Chinese e-commerce retailer Temu has filed a lawsuit in Massachusetts accusing its rival Shein of violating US antitrust law by preventing garment makers from working with it.
Temu, which is owned by popular Chinese e-commerce site Pinduoduo Inc., is alleging that Shein has compelled clothing manufacturers to submit to unfair supply chain arrangements preventing them from working with Temu after it entered the US market in 2022. Temu’s US headquarters is in Boston.
Shein (SHE-in) and Temu (TEE-mu) are fast-rising online shopping platforms. Shein has grabbed the largest share of the fast fashion market in the United States, at over 50 percent, according to Temu’s complaint. Temu is the second-most downloaded app in the United States, according to the website data.ai, formerly App Annie, which tracks app rankings. It offers everything from apparel to household goods at similarly competitive prices.
Both companies specialize in “ultra-fast fashion,” where makers of clothes and accessories crank out new designs inspired by recent pop culture and social media trends. According to the complaint, Temu posts about 6,000 new clothing items every week. Most are produced by small manufacturers who often make just a couple of hundred copies of each new design. These are often shipped directly from factory to customer, eliminating the need for a network of large and costly warehouses. This lets Temu and Shein charge far less than traditional retailers and even online stores like Amazon.
Shein had the market to itself when it began doing business in the United States in 2017. Temu estimates that Shein has 75 percent of the ultra-fast fashion market. But Temu, which launched in the United States just 10 months ago, has already become a formidable rival. According to research from Bloomberg Second Measure, a research tool that tracks credit card transactions, Temu posted 20 percent more in sales than Shein in May of 2023.
In response, Temu said in its complaint, Shein is playing dirty.
“Shein has engaged in a campaign of threats, intimidation, false assertions of infringement, and attempts to impose baseless punitive fines and has forced exclusive dealing arrangements on clothing manufacturers,” according to the complaint Temu filed on July 14 with the US District Court for the District of Massachusetts.
In an emailed statement, Temu said that Shein also punished merchants that worked with Temu by imposing “extrajudicial fines” and forced retailers to assign their intellectual property rights to Shein, which could then seek to enforce these rights against those who also operate on Temu.
“For a long time, we have exercised significant restraint and refrained from pursuing legal actions. However, Shein’s escalating attacks leave us no choice but to take legal measures to defend our rights and the rights of those merchants doing business on Temu, as well as the consumers’ rights to a wide variety of affordable products,” the retailer said in the statement.
Shein did not immediately respond to the Associated Press with a comment, though it previously said that the case was “without merit” and that the firm would defend itself against the allegations.
Gregory Stoller, master lecturer in strategy and innovation at Boston University’s Questrom School of Business, said it’s unclear how a US court ruling could compel Shein to change the way it treats clothing suppliers who are nearly all based outside the United States, mostly in China.
“When they’re bringing the preponderance of their material from outside the United States, it’s very creative to pursue an antitrust case,” Stoller said. “I view this as being spaghetti flung up against the wall to see if anything sticks.”
Earlier, Shein sued Temu in Illinois, asserting that it engaged in deceptive business practices and created impostor pages that violated copyrights and trademarks.
Both Shein and Temu have gained attention as imports to the United States via their platforms have surged.
Just days ago, a filing in California by three US fashion designers accused Shein of copyright infringement so aggressive that it amounts to racketeering. The filing alleges the company has violated the Racketeer Influenced and Corrupt Organizations Act, better known as RICO, a law originally crafted to prosecute organized crime.
A Congressional report published last month questioned both companies’ compliance with efforts to prevent goods made by forced labor from being sold on their platforms.
Hiawatha Bray of the Globe staff contributed to this report.