Shein Accused of ‘Mafia-Style’ Tactics by Rival Temu
Temu, a popular low-cost online marketplace with ties to China, accused its rival Shein of using “mafia-style” methods to tamp down competition in a lawsuit filed Wednesday, the latest volley in a heated turf war between two of the fastest-growing fashion retailers in the United States.
In the filing, Whaleco, which operates in the United States as Temu, accused Shein of orchestrating a “multifaceted scheme” to slow its growth. It added that Shein had been trying to impede its growth by intimidating merchants and instigating unfounded copyright infringement lawsuits.
“Shein chokes the ultra-fast-fashion suppliers with exclusivity requirements and mafia-style intimidation and detention scare tactics against suppliers who dare to sell to Temu, including false imprisonment” by detaining suppliers’ representatives in its office for hours and “seizure of cellphones during meetings Shein calls on false pretenses,” the lawsuit says. It goes on to claim that Shein then “coerces” suppliers to sign exclusive deals with them.
The suit also asserts that Shein has instigated unfounded copyright infringement lawsuits against Temu, and it describes Shein as having “monopoly power in the U.S. ultrafast fashion market.”
“We believe this lawsuit is without merit and we will vigorously defend ourselves,” a Shein spokeswoman said in an emailed statement.
The suit is the latest challenge for Shein, which in November filed confidentially for an initial public offering in the United States.
In the past few years, Shein has gained a following among teenagers and young adults drawn to its inexpensive and wide-ranging merchandise, like $10 dresses and $3 packs of fake eyelashes. It uses sophisticated technology and production models that allow it to quickly put new items in front of shoppers, keeping them coming back to its website and app.
Last year, it gained a formidable competitor with Temu, which is a subsidiary of PDD Holdings in China that sells electric milk frothers for $2.87 and women’s tank tops for $3.99. Temu made a splash among consumers after running multiple ads during this year’s Super Bowl, one of the most expensive slots for advertisers. On TikTok, shoppers regularly post videos of their purchases under the hashtag #temuhauls.
In the suit, Temu noted that Shein’s reported valuation had fallen and said that Shein was trying to tamp down the competition in response.
“Shein’s conduct targeted at Temu is part of a larger pattern of behavior by Shein to subvert and abuse the U.S. legal system,” the suit says.
Shein has been facing intense scrutiny from legislators in Washington related to its business practices. It has faced questions from lawmakers about its supply chain since reports linked the company’s cotton to Xinjiang — a region in China where, U.S. officials say, the government has exploited the labor of ethnic Uyghurs.
It has also been accused of stealing independent designers’ intellectual property, and a growing number of lawmakers, lobbyists and other retailers say Shein benefits unfairly from de minimis, a U.S. trade provision that allows companies to avoid paying customs fees when shipping low-cost products to consumers in the United States.
As Temu becomes more prominent, it is starting to face some of the same criticisms. In June, lawmakers accused the platform of providing an unchecked channel that allows goods made with forced labor to flow into the United States. Critics also say its use of de minimis is unfair to American retailers.
