By Arriana McLymore and Casey Hall
NEW YORK/SHANGHAI (Reuters) - Online fast-fashion retailer SHEIN and its newer rival Temu are in a race to win shoppers' attention for their inexpensive China-made goods.
The battle between them is playing out not only on social media but also in a U.S. court. The legal skirmish is important for U.S. consumers and rival retailers because it shows how online retailers with vendors in China need to navigate U.S. intellectual property protections.
In U.S. federal court, SHEIN has accused Temu of contracting social-media influencers to make "false and deceptive statements" against SHEIN in their promotions of Temu.com.
If Temu loses, Temu could be forced to curtail its use of social media influencers as a key marketing strategy. SHEIN seeks to block Temu from using SHEIN's name for marketing, and it wants damages from sales that SHEIN could show came through "deceptive" or "infringing" marketing.
Temu has asked the court to dismiss the lawsuit. The court has not ruled on the case.
“I think as Temu gets a higher profile, there will just be more and more lawsuits. Including IP, but probably not just IP. I'm sure there will be data-related things as well,” US and China tech analyst Rui Ma said.
SHEIN produces clothing in China to sell online in the United States, Europe and Asia, offering items such as $10 dresses and $5 tops. SHEIN, originally founded in China, relies on drop-shipping directly from its extensive network of China-based suppliers.
SHEIN is set to raise around $2 billion in a new funding round this month and is aiming for a U.S. listing in the second half of this year, three people with knowledge of its plans told Reuters. SHEIN said it does not currently have plans for an IPO and declined to comment further.
SHEIN's lawsuit against Temu, filed in December in U.S. District Court for the Northern District of Illinois, alleges that Temu told social media influencers to make disparaging remarks about the fast-fashion retailer, and tricked customers into downloading the Temu app using "imposter" social media accounts.
Social media influencers on TikTok often mention SHEIN in posts about Temu, comparing the companies and their merchandise.
"I am not with Shein anymore," one influencer said in a February post on TikTok. "I am with Temu who has the same and more for less."
The now-deleted @SHEIN_DC, @SHEIN_USA_, and @SHEIN_NYC pages were created in September and displayed SHEIN's logo and marketing material on their bio pages, according to screenshots provided with SHEIN's complaint.