Legal Battle Intensifies: Shein Sues Temu Over Copyright Infringement and Trade Secrets

The rivalry between Chinese fast-fashion giants Shein and Temu has escalated into a full-blown legal battle, with Shein filing a lawsuit against its competitor. The suit, lodged in the Washington D.C. federal court, accuses Temu of copyright infringement, trade secret theft, and a range of other unfair business practices. This move follows a CNBC report detailing the growing tensions between the two companies.

Copyright Infringement and Trade Secret Theft Allegations

Shein’s lawsuit claims that Temu has been actively encouraging counterfeiting, allowing sellers to copy designs from Shein and others without consequence. The complaint alleges that Temu, owned by PDD Holdings, uses a business model that prices products so low they require subsidies, leading to financial losses on every sale. According to Shein, this unsustainable model is only viable because Temu’s sellers infringe on intellectual property rights, selling counterfeit or sub-standard goods.

In a bold response, a Temu spokesperson told MyBroadband, “The audacity is unbelievable. Shein, buried under its own mountain of IP lawsuits, has the nerve to fabricate accusations against others for the very misconduct they’re repeatedly sued for.”

Shein’s lawsuit doesn’t stop at copyright issues. The company also accuses a Temu employee of stealing trade secrets and internal pricing information. This information was allegedly used to create promotional images for Temu that were nearly identical to Shein’s, down to the products featured. Furthermore, Shein claims Temu impersonated it on social media platform X (formerly Twitter) to misdirect users and even instructed its influencers to falsely promote Temu products as cheaper and superior to Shein’s.

Ongoing Legal Skirmishes

This lawsuit is just the latest in a series of legal disputes between the two companies. Temu had previously accused Shein of using intimidation tactics to prevent suppliers from working with them. In turn, Shein alleged that Temu had hired social media influencers to spread false claims about Shein. Though both lawsuits were eventually dropped, the tension between the two companies continued to simmer, with further allegations surfacing, including accusations that Shein was imprisoning merchants who did business with Temu.

Impact on the South African Market

The battle between Shein and Temu is not just a corporate affair; it has significant implications for the South African clothing market. Both retailers have gained a strong foothold in the country, with Shein operating for several years and Temu entering the market in January 2024. Their aggressive pricing strategies, made possible by exploiting import tax loopholes, have put immense pressure on local clothing retailers.

In response to these practices, the South African Revenue Service (SARS) has announced plans to implement new import duties aimed at leveling the playing field. Initially set to take effect on 1 July 2024, the changes were delayed for further stakeholder engagement. However, as of 1 September 2024, SARS will introduce interim tax measures, including adding VAT to the existing 20% flat duty on clothing imports. Permanent changes are expected to follow in November.

Conclusion

The legal tussle between Shein and Temu highlights the fierce competition in the fast-fashion industry, where low prices and rapid product turnover often come at the expense of intellectual property and ethical business practices. As these two giants continue to clash, the repercussions are felt globally, from the courtroom to local markets like South Africa, where regulators are grappling with the impact of their disruptive business models.