Shein vs Temu: An Escalating Legal Battle

Friday - July 28 2023, 01:29 UTC - 1 year ago

Shein and Temu, two Chinese e-commerce platforms occupy the same off-price shopping space and are engaged in an escalating legal battle over what each claims is unfair competition. Shein accused Temu of misleading consumers into thinking they were the same company while Temu claims that Shein is coercing manufacturers into arrangements that force them to not do business with Temu. There is also a long history of exclusivity agreements in Chinese tech fights with companies like Meituan and Alibaba’s Tmall enforcing them. Now a new tactic has emerged with the Shein–Temu battle- trademark bullying.

Even though I know that Temu and Shein, two Chinese e-commerce platforms, occupy the same off-price shopping space, I have to admit I didn’t expect the tensions between them to escalate so quickly.Yet, perhaps unsurprisingly, they don’t seem to bond over their shared difficulties. Instead, the competition between Shein and Temu is starting to look like a race to the bottom. The two platforms are engaged in an escalating legal battle over what each claims is unfair competition .

It started in December, when Shein sued Temu over intellectual-property infringement. Specifically, Shein accused Temu of misleading consumers into thinking they were the same brand, allegedly selling products copyrighted by Shein and displaying the word "Shein" in search ads that led to Temu’s website. It also claimed that Temu is behind three imposter Twitter accounts using names like "Shein_USA" and asking fans to support "the new Twitter of Shein" while posting links to Temu’s app and website .

The two companies are still fighting over this case in court."For a long time, we have exercised significant restraint and refrained from pursuing legal actions. However, Shein’s escalating attacks leave us no choice but to take legal measures to defend our rights and the rights of those merchants doing business on Temu, as well as the consumers’ rights to a wide variety of affordable products," Temu told MIT Technology Review .

Meanwhile, a Shein spokesperson told MIT Technology Review, "We believe this lawsuit is without merit and we will vigorously defend ourselves."To take a step back: Shein doesn’t operate like traditional consumer brands. Instead of owning factories that make products for it exclusively, the company works with a vast network of independent Chinese factories. Most times, these factories create the designs, manufacture the products, and sell them to Shein, entrusting the platform to deal with other processes, like listing, customer service, and shipping .

Shein offers these suppliers a steady stream of overseas orders. In exchange, it buys the products at very low prices and requests that the suppliers remain loyal to the brand. "As the dominant ultra-fast-fashion retailer, Shein knows that manufacturers need Shein’s volume and its access to the US market and it is, therefore, able to coerce manufacturers into arrangements that force manufacturers not to do business with Temu," says Temu’s filing .

For a while, the companies differentiated themselves by the kind of products they sold: Shein is more about apparel, while Temu is more about household products. But each platform is now looking at the other’s primary product lines too, making the companies more direct competitors—meaning that they are going after the same suppliers.(To be fair, Temu itself is no stranger to accusations of coercion against suppliers .

Many Chinese sellers have complained that the platform forces them to accept extremely low prices or arbitrarily ends their business when it finds a cheaper supplier.)Historically, exclusivity agreements have not been uncommon in Chinese tech fights. For more than a decade, companies like Meituan and Alibaba’s Tmall have been enforcing similar practices. But a new tactic has emerged with the Shein–Temu battle: Trademark bullying .