Big Shein and Temu legal battle could spill over to South Africa – MyBroadband

The outcome of the latest legal battle between Chinese e-commerce giants Shein and Temu could significantly impact the latter’s operations in South Africa.

In the latest lawsuit filed on 19 August 2024 in a Washington federal court in the US, Shein accused Temu of intellectual property (IP) infringements and other unlawful activity.

Shein argued that these infringements could irreparably harm Shein’s goodwill and reputation and diminish the strength of its brand.

The main unlawful activities that Shein has alleged Temu is committing include:

• Copyright infringement — Shein alleges Temu copied various clothing designs and photographs of clothing without Shein’s consent. The lawsuit includes various pictures of near identical items on the two websites, with Shein claiming the original designs are its own.
• Trademark infringement — Shein alleges Temu infringed its trademark by using Shein on clothing labels displayed on Temu’s online platforms.
• Unlawful competition — Shein accuses Temu of unlawful competition by misappropriating trade secrets and poaching suppliers and staff.

Temu has slammed Shein’s lawsuit.

“The audacity is unbelievable,” said Temu.

“Shein, buried under its own mountain of IP lawsuits, has the nerve to fabricate accusations against others for the very misconduct they’re repeatedly sued for.”

Adams & Adams partner Werina Griffiths told MyBroadband that any order issued against Temu in the US would be applicable only to that country and would not directly affect its operations in South Africa.

However, she added that Shein’s allegations of IP infringements levelled against Temu would similarly be actionable under local law.

“If Shein wanted to seek relief against Temu’s business practices in South Africa, it would indeed need to file a lawsuit here, and a court would have to consider the position under South African law,” Griffiths said.

“He who alleges must prove, of course, and the success of any such lawsuit would therefore depend on Shein’s ability to do so.”

Given the importance of the US market for Temu — where it has a reported user base of around 150 million users — any changes it is ordered to implement in that country could likely spill over into South Africa, regardless of a local legal challenge.

“Shein claims that the only reason Temu is able to compete with it on both product and price, is because Temu’s business model is based on the alleged unlawful activities,” Griffiths said.

“Should Temu be found guilty and ordered to cease those activities, it is possible that its entire business model may be unsustainable.”

This is not the first time Temu and Shein have taken each other to court.

In a lawsuit last year, Temu alleged Shein had compelled manufacturers to submit unfair supply chain arrangements that blocked them from working with Temu.

Shein also previously sued Temu for deceptive business practices and misleading consumers with imposter social media accounts.

Both these lawsuits were dropped in October 2023, but Temu again sued Shein in December 2023, accusing the company of intimidating suppliers “mafia-style” to disrupt Temu’s growth in the US.

Temu and Shein already wounded in South Africa

In South Africa, Temu and Shein are already facing significant government scrutiny.

The Chinese companies offer cut-rate prices on a wide range of products, significantly undercutting similar local offerings. That has resulted in a surge in popularity among local consumers since 2023.

Responding to calls from the textile industry and local online retailers, the South African Revenue Service (Sars) is adjusting import taxes for small, low-value items, which are particularly popular on Temu and Shein.

The pair are accused of abusing a 2007 concession that enabled them to pay a flat 20% duty with no VAT on their customers’ packages.

However, from 1 September 2024, Sars started adding 15% VAT on the value of the imports with 10% uplift, in addition to the 20% duty.

Where a customer with a Shein order with a value of R200 previously only had to pay an extra R40 in tax, they are now paying R73.

Sars also promised to rework existing custom rules to align with a framework provided by the World Customs Organisation. These new rules will start taking effect from November 2024.

Webber Wentzel believes the changes will already make shopping from the Chinese retailers less attractive for South Africans and encourage consumers to buy more from local sellers.