Explained | What is the lawsuit against Chinese fast-fashion company Shein? Premium

Chinese fast-fashion company Shein is being sued in the U.S for copyright violations and under the Racketeer Influenced and Corrupt Organisations Act. We explore the case and why Shein is in hot water.

The story so far: Three U.S.-based designers and artists on July 11 filed a lawsuit against Chinese fast-fashion retailer Shein, alleging that the company indulges in copyright infringement that “constitutes racketeering”.

The case against Shein was filed in a California district court,with the plaintiffs invoking sections of the Racketeer Influenced and Corrupt Organisations Act (RICO). The lawsuit also expressed surprise that for all the scrutiny that TikTok – yet another Chinese app – has been subjected to, the U.S. Congress has not considered “more dramatic action” against Shein.

In April 2022, Shein was valued at $100 billion for a capital-raising round, Bloomberg reported. This would have made it as valuable as Elon Musk’s SpaceX, and more valuable than fast-fashion giants H&M and Zara combined, the report added.

It eventually raised $2 billion in May 2023, when valued at $66 billion, one-third down from the 2022 valuation, the Wall Street Journal reported.

Independent designers allege that Shein “produced, tributed, and sold exact copies of their creative work.”

“These are not the familiar close-call legal claims where a corporate apparel manufacturer takes inspiration a bit too liberally. At issue here, inexplicably, are truly exact copies of copyrightable graphic design appearing on Shein products,” the filing reads.

The subject of this lawsuit is primarily intellectual property theft, although it also mentions environmental damage, sweatshop labour conditions, tax avoidance, and child safety as some other malicious practices that Shein allegedly indulges in.