Chinese e-tailer accuses Shein of ‘mafia style’ actions in suit
Complaint is the latest to be filed against Shein and its parent company | Suit holds that fast fashion giant felt threated by rival's entry into US market.
S hein faces accusations of orchestrating a multifaceted scheme with “mafia-style intimidation” aimed at obstructing a competitor’s growth and stealing IP rights.
WhaleCo, operating as Temu in the US, filed a complaint against Shein and its parent company, Roadget Business, at the US District Court for the District of Columbia on Wednesday 13, 2023.
WhaleCo is owned and operated by Chinese firm PDD Holdings, which also owns Pinduoduo, a popular online commerce platform in China.
The company contends that Shein, fearing Temu's emergence as a significant competitor in the market, embarked upon a series of “malicious and unlawful actions” to impede its success.
The complaint alleges unlawful activities by Shein, including coercive IP transfers, illegal IP seizures, fraudulent Digital Millennium Copyright Act (DMCA) campaigns, improper copyright registrations, and a broader pattern of defrauding and abusing the US legal system.
The legal dispute unfolds against the backdrop of Shein's reported valuation of more than $100 billion in early 2022—which took a hit of more than $30 billion following Temu's entry into the US market, according to the suit.
Alleged unfair practices in ultrafast fashion
The lawsuit suggests that Shein—perceived as a massive force in the fast fashion sector—has engaged in exclusive-dealing agreements with suppliers and coercively transferred IP rights, affecting fair competition.
Temu also claims that Shein's amendments to these agreements convinced suppliers to grant exclusive licences, prohibiting them from listing similar products on Temu or other platforms.
Shein exploited unlawfully seized IPs for a barrage of DMCA notices, Temu further contends, creating what Temu describes as a “bad-faith campaign” to disrupt its operations.
The complaint asserts that Shein's flood of copyright takedown requests, comprising a significant portion of all notices received, far exceeds the legitimate requirements of copyright protection.
Shein abused its monopolistic power in the fast-fashion market and implemented anti-competitive pricing floor requirements, Temu adds.
These tactics, combined with Shein's reported coercion and threats against suppliers, not only harm its business but also negatively impact the ultrafast fashion industry's competitive landscape, claims Temu.
Shein faces widespread copyright and trademark infringement
In July this year, Shein was hit with another lawsuit from a group of graphic designers who alleged a pattern of copyright and trademark infringement of not only their designs, but potentially tens of thousands more.
The lawsuit was filed by three US-based artists—Krista Perry, Larissa Martinez, and Jay Baron—after they observed what they assert were precise replicas of their individual artworks being used on newly introduced products for sale by Shein.
Additionally, in 2022, Shein faced a lawsuit from Stussy for alleged infringement of the brand's graffiti-style trademarks used on its designer streetwear.
According to the filing, Shein used and infringed the marks by selling and distributing products that bear copies and close reproductions of the Stussy marks, which would likely lead to consumer confusion.
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