Alibaba Rival Temu Takes Shein To Court: What Does This Mean for US Fashion Retail?

PDD Holdings Inc PDD-owned Temu has filed a lawsuit against Shein, a fast-fashion rival, in the U.S. District Court for the District of Columbia, alleging intensified anti-competitive practices. 

This legal action reignites a previous conflict between the two companies, each having withdrawn earlier lawsuits against the other. 

Temu, operated by Whaleco Inc, accuses Shein of implementing a "desperate plan" to undercut its business. 

This includes issuing copyright takedown notices, enforcing exclusive agreements with fashion suppliers, and exerting pressure on Temu merchants, Bloomberg reports.

Also Read: Temu vs. Dollar Stores: Is Alibaba's Competitor Rewriting the Rules of American Retail?

The lawsuit details how Shein allegedly coerced Chinese suppliers who listed their products on both platforms, forcing them to surrender phone passwords and transaction records related to Temu. 

Temu contends that Shein's anti-competitive behavior has become increasingly aggressive, necessitating this lawsuit. 

Shein, which has yet to respond to these allegations, is reportedly pursuing an initial public offering in the U.S., targeting a valuation as high as $90 billion.

Temu's entry into the U.S. market in late 2022 is said to have contributed to a decline in Shein's valuation, previously exceeding $100 billion. 

The lawsuit also alleges Shein's corporate relocation to Singapore as a strategy to improve its reputation, despite most of its operations and employees remaining in China. 

Additionally, Temu accuses Shein of poaching its marketing executives and signing restrictive supplier agreements.

According to Bloomberg Second Measure data, Temu has been leading in U.S. transactions against Shein since May, with its parent company PDD's market capitalization recently surpassing Alibaba Group Holding Ltd BABA, partly due to Temu's international achievements.

PDD stock has gained over 73% year-to-date while BABA lost over 22%.

Also Read: JD.com's Founder Sounds the Alarm: Can New Strategies Revive the E-Commerce Giant?

Price Action: PDD shares are trading higher by 0.40% at $147.01 premarket on the last check Thursday.