Shein is feuding with Temu again, this time for running a “fraudulent” marketplace that it says employs “unfair and unlawful” means such as counterfeiting, trade secret theft and intellectual property infringement to get a leg up on its competitors—primarily Shein.
“Temu masquerades as a legitimate e-commerce ‘marketplace’ where independent sellers can offer their products for sale,” Shein parent company Roadget Business wrote in a lawsuit filed against Temu operators PDD Holdings and Whaleco in the U.S. District Court for the District of Columbia on Monday. “But the facts uncovered to date—and those expected to be uncovered in discovery—demonstrate otherwise.”
The legal salvo is only the latest in an ongoing fusillade of grievances between the two Chinese-founded e-tail empires, whose impossibly inexpensive products—they sell everything from clothing to electronics to kitchen wares—have fueled their breakneck growth among Western consumers seeking relief from the persistent inflationary squeeze, though not without blowback.
Shein, which is based in Singapore, accused Temu, whose headquarters are located in Boston, of controlling “every aspect” of its sellers’ activity, directing what products they can sell and for how much, even “preventing” them from withdrawing items after they have admitted infringement. These are not the actions of a “legitimate third-party ‘marketplace,” the lawsuit said, adding that Temu reportedly loses $30 or 30 to 50 percent on every order placed in the United States as part of its strategy to seize market share.
“Temu draws U.S. consumers into downloading and using its mobile application with promises of extremely low pricing. But Temu is not profiting from the sale of these products, which are priced so low that Temu must subsidize each sale, losing money on every transaction,” Shein said. “Only by encouraging its sellers to infringe the intellectual property rights of others and sell counterfeit or substandard goods can Temu hope to minimize the massive losses it is subsidizing.”
At the same time, Temu has “strategically ripped off” the “Shein brand” and “swindled consumers,” the complaint said. Its “brazen” behavior, meant to achieve its rock-bottom prices “by any means,” has also included “substantial” investment by the “Shop Like a Billionaire” platform to pass itself off as Shein.
“At least one Temu employee stole valuable trade secrets that identify bestselling Shein products—and internal pricing information—to give Temu a blueprint for unlawfully competing with Shein,” the lawsuit said. “Armed with this stolen information, Temu then directed its sellers to copy those and other bestselling Shein products and sell knock-off versions on Temu’s website and mobile applications.”
But Shein has fielded its share of copyright infringement allegations, including one that claimed that the aggressiveness of its copycat violations was tantamount to racketeering. Lawsuits from Adidas, Dr. Martens, H&M Group, Levi Strauss & Co., Ralph Lauren and others are still active, as is a complaint that charges Shein with using “mafia-style intimidation and detention scare tactics,” including false imprisonment, to coerce sellers into exclusive agreements. Shein, Temu told the same Washington, D.C. court in December, has been “abusing” the U.S. legal system by instigating “dubious” copyright infringement lawsuits and issuing “voluminous” bad-faith takedown notices.
“Shein’s illegal scheme to disrupt Temu’s business cannot be separated from its public campaign to manufacture the false image of itself as a law-abiding corporate citizen,” Temu said in its complaint. “Shein’s behind-the-scenes campaign to prevent competition and thwart Temu’s success exposes its public campaign as a fraud and a farce. The truth is that Shein’s interpretation of ‘protecting intellectual property’ is illegally seizing, fabricating and weaponizing intellectual property rights to block competition.”
“The audacity is unbelievable,” a Temu spokesperson told Sourcing Journal. “Shein, buried under its own mountain of IP lawsuits, has the nerve to fabricate accusations against others for the very misconduct they’re repeatedly sued for.”
The latest lawsuit comes as Shein edges closer to a potential initial public offering in London and Temu grapples with a demand from nearly two dozen U.S. attorneys general to clarify its possible ties to the Chinese Communist Party, its data collection and sharing practices and any potential violations of the Uyghur Forced Labor Prevention Act. Shein, too, has come under similar scrutiny, though the company doesn’t appear to be allowing the negative attention to cramp its style: It’s currently forging a sprawling $517 million supply chain nerve center in Guangzhou.
Whether proposed de minimis reforms—in the United States mainly, but also in the European Union, South Africa and Turkey—will disrupt either e-tailer’s trajectory of success, which experts say derives in part from the ability of low-value packages to skirt import taxes and closer customs attention, is still a looming question. As the companies continue their internecine turf war, however, Shein v. Temu is the conflict to watch. Whaleco, the legal entity that operates Temu in the United States, said so itself in a complaint filed with a federal court in the district of Massachusetts last July, though it stood down this particular lawsuit a few months later.
“Shein now views itself as being ‘at war’ with Temu and has engaged in an elaborate and anticompetitive scheme aimed at stymieing Temu’s business,” Whaleco said. “The U.S. market is the primary theater of this war.”
And the feeling, it would seem, is nothing if not mutual. It was only in January, after all, that Shein filed four lawsuits in Illinois’ Northeastern District Court against Temu—plus AliExpress—sellers for copyright theft. Shein also tried to haul Temu and the social media platform formerly known as Twitter to court last year after accusing its rival of “impersonating the Shein brand” and demanding that Twitter hand over all undeleted data. The complaint was later voluntarily dismissed. If there was a truce at some point, it’s now decidedly over.
“Temu massively, continuously and illegally infringes on Shein’s rights directly and through its suppliers who Temu controls,” a Shein spokesperson told Sourcing Journal. “Temu uses deceptive and unlawful tactics, including theft of trade secrets, trademarks and copyrights. Shein is confident that evidence will demonstrate Temu’s engagement in infringing activities, which wrongfully misleads consumers, suppliers and the public.”
