In a battle of the Chinese ultra-fast-fashion giants, Temu has filed a lawsuit against Shein, accusing it of various nefarious practices aimed at deterring apparel manufacturers from doing business with Temu in order to thwart competition from the newer entrant to the U.S. market.
“Shein now views itself as being ‘at war’ with Temu and has engaged in an elaborate and anti-competitive scheme aimed at stymieing Temu’s business,” Temu alleges in the lawsuit, filed Monday in U.S. District Court in Boston. “The U.S. market is the primary theatre of this war.”
“We believe this lawsuit is without merit and we will vigorously defend ourselves,” Shein said in a statement.
The lawsuit is the latest salvo in an ongoing legal and commerce battle between the dominant ultra-fast-fashion player and its rival upstart, Temu. Shein has accused Temu in a separate lawsuit of impersonating its brand by creating fake Twitter accounts, according to Business Insider.
Shein was taken to task last month for sending a group of American fashion influencers on a tour of its Chinese factories, under the guise of demonstrating it wasn’t using forced labor as alleged in many quarters. The PR makeover effort blew up in its face.
The alleged anti-competitive practices outlined in Temu’s lawsuit, include “a campaign of threats, intimidation, false assertions of infringement and attempts to impose baseless punitive fines,” all of which led manufacturers to strike exclusive deals with Shein.
“As the dominant ultra-fast fashion retailer, Shein knows that manufacturers need Shein’s volume and its access to the U.S. market and it is, therefore, able to coerce manufacturers into arrangements that force manufacturers not to do business with Temu,” the lawsuit reads.
The result, Temu alleges, is that Shein is attempting to exclude it from the market in order to charge higher prices and offer a smaller selection than it would if it faced stiffer competition from Temu.
Throughout the lawsuit, Temu paints a picture of Shein nervously looking over its shoulder and throwing roadblocks in the way of its main competitor in the U.S. This includes allegedly using its market dominance to force its Chinese suppliers into exclusive agreements, threatening them with fines and penalties if they do business with Temu. Suppliers were also allegedly made to sign “loyalty oaths” promising no to, with no other competitors mentioned.
Shein also allegedly sent false notices accusing Temu of copyright infringement related to products it sold on its marketplace. “These notices are almost always aimed at products that Temu sells at lower prices than Shein charges for identical or similar products,” the company alleges.
Since October, when this campaign was in full bloom, the company alleges, 10,000 products have been pulled from its marketplace as a result of Shein’s actions.
In providing a brief history of the ultra-fast-fashion market, the lawsuit notes how Shein is by far the dominant player, with 75% of the market and 50% of the market when fast fashion (Zara, H&M, Uniqlo, etc.) is added in. But Temu, whose app was the most downloaded on Apple and Google after its November launch in the U.S., has been selling essentially the same items but at a 10%-40% discount to Shein.
“Since Temu entered the market, Shein has attempted to maintain its monopoly by means of its anticompetitive scheme, desperate to avoid the robust competition Temu brought to the market,” the lawsuit states.