Attorneys for Temu, a China-based e-commerce platform, claim that rival Shein uses coercive, mafia-style tactics to control competition.
A Chinese e-commerce retailer has filed a federal lawsuit against its biggest competitor, Shein, claiming that the latter company engages in “mafia-style intimidation of suppliers.”
According to CNBC, the lawsuit was filed earlier this week in U.S. District Court for the District of Columbia. In its complaint, WhaleCo—which operates as Temu in the United States—asserted that Shein infringes on its intellectual property rights, falsely imprisons its merchants, and has taken other illegal steps to curb Temu’s expansion in North America.
“We sued Shein because recently their actions have escalated,” a Temu spokesperson said.
“They began to illegally detain merchants, forcibly asking for their phones, stealing our merchant accounts and passwords, stealing our business secrets, and simultaneously forcing merchants to leave our platform,” they said.
“Their actions are too exaggerated,” Temu added. “We had no choice but to sue them.”
CNBC notes that Temu and Shein are “fierce competitors in the online budget shopping space,” even though they have somewhat different business models. This intense competition is attributed, in part, to both companies’ practice of relying upon lower-cost, made-in-China products.
“Though Temu’s business model is very different from the fashion-focused, resale approach relied on by Shein, 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 says.
The lawsuit, which is 96 pages long and details numerous allegations, suggests that Shein frequently threatens product suppliers, using coercive tactics to prevent merchants from offering products on Temu’s website.
“While Shein’s threats to suppliers often occur quietly, through backdoor channels, one intimidation tactic Shein has taken against suppliers is very public,” the lawsuit says. “On the website “geiwohuo.com,” which serves the global supplier system, Shein has used the site’s bulletin board to intimidate suppliers into staying in an exclusive relationship with Shein.”
These tactics have purportedly included threatening legal and financial retaliation against companies that breach the terms of an “Exclusive-Dealing Agreements” with Shein.
And, in China, Shein has allegedly forced suppliers “who previously listed products on Temu’s and Shein’s platforms” into an “inspection room,” where they were “held at Shein’s offices in a small room for up to ten hours and threatened by Shein employees until they acquiesced to Shein’ s demands.”
As a condition of release, Temu attorneys say, suppliers were made to sign “adverse statements and false statements, including terms falsely claiming that products sold on Temu were owned by Shein, even when they were independently developed, as well as documents misrepresenting certain copyrights belonged to Shein when they did not.”
The lawsuit also includes screenshots and side-by-side comparisons of an assortment of games, graphics, and other designs that Shein appears to have copied from Temu’s platform, subject only to slight alterations.
Temu is seeking a jury trial and unspecified damages, including punitive damages, compensation for instances of alleged copyright infringement, and reimbursement of attorneys’ fees and other legal costs.