Chinese E-Retailer Temu Sues Fast-Fashion Giant Shein Over Alleged ‘Anticompetitive Scheme’

A man cleaning the windows of the first permanent showroom of Chinese online fast fashion giant Shein, during a media preview in Tokyo, on Nov. 10, 2022. (Richard A. Brooks/AFP via Getty Images)

Chinese e-retailer Temu has filed a lawsuit against fellow Chinese fast-fashion giant Shein, accusing the latter of engaging in an “anticompetitive scheme” aimed at stymieing its business.

The lawsuit (pdf) was filed in Massachusetts court on July 14 and accuses Shein of engaging in a “campaign of threats, intimidation, false assertions of infringement, and attempts to impose baseless punitive fines” in an effort to push Temu out of the market in the United States.

“Temu and Shein are at the vanguard of ultra-fast fashion, where technology and highly efficient supply chains meet to satisfy consumer demand for cutting-edge fashions at ultra-low prices,” the lawsuit states. “The speed of communications and rapidly changing consumer preferences and fashion have created strong consumer demand for the ultra-fast fashion business model. Critically, that model relies on relationships with tens of thousands of clothing manufacturers capable of meeting the rigors of the ultra-fast fashion business model.”

“Temu and Shein both have extensive experience with ultra-fast fashion in Asian markets,” the lawsuit continued, noting that Shein entered the United States market in 2017 and obtained a “monopoly position.”

Temu, which is owned and operated by the Chinese-based PDD Holdings, which also owns e-commerce giant Pinduoduo, entered the U.S. market in September 2022.

“Temu quickly became U.S. consumers’ favorite ultra-fast fashion retailer, topping the app store charts and consistently offering lower prices than Shein,” the lawsuit states, citing an analysis of identical products offered by both retailers which they allege showed that Temu’s prices were usually 10–40 percent less than Shein’s.

“In response to Temu’s entry and lower prices, Shein chose not to compete on the merits by offering better prices, terms, service, or quality to maintain or expand its U.S. business. Instead, Shein has undertaken a scheme as alleged herein to protect and expand its power in the United States ultra-fast fashion market,” the lawsuit continues.

Manufacturers ‘Forced’ Into Exclusive Agreements

According to lawyers for Temu, the conduct of Shein, which is valued at around $66 billion, violates sections 1 and 2 of the Sherman Antitrust Act, the Clayton Act, as well as the Massachusetts Consumer Protection Law, and further constitutes “common-law tortious interference.”

Specifically, lawyers for Temu accuse Shein of having engaged in anti-competitive conduct by “forcing manufacturers” to enter into agreements that create exclusive supplier relationships, and of having threatened manufacturers with “onerous fines and penalties” if they supply products to Temu.

They also argue that Shein forces manufacturers to sign “loyalty oaths certifying that they will not do business with Temu,” but not other competitors, and fining those manufacturers who do supply products to its rival.

“Shein sends numerous false notices of copyright infringement to Temu in order to disrupt sales of products that are offered for sale on Temu. These notices are almost always aimed at products that Temu sells at lower prices than Shein charges for identical or similar products,” the lawsuit states.

The alleged behavior and tactics by Shein have led to 10,000 products being pulled from Temu’s site, according to the lawsuit.

A worker makes clothes at a garment factory that supplies Shein, a cross-border fast fashion e-commerce company in Guangzhou, in China's southern Guangdong province, on July 18, 2022. (Jade Gao/AFP via Getty Images)

“Shein’s scheme 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,” lawyers for Temu concluded.

Temu is asking the court to declare Shein’s conduct illegal and block it from making similar arrangements with manufacturers in the future. The clothing retailer is also seeking an unspecified amount in monetary damages.

The latest lawsuit comes after Shein also sued Temu in December last year, alleging in court documents (pdf) that the latter has been paying influencers to spread “false and deceptive statements” about Shein on social media in exchange for monetary payments.

Temu has denied the accusations.

In a statement sent to Reuters on Wednesday, Temu said it had to take legal measures against Shein to defend its and its merchants’ rights due to “escalating attacks” from the company.

A Shein spokesperson told The Epoch Times in an emailed statement, “We believe this lawsuit is without merit, and we will vigorously defend ourselves.”

Shein’s Legal Woes

Temu’s lawsuit is not the only one against Shein, which has repeatedly faced scrutiny over its alleged connection to human rights abuses, unethical labor practices, and plagiarism claims.

A lawsuit filed in the United Stetson in July, for example, by independent designers Krista Perry, Larissa Martinez, and Jay Baron alleges that Shein produced and sold their designs without permission.

Shein, again, claims that lawsuit is without merit and has vowed to vigorously defend itself in court.

The company also recently came under fire for funding a fully paid trip to one of its factories based in Guangzhou, China, for a group of American fashion influencers. Critics described the trip, which portrayed factory workers as earning a decent wage and working reasonable hours under good conditions, as Chinese “propaganda.”

A 2022 undercover documentary by the United Kingdom’s Channel 4 found Shein factory employees working up to 18 hours a day with just one day off every month and earning next to nothing.

A separate report published in 2021 by Public Eye found that some Shein workers in Guangzhou were working 75-hour work weeks with one day off a month in “informal” workshops with no emergency exits and barred windows.

Like Shein, Temu has also been accused of using forced labor by Uyghurs and other Muslim minorities to make its products.

An April report (pdf) from the U.S.–China Economic and Security Review Commission found concerning patterns and practices among both companies including forced labor, violations of intellectual property rights, and exploitation of trade loopholes, among other issues.

“These firms’ commercial success has encouraged both established Chinese e-commerce platforms and startups to copy its model, posing risks and challenges to U.S. regulations, laws, and principles of market access,” the report read. “Given the rapid increase in the market share of Shein and other Chinese e-commerce firms in the United States, the U.S. government should be vigilant in ensuring that these firms adhere to U.S. laws and regulations and are not granted unfair advantages over U.S. firms.”