E-commerce retailer Temu, known for its coupon wheel and surprisingly cheap items, is accusing fast fashion giant Shein of dirty tactics to stifle competition.
In 100 pages complaint Filed on Dec. 13 in federal court in Washington, D.C., Whaleco Inc., doing business as Temu in the U.S., claimed that Shein has been using “mafia-style supplier intimidation,” summoning those it believes are working with Temu to his offices, “falsely imprisoning” merchant representatives for hours, confiscating their phones and threatening sanctions for doing business with his rival.
The lawsuit is not the first time the two rivals, both founded in China, have become embroiled in a legal battle as they compete against each other for American buyers.
“They have also sued each other abroad, but this is at least the third lawsuit here in the United States,” Susan Scafidi, founder and director of the Fashion Law Institute at Fordham University, told CBS News.
Shein first sued Temu in October 2022, just a month after the e-commerce newcomer launched its website in the United States. Shein, which made its US debut in 2017, had already surpassed the US market by that time.seemingly overnight.
In its complaint, Shein accused Temu of hiring social media influencers to make “false and misleading statements” against the company in its online marketing, Reuters reported At the time.
Temu responded in July with his own lawsuit against Shein in federal court in Massachusetts, accusing the former company of “a campaign of threats, intimidation, false claims of infringement” allegedly aimed at forcing suppliers to sign exclusive agreements. Both companies abandonment their demands in late October without providing a reason.
“That's a lot of lawsuits in a very short time,” said Scafidi, who noted that the accusations leveled against Shein by Temu in his current lawsuit are not new. “We're seeing these allegations mentioning 'gangster-style' behavior a couple of times, trying to threaten suppliers and making sure Shein's suppliers don't do business with Temu as well,” she said.
But strong-arm tactics are not the main focus of Temu's latest court filing against the fast fashion giant, according to Scafidi.
“The accusations that the case really leads to are copyright accusations,” he said.
In its lawsuit, Temu claims that Shein is involved in a copyright scheme in which it manipulates U.S. copyright laws to obtain improper registrations for items to which it has no real rights. Shein then uses those allegedly false registrations to file frivolous lawsuits against Temu, demanding that they remove listings for competing products from their marketplace, the complaint states.
“So it's a whole series of accusations that are really about how Shein does business and claiming that their business is based on copying itself, but also fraudulent lawsuits focused specifically on Temu and that they are trying to take down Temu now that Shein has announced that“Scafidi said.
Copyright and fast fashion
Harnessing the marketing power of social media combined with the mass migration of consumers to online shopping during the pandemic, the fast fashion industry, led by Shein, skyrocketed to become a $106.4 billion global industry in 2022, according to data from an April report. report by the US-China Economic Security Review Commission (USCC).
As the name implies, violations ranging from design piracy to merchandise counterfeiting.is defined by its ability to satisfy consumers' appetite for modern, affordable clothing. Behind this booming industry there is a lot of copyright and ethics
“What Shein and Temu would probably say is, well, they identify trends very quickly and ship things directly from the manufacturer to consumers, so they don't pay additional warehouse fees or shipping fees, and of course they have very thin margins.” Scafidi said.
“But – butcritics would say with Temu and Shein… they are also copying and not designing, they are probably dedicated to various forms of“And by the way, they have been very, very effectively exploiting a loophole in US tariff law to avoid a lot of import tariffs,” he said.
Tariff legal loophole
A Congressional Report published in june said that both Shein and Temu were avoiding taxes on imports through a centuries-old trade rule, known as de minimis – that allows them to import packages valued at less than $800 as long as they are packaged and shipped directly to consumers.
The House Select Committee report on the Chinese Communist Party also offered a blistering critique from retailers, and lawmakers accused Temu of failing to maintain “even the façade of a meaningful compliance program” that seeks to prevent products made through forced labor from being sold on its platform.
“American consumers should be aware that there is an extremely high risk that Temu supply chains are contaminated with forced labor,” the report says. Temu is owned by Pinduoduo Inc., a popular e-commerce site in China.
“That's something we want to be very careful about,” Scafidi said. “And Congress just isn't sure Temu and Shein are taking it seriously.”
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