China’s renowned fast fashion retailer, Shein, is currently embroiled in a lawsuit that alleges the company’s flagrant copyright infringement practices amount to racketeering. In a recent filing, the plaintiffs assert that Shein’s continuous pattern of infringing on individual copyrights, which shows no signs of stopping, is indicative of a racketeering enterprise. To create a staggering number of approximately 6,000 new items daily, Shein employs a complex corporate structure to unlawfully copy designers’ work. The lawsuit argues that the most effective way to combat this illegal operation is by utilizing the Racketeer Influenced and Corrupt Organizations Act (RICO) statutes.
This legal challenge is merely the latest in a series of obstacles Shein has encountered. In May, a bipartisan group of lawmakers urged the Securities and Exchange Commission to halt Shein’s initial public offering until verifying that the company does not engage in forced labor practices that exploit the predominantly Muslim Uyghur population in China. The filing further states, “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.”
The lawsuit has been initiated by three fashion designers in the US District Court for the Central District of California who allege that Shein has not only recreated but also distributed and sold exact replicas of their original creative work. The civil lawsuit explicitly highlights the presence of genuinely identical copyrighted graphic designs on Shein products. At the time of writing, Shein has not responded to requests for comment.
The designers involved are pursuing unspecified damages and requesting injunctive relief to prevent further racketeering activities. While Shein has not confirmed any plans to go public this year, reports indicate that the company is gathering funds in anticipation of a listing on a US exchange before the year’s end. Shein’s spokesperson, Peter Pernot-Day, assures the public that the company is deeply committed to transparency throughout its supply chain. However, last month, a congressional report heavily criticized Shein and another Chinese fashion retailer, Temu, as part of an ongoing investigation into potentially forced labor-produced products reaching American consumers. The investigation prompted the committee to send letters to brands like Nike, Adidas, Shein, and Temu, seeking information about their compliance with laws against forced labor.
Shein maintains that it adheres to the customs and import laws of the countries in which it operates, adding that it has a zero-tolerance policy against forced labor and has implemented rigorous systems to ensure compliance with US legislation.
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