Shein sues Temu

Chinese clothing retailer Shein has sued business rival Temu, accusing it of copyright infringement and stealing its trade secrets, according to a CNBC report.

This follows a civil complaint filed by Shein at the Washington D.C. federal court claiming that Temu encourages counterfeiting other designs and disallows the removal of admittedly copied products.

Both retailers have been battling for market share in the fast-fashion market, following the meteoric growth of their businesses following the Covid-19 pandemic.

The complaint also accused Temu, owned by PDD Holdings, of relying on a business model that priced products so low that they needed to be subsidised, causing the business to lose money with every transaction.

“Only by encouraging its sellers to infringe the intellectual property rights of others and sell counterfeit or sub-standard goods can Temu hope to minimise the massive losses it is subsidising,” the lawsuit said.

“The audacity is unbelievable,” a Temu spokesperson told MyBroadband.

“Shein, buried under its own mountain of IP lawsuits, has the nerve to fabricate accusations against others for the very misconduct they’re repeatedly sued for.”

Large fashion brands, such as H&M, Victoria’s Secret, Levi Strauss, and Uniqlo, have accused Shein of copyright infringement.

Many fashion designers, graphic designers, and small businesses have done the same.

One case against Shein claimed the retailer’s method of identifying and creating new designs, utilising artificial intelligence algorithms to find viral and trending images on the Internet, does not involve an intermediary to ensure they are not the property of others.

They said part of the problem was the sheer quantity of products Shein produced a day.

However, Shein’s accusations did not stop at copyright infringement.

The retailer claimed that a Temu employee had stolen trade secrets and internal pricing information, which was used to create what Shein claims were identical promotional images to those it had of the same products used on the Temu website and app.

Shein also accused Temu of “impersonating” it on social media platform X in an attempt to misdirect users.

In addition, the complaint said Temu “instructed its paid social media influencers to falsely claim that Temu products, which are often counterfeits of Shein products, are cheaper and of higher quality than genuine Shein goods.”

This is not the first time the two bargain retailers have taken legal action against each other.

Temu accused Shein of using intimidation and threats to stop suppliers from doing business with it.

Next, Shein claimed Temu had contracted social media influencers to make false statements about it in its advertisements.

Both lawsuits were eventually dropped, but the furious exchange did not stop there. Shein was then accused of imprisoning merchants who did business with Temu.

In South Africa, the companies have been making enemies of their own by disrupting the local clothing sector with prices far below the country’s budget retailers.

Shein has been available in South Africa for a few years now, while Temu is a relatively new entrant. It launched locally in January 2024.

Both e-commerce platforms have seen immense growth in 2024. However, local retailers accused them of exploiting import tax loopholes to undercut local clothing prices.

South African Revenue Service (Sars) commissioner Edward Kieswetter has committed to cracking down on the Chinese retailers.

Sars previously committed to implementing a new import duty on 1 July 2024 to address the issue. However, it delayed its implementation, citing a need for more stakeholder engagement.

In an announcement from Friday, 9 August 2024, Sars said it would implement interim tax changes for e-commerce players from 1 September 2024.

Shein and Temu’s local logistics partners currently benefit from a years-old concession that allows it to pay a flat monthly rate of 20% on clothing imports.

From 1 September, Sars will charge value-added tax (VAT) on top of the flat 20% duty the importers currently pay. It will implement further, permanent changes in November.