A battle between Chinese fast-fashion giants Shein and Temu is brewing in US courts – and it could have global impact.

Shein, the older of the two e-commerce retailers, has filed papers with a federal court in Washington, DC, accusing Temu of a litany of anticompetitive practices including copyright infringement, trademark violations and trading in counterfeit goods.

“The background to the dispute is Temu’s entry in to US market,” said Werina Griffiths, partner specialising in brand protection at South African law firm Adams & Adams, in a recent interview with TechCentral.

“The court papers claim Temu entered the US market in 2022, and that by May 2024 it had already acquired a user base of between 150 and 160 million users. So, in a very short space of time, Temu got a strong foothold in the US market, and being direct competitors, a portion of that user base would have come at a cost for Shein,” Griffiths said.

First among the allegations made by Shein is the claim of copyright infringement. Shein alleges that Temu copied designs used on clothing, such as pictures or slogans, and related to this, has claimed that Temu “lifts” advertising material in the form of model photographs from Shein’s website, removes the Shein watermark and then uses these images to promote copies of the same products on its own website.

According to Griffiths, Shein has included examples of copied photographs in its filing with the US court. “They are clearly a copy,” she said.

Allegations

Shein also accused Temu of trademark infringement, alleging the company used its brand name, without permission, on its website – including on clothing labels.

A third allegation regards alleged false advertising. According to Shein, Temu has in the past set up false accounts and social media profiles under Shein’s name.

Furthermore, Shein has alleged that Temu trades in counterfeit goods by using labels belonging to Shein sub-brands on its clothing and producing “copied” fashion items.

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Fast fashion, as opposed to more traditional models in the fashion industry, relies on selling high volumes of items at lower margins to be successful. Predicting which items are going to be best sellers is key to making strategic decisions about where to direct resources.

According to Shein, the data the company has collected around this decision-making process is a key pillar of its success, and it has accused Temu of stealing this data by poaching Shein employees.

Although the case has been filed in the US, Griffiths said the two companies have been at loggerheads in other countries, especially regarding “takedown disputes” related to allegedly fake social media profiles and website content.

Griffiths said the case poses significant risk of reputational damage to Temu’s brand, especially if it loses the matter in open court. There is a possibility, however, that the two parties opt for an out-of-court settlement to avoid making any further disclosures about their operations, something that could undermine their competitiveness.

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Shein and Temu have been the subject of public scrutiny in the US, and other jurisdictions, including South Africa, over allegations they evade import duties and other taxes.

The lawsuit was filed by Shein on 20 August and Temu is yet to respond to the allegations made by Shein.

“There is no doubt Temu is going to kick back in one form or another. We have no idea what its response to these allegations is going to be – it might even come up with claims of its own,” said Griffiths. – © 2024 NewsCentral Media