Shein, a Chinese fast-fashion retailer, is facing a lawsuit from its rival Temu, another online retailer owned by PDD Holdings Inc. Temu claims that Shein has violated antitrust laws by using threats and intimidation to block clothing manufacturers from working with Temu.
According to the lawsuit filed in the U.S. District Court for the District of Massachusetts, Shein has a dominant position in the U.S. “ultra fast-fashion” market, offering consumers the latest fashion products at bargain prices. Since Temu entered the U.S. market in 2022, Shein has allegedly forced clothing manufacturers into exclusive arrangements that prevent them from supplying products to Temu or selling on its platform.
Temu accuses Shein of engaging in at least four strategies to stifle competition, including levying fines and penalties on suppliers that work with Temu, forcing suppliers to sign “loyalty oaths”, issuing “public penalty notices” and imposing “extrajudicial fines” on disobedient manufacturers, and making false assertions of infringement.
Temu says that Shein’s actions have harmed its growth and deprived consumers of access to a wide variety of affordable products. Temu also says that it has exercised restraint and refrained from pursuing legal actions for a long time, but Shein’s escalating attacks have left it no choice.
Shein denies the allegations and says that the lawsuit is without merit and that it will vigorously defend itself. Shein has also sued Temu in the U.S., alleging trademark and copyright infringement and false and deceptive business practices.
The lawsuit offers a rare glimpse into the business models and competitive practices of the two secretive companies, which are both popular among U.S. consumers. Temu is an offshoot of eCommerce company Pinduoduo, which launched in the U.S. last year and gained more prominence after airing ads during the Super Bowl. Shein is one of the most successful startups in the world, with a valuation of $66 billion, according to the market research firm CB Insights.