USA: Shein and Chinese rival take ‘war’ to court – 07/21/2023 – Market

Chinese online retailer Temu has accused rival Shein of “illegal exclusionary tactics” as the two e-commerce groups take their dispute over the US market to court in Massachusetts.

Temu filed an antitrust lawsuit against Shein in US federal court last week, accusing the fast-fashion company of forcing its Chinese factories to stop manufacturing for Temu in an attempt to maintain dominance of the US market.

“The increasing attacks by Shein leave us no choice but to take legal action to defend our rights,” Temu said in a statement on Wednesday (19).

Chinese companies have reached the top of downloading apps for selling clothes and low-priced items from China. Temu, an online marketplace launched by Chinese e-commerce company Pinduoduo last year, has been challenging Shein’s dominance.

Founded in the eastern Chinese city of Nanjing over a decade ago, Shein pioneered the sale of ultra-cheap fashion products to millennials in the US and Europe through its hit app. In 2022, it raised about US$ 30 billion (R$ 143.1 billion) in sales, according to the complaint – a number greater than those of H&M and Gap.

Shein’s rise to the top of the “fast fashion” world and its $100 billion valuation has spawned a slew of Chinese imitators, including Temu. The company’s valuation was reduced to around US$64 billion (R$305.4 billion) earlier this year as a result of the technology crisis.

Temu alleges its rival is using underhand tactics in China to disrupt its ability to buy and sell the $8 dresses that American shoppers are rushing to buy.

Shein “engaged in an elaborate and anti-competitive scheme designed to disrupt Temu’s business,” said the complaint filed in Boston federal court. “The US market is the main theater of this war.”

Temu’s lawyers alleged that Shein was abusing its 75% control of the “ultra-fast fashion” market in the United States to force its Chinese suppliers to maintain exclusive relationships. The tactic denies US buyers “access to direct price competition” and suppresses Temu’s ultra-fast fashion sales volume by 300-400%, the complaint said.

Asked about the dispute, Shein said: “We believe this lawsuit is without merit and we will defend ourselves vigorously.”

As suspicions about Chinese companies mount in the US and Europe over deteriorating ties between Washington and Beijing, Temu and Shein are trying to distance their brands from China, where the vast majority of their operations are based. Shein re-incorporated in Singapore last year, while Temu claims it “was founded in Boston, Massachusetts in 2022”.

But the complaint makes clear that the two groups’ supply chains are closely intertwined with China. Temu said Shein had forced its network of “8,338 independent apparel manufacturers located in China” to sign exclusive agreements that bar factories from producing for Temu.

At the same time, the group admitted that “nearly all of Temu’s product offerings in the United States come from a network of manufacturers located in China.”

Temu said it is suing Shein because “the Chinese manufacturers that Temu and Shein depend on are not familiar with the US legal system.”

The two companies are already fighting each other in federal court in Chicago. In March, Shein filed a lawsuit alleging that Temu was behind influencers who disparaged Shein on social media and posed as its brand to “mislead consumers” into downloading its app.

Translated by Luiz Roberto M. Gonçalves