Shein, the fast-fashion powerhouse known for its affordable and trendy clothing, has filed another lawsuit against its competitor, Temu, accusing the e-commerce platform of intellectual property theft, counterfeiting, and fraudulent practices. The lawsuit, lodged in a federal court in Washington, D.C., adds another chapter to the escalating legal battle between these two giants of the online retail world.

Shein, which was originally founded in China but is now based in Singapore, alleges that Temu, a platform owned by the Chinese company PDD Holdings, has been engaging in a variety of illicit activities to undermine Shein’s market position. According to the complaint, Temu has encouraged its sellers to infringe upon Shein’s designs and sell counterfeit goods.

Copyright infringement occurs when someone copies or reproduces a protected work without permission. In this context, Shein argues that Temu has unlawfully reproduced its copyrighted designs and used them for profit.

The legal dispute highlights the intense competition between Shein and Temu, both of which have disrupted the retail industry with their ability to quickly respond to fashion trends and offer exceedingly low prices. However, their business practices have drawn significant criticism, particularly regarding labor conditions, their connections to China, and accusations of stealing designs from other brands.

In its latest legal action, Shein asserts that Temu has built its business by posing as a legitimate online retailer while profiting from the sale of fraudulent or low-quality merchandise. The complaint states that Temu’s business model relies on subsidizing its low prices, leading to substantial financial losses for the platform. To mitigate these losses, Temu allegedly encourages its sellers to copy the designs of established brands, including Shein, and sell them at a fraction of the cost. The lawsuit argues, “Only by encouraging its sellers to infringe the intellectual property rights of others and sell counterfeit or sub-standard goods can Temu hope to minimize the massive losses it is subsidizing.”

The lawsuit also touches on the issue of trade secrets, with Shein accusing Temu of having at least one employee who stole confidential information regarding Shein’s best-selling products and internal pricing strategies. Trade secret misappropriation involves the unauthorized use of a company’s confidential business information, which gives the company a competitive edge. Shein’s allegation that Temu stole its trade secrets to create counterfeit products directly pertains to this legal concept. According to the complaint, Temu used this information to direct its sellers to create knock-off versions of Shein’s most popular items, which were then marketed on Temu’s platform.

One particularly troubling allegation in the lawsuit involves Temu’s use of deceptive marketing tactics. Shein claims that Temu has falsely presented itself as Shein on social media platforms, particularly on X (formerly Twitter), in an effort to, “misdirect customers away from the Shein platform to the Temu platform.” The complaint includes evidence of Temu-sponsored Google ads that use Shein’s name in the headline but direct users to Temu’s website.

Furthermore, Shein alleges that “Temu has instructed its paid social media influencers to falsely claim that Temu products which are often counterfeits of Shein products are cheaper and of higher quality than genuine Shein goods.” The claim of unfair competition addresses business practices that are deceptive, fraudulent, or otherwise unethical. Shein’s allegations that Temu has engaged in deceptive advertising, impersonation on social media, and other misleading practices fall under this category.

The lawsuit seeks damages from Temu, to be determined by a jury trial.