Temu Accuses Shein of 'Mafia-Style' Tactics in Lawsuit

 Online fashion retailer Temu filed a lawsuit against Shein in the U.S. Wednesday, alleging the rival fast fashion company used “Mafia-style intimidation” tactics to dissuade suppliers from working with Temu, the latest in a series of legal fights between the two Chinese-founded companies.

 

A D.C. federal court filing made by WhaleCo—Temu’s operator in the U.S.—alleges it has been the “target of malicious and unlawful conduct” by Shein, which views Temu as its “greatest threat.”

The filing accuses Shein of abusing intellectual property rights laws to “falsely imprison merchants doing business with Temu,” while also engaging in threats, intimidation and coercion.

Temu also alleges Shein poached key marketing and advertising staffers who had access to confidential information and know-how that Shein then copied.

The filing alleges Shein has physically detained merchants who choose to work with Temu and has even illegally seized their devices ahead of a major Super Bowl advertising campaign by the latter in February next year.

Temu is asking the Court to “put a stop to Shein’s deceptive misuse of the U.S. legal system and anticompetitive conduct.”

A Temu spokesperson told Forbes, Shein’s actions were “too exaggerated; we had no choice but to sue them,” while the latter is yet to comment on the matter.

CRUCIAL QUOTE

Temu’s filing alleges: “Shein’s conduct has harmed and continues to irreparably harm Temu, U.S. consumers, hard-working ultra-fast fashion suppliers, and the U.S. intellectual property and judicial systems as a whole.”

TANGENT

The lawsuit comes just weeks after reports of Shein confidentially filing for an IPO, targeting an $80-90 billion valuation. At its most recent fundraising round in May, Shein raised fresh capital at a valuation of $66 billion. Both numbers are a step down from the $100 billion the company was valued at in 2022—making it the world’s third most valuable startup behind TikTok’s parent Bytedance and Elon Musk’s SpaceX. Temu’s suit attributes this slump in valuation to its entry into the U.S. market, noting: “Following the U.S. entry of Temu…Shein’s valuation reportedly fell by over $30 billion, so Shein hatched a desperate plan to eliminate the competitive threat posed by Temu.”

KEY BACKGROUND

Founded in China and now headquartered in Singapore, Shein has quickly grown to become the biggest fast-fashion retailer in the world, dwarfing more established rivals like H&M and Zara. Temu is owned by the Chinese internet giant PDD Holdings and launched in the U.S. in September last year. The popularity of both fashion retailers has been attributed to their wide inventory of deeply discounted merchandise. Despite their meteoric rise, both have been plagued by controversies. Temu has come under scrutiny for poor customer support and data security practices, while Shein has been accused of stealing designs and intellectual property from major fashion brands and independent designers. Both sides clashed legally in the past as well, with Shein suing Temu last year over alleged IP violations, while Temu accused Shein of coercing suppliers into signing exclusivity agreements. In October, both sides agreed to drop the lawsuits.