Shein is a popular online destination for social influencers and shoppers to stock up on trendy yet affordable clothing, but a new lawsuit alleges that the site maintains its advantage by engaging in “egregious” copyright infringement that constitutes extortion.
The complaint was filed Tuesday in federal court in California on behalf of three designers who said they were “shocked” and “outraged” to see their products faithfully copied and sold by the Chinese fast-fashion retailer.
The reproduced products were not “close” copies, where the designs are interpreted with some liberties, but were “truly exact copies of the copyrighted graphic design” that was sold by Shein, according to the suit. The company allegedly engages in a pattern of copyright infringement as part of its effort to produce 6,000 new articles every day for its millions of customers. That’s a violation of the Racketeer Influenced and Corrupt Organizations Act, or RICO, according to the complaint.
“Shein has enriched himself by committing individual violations time and time again, as part of a long and ongoing pattern of abuse, which shows no signs of abating,” the lawsuit alleges.
Shein is the world’s largest fashion retailer with annual sales of nearly $30 billion, more than H&M and Zara combined, the lawsuit notes.
A company representative told CBS MoneyWatch that it does not comment on pending litigation.
One of the designers who is suing Shein, Krista Perry of Worcester, Massachusetts, discovered copies of a graphic poster with the words “Make It Fun” for sale on Shein and a sister site, Romwe.com. Perry complained to Shein via their website’s contact forms about the copying, describing it as “incredibly disheartening, insulting and downright mean to take advantage of artists without their knowledge or permission.”
Shein responded with an offer of $500. “Shein made his offer as if it were a mom-and-pop operation rather than one of the wealthiest companies in the world,” the suit alleges.
The lawsuit claims that Shein’s pattern, when accused of copyright infringement, is to claim he had low sales and blame a third-party organization for the theft.
“Shein will also offer an apology and a vague explanation that makes it seem like this was an anomaly; somehow Shein crossed the wires and produced a very small number of exact copies of the designer’s products,” al· read the demand “[N]One time out of 10, the designer’s advisor will accept what is offered or negotiate a little more.”
The other two designers, Jay Baron of Burbank, California, and Larissa Blintz of Los Angeles, also alleged that their designs were copied exactly by Shein. Baron created an artwork called “Trying My Best,” which was allegedly copied and sold by Shein, while Martinez’s “Orange Daisies” outfit was also copied.
Perry suffered “substantial damages to his business in the form of diversion of trade, loss of profits and a diminution in the value of his designs and art, his rights and his reputation,” the suit alleges.
Who owns Shein?
Part of the challenge in pursuing Shein in court is its decentralized, even Byzantine, structure, the lawsuit noted.
Shein “is a loose and ever-changing (although continuing although some individual elements may change to be replaced by others) association of entities and individuals,” the lawsuit stated. Designers without a lawyer “face an absolute brick wall,” the lawsuit added, noting that even people with lawyers on their side can struggle to find “a suitable defendant.”
As a result, the plaintiffs allege a violation of the RICO Act, which is “designed to address the misconduct of culpable individual cogs in a larger enterprise,” the lawsuit states.
“The unrepresented parties face an absolute brick wall,” the lawsuit states. “But even plaintiffs with lawyers, with strong cases, struggle to find a suitable defendant. In the end, they simply sue any party they can find and hope to settle the matter in discovery.”
Shein was founded in 2012 by Chinese entrepreneur Chris Xu, also known as Xu Yangtian, who is valued over $10 billion by Forbes. But not much is known about him, seconds in The Guardian, which noted the varying reports of his background, with some stories describing him as a Chinese-American who studied at George Washington University, while others say he was born in Shandong in 1984 and studied in Qingdao University of Science and Technology.
“There is no Coco Chanel or Yves Saint Laurent behind the Shein empire. Rather, there is a mysterious tech genius, Xu Yangtian, aka Chris Xu, about whom almost nothing is known,” the lawsuit alleges .
What is a RICO charge?
The RICO Act of 1970 was designed as a way to combat the exploitation of legal businesses by organized crime, seconds in the Department of Justice. Although often considered a law to combat organized crime, the RICO Act has also been used to prosecute white-collar crimes such as the Enron accounting scandal and Bernie Madoff’s financial pyramid scheme.
Racketeering generally refers to an illegal activity carried out by extortion or fraud, but the RICO Act also has a civil section that can be used for consumer protection or to protect against commercial fraud. seconds in the Department of Justice.
“It is well established that flagrant copyright infringement (of the kind alleged here and of the kind referenced in other similar cases against Shein) constitutes extortion,” the lawsuit states.