The battle between Chinese discount shopping apps Shein and Temu is getting downright nasty. Temu has filed a new lawsuit against Shein alleging much more than run-of-the-mill anticompetitive behavior. The suit alleges that Shein uses “mafia-style tactics” to coerce sellers into severing ties with Temu, including detaining sellers at their offices for up to 10 hours and confiscating their phones to search for details of their Temu sales.
In response to a request for comment a Shein spokesperson told Retail TouchPoints: “We believe this lawsuit is without merit and we will vigorously defend ourselves.”
That’s almost the exact same wording Shein used in its response the first time Temu sued Shein for anticompetitive practices this past July. But this isn’t a one-sided fight: earlier in 2023, Shein filed its own suit against Temu, accusing its competitor of contracting influencers to make “false and deceptive claims” about Shein in their promotions of Temu. Still, this latest lawsuit from Temu comes as a surprise following a seeming truce in October, when both companies voluntarily agreed to drop their respective lawsuits.
Since that time, however, Temu said it has discovered that Shein’s anticompetitive behavior “has not only persisted but intensified,” according to a Temu spokesperson in comments shared with Retail TouchPoints. “Their actions are too exaggerated; we had no choice but to sue them,” the spokesperson added. Reports that Shein had confidentially applied for a U.S. IPO in late November may also have been a factor.
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The new lawsuit, which was filed in the U.S. District Court for the District of Columbia on Dec. 13, describes a host of anticompetitive practices, which Temu claims are prompted by Shein’s declining valuation following Temu’s entry into the U.S. market in late 2022. Since that time, Temu has overtaken Shein as the top shopping app in the U.S., according to SimilarWeb, and was recently crowned by Apple as the most downloaded free app of the year.
Among the “mafia-style” tactics that Temu alleges Shein has resorted to in its efforts to gain an edge with sellers in China are:
- “Falsely imprisoning merchants associated with Temu” by “summoning Temu’s suppliers on false pretenses to Shein’s offices and detaining those suppliers’ representatives in Shein’s office for up to 10 hours”;
- “Seizing these Temu sellers’ phones” and then searching said phones for “Temu sales, commercial and other financial information without permission,” as well as demanding access to chat histories and Temu log-in credentials; and
- Compelling sellers “to sign documents against their will and threatening them with extensive penalties and termination of their Shein contracts for selling on Temu.”
The lawsuit goes on to say that several manufacturers who severed ties with Temu told the company they did so because they were “intimidated” and “coerced” with threats of being dropped from Shein. The lawsuit states that these activities have ramped up in recent weeks, with several suppliers that sell on both platforms reporting that their representatives were called into the “inspection room” in Shein’s offices in Guangzhou, China.
Some of these suppliers say they were also summoned under on the false pretense of discussing “potential collaborations” with Shein, assisting Shein in investigating internal corruption or to discuss any difficulties the merchants were facing with their Shein business.
These tactics inform only one of the 18 complaints laid out in the lawsuit, which also include accusations of IP-related misconduct and illegal product seizures, obtaining improper copyright registrations, abusing the U.S. legal system and copyright infringement of Temu’s games and “arcade-style trade dress,” among others.
The legal battle between Shein and Temu highlights the fierce competition underway for Chinese sellers, and these two platforms aren’t the only ones duking it out to be merchants’ platform of choice. This week, Amazon hosted a summit in Shenzhen, China for China-based sellers, which make up a sizeable portion of the seller base on its third-party marketplace. Amazon also recently dramatically reduced the seller fees for low-cost apparel sold on its site in a bid to remain competitive with the likes of Temu and Shein.
