A legal showdown is unfolding between two fast-fashion giants. Temu, an emerging player in the industry, has taken legal action against Shein, accusing the latter of employing "Mafia-style" intimidation tactics to manipulate merchants and undermine Temu's market presence.
In a legal complaint filed December 13th, 2023, Temu describes a range of unlawful and anticompetitive actions undertaken by Shein, including using Mafia-style intimidation tactics to force merchants not to work with Temu and abusing the DMCA notice process to cripple Temu.
While the war for the merchants that serve the world’s largest consumer market is taking place in Guangzhou, China, the legal battle for this dominance is being fought out of D.C.
Temu's allegations are not new; the company previously filed a lawsuit in July 2023, challenging Shein's Exclusive-Dealing Agreements with suppliers. These agreements allegedly coerced suppliers into loyalty, preventing them from doing business with competitors like Temu. (Amended Complaint & Demand for Jury Trial, Whaleco Inc. v. Shein US Servs., LLC et al., No. 1:23-cv-11596-DJC (D. Mass. Oct. 2, 2023), ECF No. 44).
Despite both parties voluntarily dismissing their respective lawsuits without prejudice in October 2023, Temu claims that Shein's anticompetitive behavior has escalated rather than ceased.
The core of Temu's recent lawsuit revolves around two main accusations:
Firstly, Temu asserts that Shein has resorted to extreme measures to coerce merchants into cutting ties with Temu. According to the complaint, Shein has gone as far as falsely imprisoning merchants associated with Temu, confiscating their electronic devices, and accessing proprietary information. These drastic actions are seen as a response to Shein's declining valuation, which coincided with Temu's successful entry into the U.S. market.
“Mafia-style” tactics
As stated in the lawsuit, "Shein has now resorted to more aggressive methods of targeting suppliers believed to be selling products on Temu, including an ongoing program of summoning Temu’s suppliers on false pretenses to Shein’s offices, detaining those suppliers’ representatives in Shein’s office for up to ten hours, seizing these Temu sellers’ phones, searching their phones for Temu sales, commercial, and other financial information without permission, demanding the sellers’ chat histories and log-in credentials for their Temu account, compelling them to sign documents against their will, and threatening them with extensive penalties and termination of their Shein contracts for selling on Temu. Shein’s persistent and increasingly aggressive use of anticompetitive conduct, coercion, and threatening behavior necessitates this lawsuit."
Secondly, Temu accuses Shein of engaging in a bad-faith DMCA campaign and infringing on intellectual property rights. The lawsuit alleges that Shein forces suppliers to sign contracts that unwittingly transfer IP rights to Shein. Armed with these rights, Shein then launches false DMCA takedown notices and copyright lawsuits against Temu. The complaint goes so far as to describe Shein's business model as a "shiny façade concealing a corrupt organization," with these deceptive practices being fundamental to its operations.
Bad-Faith DMCA Campaign, infringement of Intellectual Property Rights
As stated in the lawsuit, "Shein has carried out a multi-faceted scheme to slow Temu’s growth in the United States, including through at least the following actions (the “Scheme”):
(a) Coercing thousands of suppliers to sign adhesion contracts allowing Shein to seize the suppliers’ worldwide IP rights, through invalid assignments and often without the suppliers’ knowledge;
(b) Relying on the illegally seized IP rights and/or relying on knowingly false information to obtain improper copyright registrations in the United States
Copyright Office;
(c) Issuing voluminous, bad-faith DMCA takedown notices to Temu, often alleging that a product sold on Temu’s marketplace has infringed the very rights obtained as a result of Shein’s supplier IP seizures—even where Shein has no basis to establish that it owns the IP it is purporting to enforce;
(d) Further abusing the U.S. legal system by instigating and supporting dubious copyright infringement lawsuits against Temu, even though the named plaintiffs suffered no commercial injury, and even though Shein’s entire business model is based on stealing others’ IP (with approximately 100 IP infringement lawsuits filed against Shein and its affiliates in the U.S. alone);
This legal battle highlights the cutthroat nature of the online fast-fashion industry and the lengths to which companies will go to protect their market share. As the case progresses, it will shed light on the business practices of these secretive companies and set precedents for competition and intellectual property rights within the e-commerce industry.
