Shein and Temu, who are owned by PDD Holdings Inc. , a rising force in online retail, a growing threat to the likes of H&M and Zara. The lawsuit offers a rare glimpse into the two secretive firms’ business models — and their fierce competitive practices.
Shein has captured more than 75% of the “ultra-fast fashion” market in the US since entering the market in 2017, according to the lawsuit. After Temu entered the United States in 2022, Xin retaliated by forcing the apparel manufacturers into supply arrangements that exempted Temu, the suit alleged.
“Shein has engaged in a campaign of threats, intimidation, false assertions of violation, attempts to impose baseless punitive fines and imposed exclusive trading arrangements on garment manufacturers,” according to Temu’s complaint filed July 14 with the US District Court from Massachusetts.
The allegations come after Shein sued Temu in the US, alleging trademark and copyright infringement as well as “false and deceptive business practices”.
In a separate statement, Timo explained why we should take action now.
For a long time, we exercised great restraint and refrained from legal action. However, Shein’s escalating attacks leave us with no choice but to take legal action to defend our rights and the rights of those merchants who do business on Temu, as well as the rights of consumers to a variety of affordable products,” the company said.
Shein has led the way in pioneering ultra-fast fashion, offering consumers the latest in fashion at bargain prices, with T-shirts and swimwear for as low as $2. This helped the company become one of the most successful startups in the world, valued at $66 billion, according to the market research firm. CB Visions.
“We believe this lawsuit is without merit and will vigorously defend ourselves,” a spokesperson for Xi’an said in an emailed statement.
Temu alleged that Shein engaged in at least four strategies to stifle competition, including imposing fines and penalties on suppliers who work with Temu and forcing suppliers to sign “loyalty oaths”. Shein also issues “public penalty notices and extrajudicial fines to eliminate disobedient manufacturers for supplying Temu with the product”.
Temu alleged in the suit that as of May, “Shein required all 8,338 manufacturers or sellers on the Shein platform to implement exclusive dealing agreements, which prevent these manufacturers from offering products on the Temu platform or supplying products to sellers on the Temu platform.” Temu said the 8,000-plus manufacturers supplying Shein account for 70% to 80% of the total number of merchants who are able to provide ultra-fast fashion.
Teemo said that merchants pulled over 10,000 listings as a result of Shein’s actions. In the lawsuit, the PDD unit cited examples of apparel manufacturers who have cut their presence or ceased operations on the platform, to “please” Shein.
The company claimed that “Shein knows that manufacturers need Shein’s size and access to the US market, and is therefore able to force manufacturers into arrangements that force manufacturers not to do business with Temu”. DM