Dive Brief:
- In a civil antitrust lawsuit filed last week, China-based ultra-fast fashion brand Temu accused rival Shein of trying to “lock up the supply chain” to maintain dominance in the U.S. market.
- Temu alleged that Shein forces manufacturers to sign agreements that “effectively create exclusive supplier relationships with Shein and threatens manufacturers with onerous fines and penalties if they supply product to Temu,” as well as sign “loyalty oaths” certifying suppliers will not do business with Temu.
- A Shein spokesperson said in an emailed statement, “We believe this lawsuit is without merit and we will vigorously defend ourselves.” Temu is asking a federal court to block Shein’s alleged conduct and is seeking monetary damages.
Dive Insight:
While Temu and Shein vie for U.S. customers and market share, and draw the attention of lawmakers, Temu alleges its rival is trying to stifle its growth by blocking its access to the sector's supply base.
Shein has roughly 8,338 manufacturers supplying it, a number that represents between 70% and 80% of those capable of making ultra-fast fashion merchandise, according to Temu’s complaint.
The company alleges that Shein has required all of those manufacturers to sign exclusive-dealing agreements, which prevent them from selling products on Temu’s third-party platform or supplying products to other sellers on the platform.
Under those agreements, Shein threatens suppliers with penalties that “serve no legitimate purpose except to punish manufacturers for doing business with Temu,” Temu said, adding that those fines are levied against suppliers selling products that “bear some resemblance” to those on Shein’s platform.
Temu noted in the complaint that some manufacturers have asked the company to remove their products from Temu’s platform “in order to appease Shein,” and said that one women’s apparel manufacturer did so after telling Temu that Shein management was directed to “go after” manufacturers doing business with Temu. Another told it, “’Shein is going to pursue liability and give us a fine’” of $15,000.
All of this, Temu alleges, hinders its ability to compete and “allowed Shein to continue to hold its monopoly position” on ultra-fast fashion in the U.S. market.
As the two companies grow their U.S. footprint, they’ve also come under fire from lawmakers, who have issued warnings about data collection, environmental impact, intellectual property concerns and the possibility that both companies could be importing products to the U.S. tied to forced labor.
