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Chinese online retailer Temu has accused rival Shein of “unlawful exclusionary tactics” as the two ecommerce groups take their fight for the US market to court in Massachusetts.
Temu launched an antitrust suit against Shein in a US federal court last week accusing the fast-fashion company of forcing its Chinese factories to halt manufacturing for Temu in an attempt to maintain market dominance in the US.
“Shein’s escalating attacks leave us no choice but to take legal measures to defend our rights,” Temu said in a statement on Wednesday.
The Chinese companies have risen to the top of app download charts selling ultra-cheap clothing and items sourced from China. Temu, an online marketplace launched by Chinese ecommerce company Pinduoduo last year, has been challenging Shein’s dominance.
Shein, founded in the eastern Chinese city of Nanjing more than a decade ago, pioneered sales of ultra-cheap, fast-fashion designs to millennials in the US and Europe through its hit app. In 2022, it raked in an estimated $30bn in sales, according to the complaint — a sales figure bigger than those of H&M and Gap.
Shein’s ascent to the top of the fast-fashion world and $100bn valuation spawned a series of Chinese imitators, including Temu. The company’s valuation was cut to about $64bn earlier this year as a result of the tech downturn.
Temu alleges its entrenched Chinese rival is using unfair tactics in China to disrupt its ability to source and sell the $8 dresses that US shoppers are eager to buy.
Shein has “engaged in an elaborate and anti-competitive scheme aimed at stymieing Temu’s business,” said the complaint filed in a Boston federal court. “The US market is the primary theatre of this war.”
Temu’s lawyers alleged Shein was abusing its hold on 75 per cent of the US “ultra-fast fashion” market to force its Chinese suppliers into exclusive relationships. The tactic denied US shoppers “access to direct price competition” and suppressed Temu’s ultra-fast fashion sales volume by 300-400 per cent, the complaint said.
Asked about the dispute, Shein said: “We believe this lawsuit is without merit and we will vigorously defend ourselves.”
As suspicion of Chinese companies has grown in the US and Europe because of souring ties between Washington and Beijing, both Temu and Shein have attempted to distance their brands from China, where the vast majority of their operations are based. Shein reincorporated in Singapore last year, while Temu claims it “was founded in Boston, Massachusetts in 2022”.
But the complaint makes clear how tightly both group’s supply chains are intertwined with China. Temu said Shein had forced its network of “8,338 independent apparel manufacturers located in China” to sign exclusive agreements that barred the factories from producing for Temu.
At the same time the group admitted “nearly all Temu’s product offerings in the United States come from a network of manufacturers located in China”.
Temu said it was bringing the suit against Shein because “the Chinese manufacturers on whom Temu and Shein rely are not familiar with the US legal system”.
The two companies are already battling each other in a Chicago federal court. Shein in March launched a case alleging Temu was behind influencers disparaging Shein on social media and had impersonated its brand to “trick consumers” into downloading its app.