In the latest sign of legal troubles for Chinese clothing retailer Shein, the company has been hit with a RICO lawsuit that alleges that their theft of clothing designers’ intellectual property is so systemic that it amounts to racketeering.
The lawsuit, which was filed by three clothing designers, accuses Shein of using “truly exact copies of copyrightable graphic design,” and further claims that “Shein has grown rich by committing individual infringements over and over again, as part of a long and continuous pattern of racketeering, which shows no sign of abating.”
In a statement issued Friday, Shein responded to the claims by saying, “Shein takes all claims of infringement seriously, and we take swift action when complaints are raised by valid IP rights holders. We will vigorously defend ourselves against this lawsuit and any claims that are without merit.”
Shein, which is also potentially pursuing an initial public offering in the United States, is also facing pressure from lawmakers who allege that the company may produce clothes using forced labor from China’s Uyghur population. According to the Associated Press, a bipartisan Congressional report issued in June accused Shein and Temu (another Chinese retailer) of failing to maintain “even the façade of a meaningful compliance program” with a U.S. law that blocks imports from China’s Xinjiang region unless retailers can prove that items were made without the use of forced labor.
The report further accused Shein and Temu of abusing the “de minimis” loophole in trade law by mailing small packages worth less than $800 directly to consumers rather than to a United States distributor, which has helped them evade oversight of their manufacturing and trade practices. Republican Rep. Mike Gallagher said at the time that the two companies were “Building empires around the de minimis loophole in our import rules — dodging import taxes and evading scrutiny on the millions of goods they sell to Americans.”