against Shein, alleging that the fast-fashion giant has engaged in large-scale copyright infringement and unethical labor practices. Despite these accusations, Shein remains one of the most successful online retailers, with a significant presence in the U.S. market.
The rivalry between Shein and Temu has intensified as both companies have grown rapidly, capturing significant market share with their ultra-low-priced products and ability to quickly respond to fashion trends. Last year, Temu sued Shein over copyright concerns, accusing it of using "mafia-style intimidation" to coerce suppliers into exclusivity agreements. Shein's latest lawsuit echoes these accusations, accusing Temu of "brazen" illicit behavior, including stealing valuable trade secrets and using them to compete unfairly.
Shein's complaint details how Temu allegedly instructed its sellers to copy best-selling Shein products and sell knock-off versions on its platform. The lawsuit also accuses Temu of using copyrighted images of Shein products in its promotional materials, further blurring the lines between the two companies in the eyes of consumers. "Temu is no garden-variety infringer," the suit declares, emphasizing the alleged extent of Temu's misconduct.
This legal battle is not just a clash of titans in the fast-fashion world; it also highlights the broader issues facing online marketplaces that operate with minimal regulation. Both Shein and Temu have faced criticism for their labor practices and their reliance on Chinese supply chains, which are often associated with poor working conditions and questionable sourcing practices. The two companies have also been accused of exploiting a trade loophole known as the de minimis exception, which allows packages worth less than $800 to enter the U.S. duty-free, further fueling their price wars.
Temu has yet to respond publicly to the latest lawsuit, but the company has previously accused Shein of unethical practices, including pressuring manufacturers to cut ties with Temu. In a December lawsuit, Temu even claimed that Shein's aggressive tactics had led to a significant drop in its market valuation. Despite these allegations, Temu has made significant inroads in the U.S. market, reportedly selling three times as much as Shein in December 2023.
