Within a few short years, China-based apps Shein and Temu have mushroomed within the US consumer scene, offering a seemingly endless variety of clothing, makeup, and home goods at rock-bottom prices.
Now, the two are locked in a legal battle, accusing each other of illegal behavior in their quest to woo American shoppers.
Timo lawsuit Shein is in federal court in Massachusetts, accusing the longtime company founded in 2012 of aggressively arming suppliers into exclusive agreements to deny Temu goods, in violation of US antitrust laws.
Shein requires manufacturers to “sign an oath of allegiance certifying that they will not do business with Temu,” the complaint filed on July 14 says. And if they refused, Shein imposed “illegal fines” on the manufacturers and publicly shamed them. These alleged antics led to 10,000 products being pulled from Temu’s website, according to Suit.
Shein’s alleged weaponization is problematic, according to Temu, because there are relatively few manufacturers in China that can keep up with the rapid lighting turnaround that Temu requires, and Shein has booked 8,338 of them in exclusive agreements, according to the suit. Temu claims to have lost tens of thousands of its listings after suppliers were bullied by Shein into ending their relations with Temu.
Such exclusive agreements are illegal under US antitrust law. It’s also a bad deal for consumers, because “Temu beats everyone else on price,” the suit claims.
Copyright claims abound
As the complaint explains, both Shein and Temu are part of the world of “ultra-fast fashion,” which “distinguishes itself … by not only offering an enormous number of products, but also frequently replacing these products with new designs.” suppliers to Shein and Temu have almost no inventory; Instead, they generate thousands of new designs, run small productions of no more than 100 items, frequently change styles depending on shopper feedback and do it all with extremely thin margins, resulting in prices as low as $3 for a shirt or $15 for a dress.
Temu also accuses Shein of making frivolous copyright claims against suppliers to punish sellers who use both systems, resulting in Temu losing merchandise.
Shein filed a lawsuit against Temu Copyright and trademark infringement Earlier this year in Illinois. Earlier this week, three fashion designers sued SHEIN in California, accusing the company of committing blackmail Stealing fashion designs.
Sheen declined to comment on the lawsuit. “We believe this lawsuit is without merit and we will vigorously defend ourselves,” Shen said in a statement about Timo’s lawsuit this week.
Fight in fast fashion arcades
The legal battle unfolds as the two companies compete fiercely for American consumers in the face of scrutiny from US lawmakers.
Shein, which entered the US market in 2017, has come to dominate the fast fashion industry, beating out competitors such as Fashion Nova, Forever21, H&M, and Zara, with more than 50% of sales, according to Temu Suit — a position that makes it a “monopoly,” according to its competitor.
Temu broke into the American shopping scene in September 2022 with an intense advertising campaign that included influencer sponsorships, a series of paid promotional Articles in major American newspapers and a $45 billion Superbowl ad. It quickly became the most downloaded app on Google and Apple and is currently among the top 10 shopping apps, according to Similar.com.
“It was pretty unprecedented to see a shopping app take off so quickly and get so much traction early on,” Sky Canaves, senior retail and e-commerce analyst at Insider Intelligence, told CBS MoneyWatch.
app too aroused consumer skepticism, With many asking if the unbelievably low prices are a scam. Last year, customers filed nearly 600 complaints against Temu with Better Business officewhere it currently has a C minus rating.
“You’ve got a lot of consumers wondering, ‘What is this company? Is it real? But because it’s so cheap and low risk to try… A lot of consumers were at least willing to try it,'” Canaves said.
In Canaves’ view, Temu has benefited from sharp inflation in the US over the past year, as well as heavy advertising on social media and a willingness to sell at rock-bottom prices. She said its overnight popularity may not be enough for long-term profitability.
“I think they sell a lot of commodities at a loss,” she said.
Serious fears of forced labor practices
US lawmakers have also raised concerns about Timo and Chin’s data collection and labor practices. Member of Congress a report The post last month implied that neither company was fully complying with the ban on goods from China’s Xinjiang region, writing, “American consumers should know that There is a very high risk of contamination of Timo’s supply chains by forced labour.”
The US-China Economic Security and Audit Committee also cited several “controversial” business practices by the two companies in the report. April reportwhich described Shein’s growth as “a case study of Chinese e-commerce platforms outsmarting regulators to grow a dominant presence in the US market”.
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