Low-cost e-commerce player Temu files lawsuit against its rival Shein. PDD Holdings’ (PDD.O) international facing discount e-commerce platform, Temu, filed a lawsuit in a U.S. District of Columbia court on Wednesday against rival Shein. Temu’s lawsuit is alleging rival Shein of employing “Mafia-style intimidation” to coerce suppliers that also worked with Temu.
According to Temu’s lawsuit filing, Boston-based company WhaleCo Inc., which operates in the U.S. as Temu, alleges China-founded, Singapore-based rival Shein misused intellectual property legislation to stop merchants and suppliers working with Temu.
Temu’s rapid growth
Within weeks of its launch, Temu topped app store rankings and subsequently expanded rapidly across countries such as Australia, New Zealand, France, Italy, Germany, the Netherlands, Spain, and the U.K.
Temu’s lawsuit against Shein
The lawsuit also claimed Shein “falsely imprisoned” vendors who dealt with Temu by detaining merchant representatives in Shein’s offices for many hours. Also confiscating their electronic devices and threatening them with penalties for doing business with Temu.
“Though Temu’s business model is very different from the fashion-focused, resale approach relied on by Shein, ever since Temu’s U.S. launch in September 2022, the company has been seen by Shein as its greatest threat — and therefore the target of malicious and unlawful conduct intended to thwart Temu’s success,” according to the filing on Wednesday.
Shein did not immediately reply to a request for comment on the Temu lawsuit on Thursday.
Boom in both firms
Both firms, which have roots in China, have seen their businesses boom in the U.S. market in recent years as inflation and cost-of-living pressures have helped attract consumers to low-cost e-commerce offerings, such as Shein’s $5 T-shirts and Temu’s $3 earphones.
The bulk of suppliers for both companies are in China and a spokesperson for Temu confirmed the alleged infractions involved Chinese vendors.
“We sued Shein because recently their actions have escalated. They began to illegally detain merchants, forcibly asking for their phones, stealing our merchant accounts and passwords, stealing our business secrets, and simultaneously forcing merchants to leave our platform,” the spokesperson said.
Shein’s unfair practices as per Temu
The Temu lawsuit also alleges that Shein poached Temu’s key marketing and advertising personnel. It did not specify where they were based.
This is not the first time the fierce rivals have traded barbs in legal suits filed in U.S. courts. Both companies withdrew actions filed against one another in October without giving a reason.
Shein’s lawsuit against Temu
Shein’s previous U.S. lawsuit against Temu alleged Temu told social media influencers to make disparaging remarks about the fast-fashion retailer, and tricked customers into downloading the Temu app using “imposter” social media accounts.
In July, Temu filed its own lawsuit in Boston federal court, accusing Shein of violating U.S. antitrust law in its dealings with clothing manufacturers.
Shein’s U.S. IPO
In November, Shein confidentially filed for an IPO in the U.S. Shein’s valuation was at $66 billion. The Shein IPO was for $90 billion float, renewing scrutiny of its business practices and supply chain.
