The cease-fire in the war between Chinese-founded discount digital retailers Temu and Shein appears to be over, as the former filed a new lawsuit against the latter, claiming the company has targeted suppliers with intimidation tactics.
According to the suit, which was filed yesterday in U.S. District Court in Washington, D.C. by Temu parent company WhaleCo, Shein has ramped up its efforts to interfere with Temu’s business, allegedly falsely imprisoning merchants working with discount retailer. The complaint accuses Shein of detaining suppliers in their offices for hours while confiscating their electronic devices. The lawsuit also claims that Shein obtained proprietary information through merchants’ seller accounts on Temu and threatened those sellers with penalties for doing business on the platform.
Related Stories
“Though Temu’s business model is very different from the fashion-focused, resale approach relied on by Shein (an incumbent online retailer that has been straining to reinvent itself as an online marketplace), ever since Temu’s U.S. launch in September 2022, the company has been seen by Shein as its greatest threat—and therefore the target of malicious and unlawful conduct intended to thwart Temu’s success,” the lawsuit said.
A spokesperson for Shein said the company “will vigorously defend” itself against what it describes as meritless claims.
The move comes after Temu and Shein reached an agreement to drop their previous lawsuits against each other in October. Temu’s previous suit accused Shein of similar anticompetitive conduct outlined in the new complaint, including intimidation and false claims of infringement to coerce clothing manufacturers in China into exclusive agreements.
In response, Shein filed its own lawsuit against Temu, accusing the company of trademark and copyright infringement, impersonation of the Shein brand and enlisting social media infuencers to make “false and deceptive statements.”
This latest complaint comes at a time when both Shein and Temu have come under criticism by members of Congress for skirting customs enforcement via de minimis under the Section 321 trade provision. According to that rule, individual shipments of foreign origin are permitted to enter the U.S. duty free if they’re worth less than $800. Many say that threshold is too high and has allowed companies such as Shein and Temu to amass multi-billion-dollar profits with small, low-value packages.
A roundtable hosted by House Ways and Means Trade Subcommittee Ranking Member Earl Blumenauer (D-Ore.) held Wednesday brought together American manufacturing industry players and law enforcement voices who called for reform on the provision they say gives foreign competitors unfair access to the U.S. market. Notably, Shein has recently called for a de minimis update as well.
Amazon also recently took aim at Shein by announcing a new reduced fee structure for sellers of inexpensive clothing, which Shein specializes in. Those new fees, which go into effect in January, include a 10 percent drop for items priced $15 to $20 while items $15 or less will see a 5 percent fee reduction.
Amid these issues, Shein has confidentially filed to take its business public despite congressional displeasure, eyeing a $90 billion valuation for its business, which was valued at $66 billion earlier this year.
According to the new lawsuit, Temu claims its entry into the U.S. market in September 2022 resulted in Shein losing more than $30 billion in valuation.
“So Shein hatched a desperate plan to eliminate the competitive threat posed by Temu,” the suit claimed.
According to a Temu spokesperson, “Their actions are too exaggerated; we had no choice but to sue them.”