China’s Shein charged with violations of RICO, a law originally used against organized crime
Chinese fast fashion retailer Shein is facing a lawsuit alleging the clothing maker’s copyright infringement is so aggressive that it amounts to extortion.
This week’s filing alleges that Shein is in violation of the Racketeer Influenced and Corrupt Organizations Act, more commonly known as RICO, a law originally created to prosecute organized crime.
“Shein has become wealthy by committing individual offenses over and over again, as part of a long and continuous pattern of extortion, which shows no sign of abating,” the filing said.
In an organized effort to create as many as 6,000 new items a day, Shein uses a “byzantine shell game of a corporate structure” to rip off designers, a coordinated illegal operation best combated through the use of RICO statutes , according to the lawsuit.
The lawsuit is the latest in a series of difficulties Shein has confronted. In May, a bipartisan group of two dozen lawmakers asked the Securities and Exchange Commission to stall an IPO by Shein until it verified that it does not use forced labor of the predominantly Muslim country Uyghur population.
The lawsuit, brought by three fashion designers in the U.S. District Court for the Central District of California, alleges that “Shein produced, distributed and sold exact copies of their creative work.”
“These are inexplicably true exact copies of copyrighted graphic design appearing on Shein products,” the civil lawsuit states.
The designers are seeking unspecified damages and want an interim injunction to prevent further extortion activity.
“Shein takes all claims of infringement seriously and we take prompt action when complaints are made by valid intellectual property rights holders,” Shein said in a prepared statement Friday. “We will vigorously defend this lawsuit and any claims that are unfounded.”
Shein has not said whether it plans to go public this year, but there are reports that the company is raising funds in anticipation of a US listing before the end of the year.
Shein spokesperson Peter Pernot-Day has said the company takes transparency throughout its supply chain seriously.
But one Congress report last month unleashed a blistering critique of Shein and another Chinese fashion retailer, Temu.
The report is part of an ongoing congressional investigation into products offered to American consumers that could be made with forced labor in China. As part of its investigation, the commission sent letters to Nike and Adidas brands, as well as Shein and Temu, in early May requesting information about their compliance with the anti-forced labor law.
Shein said at the time that it is “the company’s policy to comply with the customs and import laws of the countries in which we operate.” It also said it has “zero tolerance” for forced labor and has implemented a robust system to ensure compliance with US law.
