Retail industry
Chinese e-commerce company reignites bitter legal battle, accusing Shein of “bullying and intimidating” suppliers
Thu, December 14, 2023, 5:19 p.m. GMT
Chinese online marketplace Temu has sued its rival Shein, claiming the fast fashion giant “harassed, intimidated and even imprisoned” suppliers in China as part of a “mafia-style intimidation campaign.”
Temu reignited a bitter legal battle, accusing Shein of trying to “illegally” interfere in his business and even going so far as to confiscate traders' cellphones at meetings to gain access to confidential information.
Suppliers doing business with Temu were threatened with penalties by Shein, WhaleCo Inc – which does business as Temu in the US – alleged in a 100-page lawsuit filed in the US District Court for the District of Columbia on Wednesday.
In a statement, Shein called the lawsuit “meritless” and vowed to defend himself. The company, one of the world's leaders in fast-fashion e-commerce, is preparing for a highly anticipated initial public offering and reportedly filed confidential documents with U.S. securities regulators last month. The listing could take place as early as next year.
This came just two months after the operators appeared to have reached a truce in their heated legal battles. In October, both requested that the cases against each other be dropped and that they be dismissed “without prejudice” by their respective judges.
Shein was founded in China in 2012 by entrepreneur Chris Xu, but is now headquartered in Singapore. By 2022, its value had risen to a reported $100 billion, making it the third most valuable startup in the world, although that value was said to have fallen significantly during a fundraising round earlier this year.
PDD Holdings, which owns Pinduoduo, a Chinese discount e-commerce giant, launched Temu in the US in 2022. The platform is based in Boston, Massachusetts.
As part of what it described as a “desperate plan to eliminate the competitive threat,” Temu alleged in its new complaint that Shein abused intellectual property laws to “disrupt Temu's operations and damage Temu's valuable brand” and its illegally copied intellectual property.
Temu said it is preparing a major advertising campaign around Super Bowl LVIII in February. The campaign will “increase traffic to Temus’ app and website,” the company said, citing the impact of a similar effort earlier this year.
Ahead of this upcoming advertising campaign, Temu claimed that Shein “has resorted to even more desperate and coercive measures, including physical detention of traders who dare to work with Temu, personal threats and illegal confiscation of traders' personal devices in order to gain access “Temu Accounts of Merchants and Confidential Information and Trade Secrets of Temu.”
Temu accused Shein of overseeing an “ongoing program in which Temu suppliers were summoned to Shein’s offices under false pretenses, those suppliers’ representatives were detained in Shein’s office for up to 10 hours, those Temu sellers’ phones were confiscated and their phones for Temu sales, advertising, and other financial information without permission, demands sellers' chat histories and Temu account login credentials, forces them to sign documents against their will, and threatens them with heavy fines and termination of their Shein contracts for sales on Temu.”
It was alleged that “several suppliers” who had listed products on both Temu and Shein reported that their representatives were called to an “inspection room” at Shein's offices in Guangzhou, China. In recent weeks, Shein representatives have been summoned to discuss “potential collaborations,” only to be threatened by Shein's employees, Temu claimed.
Supplier representatives were “physically overpowered” by Shein, Temu’s complaint says. It said several Shein employees were “stationed in close quarters around the dealer during the subsequent interrogation.”
Shein's “sustained and increasingly aggressive use of anti-competitive conduct, coercion and threatening behavior necessitates this lawsuit,” Temu added.
A Shein spokesman said: “We believe this lawsuit is without merit and will defend ourselves vigorously.”
Within a few months, Temu quickly made a name for himself in the USA – and his business was booming. According to Bloomberg Second Measure, which analyzes credit and debit card transactions, Temu spending surpassed Shein spending earlier this year, with Temu gaining a 20% lead in May.
Temu's lawsuit described Shein's public brand as a “glossy facade” that obscures the company's behind-the-scenes actions and accused the company of “copying trendy designs” and reselling them. “Shein is not a brand; it is a glorified label manufacturer,” it said.
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