E-commerce fashion retailers Shein and Temu are back in court over allegations of anti-competitive behavior and intimidation of suppliers. Just months after ending a legal ceasefire, Temu has filed a new lawsuit claiming Shein engaged in a “scheme of threats, harassment and unlawful conduct” to maintain its dominance.
Allegations of Intimidation and False Imprisonment
In the lawsuit filed Thursday in a California federal court, Temu alleges Shein used mafia-style intimidation tactics including imprisonment of factory owners to block suppliers from working with Temu.
Specific allegations include:
- Threatening suppliers with financial ruin or jail time if they sell to Temu
- Falsely imprisoning factory owners without food, water or bathroom access
- Filing over 1,000 bad faith takedown requests with Amazon to remove Temu listings
- Spreading rumors that working with Temu would lead to suppliers losing Shein business
Temu claims this allowed Shein to effectively monopolize the market and stunted Temu’s growth in the crucial holiday season.
Shein called the claims “wild, unsubstantiated allegations” and denied any wrongdoing, signaling another contentious legal fight.
Previous Ceasefire Ends as Competition Intensifies
Temu and Shein previously agreed to a rare e-commerce ceasefire in September 2022 after Temu’s initial lawsuit accused Shein of copying its product designs.
| Key Events in Shein vs Temu Dispute |
|-|
| Sept 2022 | Temu sues Shein for IP infringement |
| Oct 2022 | Sides agree to ceasefire |
| Dec 2022 | Temu files new lawsuit with expanded allegations |
However, with both aiming to capture the online fast fashion market amid economic uncertainty, rivalry has only intensified according to analysts:
“The temporary truce between Temu and Shein disintegrated quickly with merchandising VP John Mercer claiming Shein was trying to ‘smother a competitor in its infancy,'” said retail analyst Silpa Sen. “This shows the stakes in fast fashion are extremely high.”
The end of the short-lived legal ceasefire indicates tensions remain high between the two competitors.
Could Allegations Threaten Shein’s Future IPO?
With Shein potentially targeting a 2024 IPO after previously filing confidentially, the lawsuit’s allegations of strong-arm tactics could impact prospects.
“Such alleged conduct hardly paints the picture of a company ready for the scrutiny of public markets,” noted equity analyst Rahim Setayesh. “While unproven, these claims of unlawfulness call Shein’s operations into question.”
The timing also suggests Temu sees an opportunity to curb Shein’s growth before a lucrative IPO. Industry rumors indicate Shein seeks up to a $100 billion valuation, which would make it one of the largest apparel IPOs ever.
Whether true or not, the allegations represent another speed bump on Shein’s road to going public in 2024. Continued legal action also serves to undermine Shein’s reputation regardless of outcome.
What’s Next in the Shein-Temu Dispute?
With the lawsuit exposing the increasing animosity between the ultrafast fashion retailers, most analysts expect another prolonged legal fight.
“Temu’s updated lawsuit signals the beginning of a multifront war between the two competitors that is likely to play out over years,” said Mike Bradley, Managing Editor at The Fashion Law.
Both sides seem entrenched, with Temu committed to curbing what it sees as Shein’s anti-competitive practices and Shein denying all claims.
Unless a settlement is reached, the lawsuit will likely progress slowly through motions and responses over 2023 and beyond. Further litigation also cannot be ruled out if Temu continues targeting Shein’s business practices.
For suppliers and consumers, it means continued uncertainty in the fast fashion space as two giants battle for supremacy. But with the market projected to grow to $30 billion by 2030, neither side seems willing to back down.
The lawsuits underscore the challenges for regulators in policing alleged anti-competitive practices in the rapid growth Chinese e-commerce arena. But for now, Temu and Shein remain locked in a high stakes legal fight that shows no sign of abating.
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