The lawsuit alleges that Shein has “falsely imprisoned” suppliers' representatives working with Temu.
Temu's suit claims the intimidation included “detaining merchant representatives in Shein’s offices for many hours”, accessing information on the representatives' electronic devices after confiscating them and threatening the officials with penalties for working with Temu.
Boston-based WhaleCo Inc, which operates as Temu in the US, has also accused Shein of “coercing thousands of suppliers to sign adhesion contracts”, which it claims allows Shein to “seize the suppliers’ worldwide IP rights through invalid assignments and often without the suppliers’ knowledge”.
The lawsuit claims the alleged tactics are part of a “desperate plan” by Shein to remove Temu as a competitor.
However, the lawsuit claimed: “Though Temu’s business model is very different from the fashion-focused resale approach relied on by Shein, […] ever since Temu’s US 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 news comes shortly after Shein was reportedly considering a public listing in the UK, despite already filing documents for an initial public offering (IPO) in the US for 2024.
A spokesperson from Temu told Just Style: "Their actions were too exaggerated, we had no choice but to sue them."
However, a Shein spokesperson told Just Style: "We believe this lawsuit is without merit and we will vigorously defend ourselves."
GlobalData’s retail managing director analyst Neil Saunders told Just Style this dispute was part of tough competition between Temu and Shein as both retailers continue to grow.
Saunders explained: "As both marketplaces expand, Shein and Temu are coming up against each other more intensely and are increasingly fighting for share and dominance. Some of the battles seem to be fought behind the scenes which is leading to various legal skirmishes."
However, he added that this latest development was unlikely to be beneficial for either Temu or Shein. He said: "Truth be told, these are not particularly helpful for either company, but the stakes are so high that it seems likely we will continue to see the legal drama play out."
The McKinsey State of Fashion report recently predicted that both Shein and Temu would continue to gain market share in 2024, suggesting the retailers' ultra-low prices would keep winning over consumers in the coming months as the cost-of-living crisis continues.
In July three independent US fashion designers, Krista Perry, Larissa Martinez, and Jay Baron, filed a lawsuit against Chinese fast fashion company Shein for engaging in AI-led “systematic criminal intellectual property infringement”.
