Temu accuses Shein of using ‘mafia-style intimidation’ of suppliers to restrict its growth

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The Shein application and website arranged on a smartphone and a tablet in Hong Kong, China, on Friday, May 21, 2021. (Justin Chin/Bloomberg via Getty Images)

Chinese e-commerce retailer Temu is suing rival Shein again, alleging its competitor is pushing dubious copyright infringement notices against the company and using "mafia-style intimidation" of suppliers to limit its growth in the U.S.

In a 100-page complaint filed Wednesday at a federal court in Washington D.C., Whaleco Inc., which operates as Temu in the U.S., claimed that Shein has been summoning suppliers it believes to be working with Temu to its offices, detaining them for hours, seizing their phones and threatening to impose penalties for doing business with its rival.

"We believe this lawsuit is without merit and we will vigorously defend ourselves," a Shein spokesperson said in a statement.

Temu on App Store displayed on a phone screen and Temu website displayed on a screen in the background are seen in this illustration photo taken in Krakow, Poland on July 6, 2023. (Photo by Jakub Porzycki/NurPhoto via Getty Images)

In the lawsuit, Temu alleges the actions were part of a "desperate plan" hatched by Shein to take out a competitive threat in the U.S. through various efforts, which include coercing thousands of suppliers to sign over their intellectual property rights and relying on those agreements to obtain copyright registrations in the U.S.

The complaint said Shein was also "instigating and supporting dubious copyright infringement lawsuits" against Temu, which is owned by popular Chinese e-commerce site Pinduoduo Inc., and foreclosing Temu’s access to suppliers through exclusivity agreements.

Temu entered the U.S. markets last year and has grown in popularity by offering cheap goods - from apparel to home products - that are shipped from China. Shein, which was founded in China but is now based in Singapore, is known for low-cost clothing items that are mostly produced in China.

The two e-commerce companies have sued each other in U.S. courts before, but both dropped their lawsuits in late October without providing a reason.

Temu’s previous lawsuit had alleged Shein was compelling clothing manufacturers to submit to unfair supply chain arrangements preventing them from working with Temu after it entered the U.S. market in 2022.

Meanwhile, Shein’s complaint had asserted that Temu had engaged in deceptive business practices and created impostor pages that violated copyrights and trademarks.

A congressional report published in June said both retailers were avoiding import taxes through a century-old trade rule - known as de minimis - that allows them to import packages valued at less than $800 as long as they are packaged and shipped directly to consumers. The report also offered a blistering critique of Temu's supply chains, saying there is an "extremely high risk" that it contained forced labor.