All About the Lawsuit Accusing Chinese Fast-Fashion Giant Shein of RICO Violations

Already at the receiving end of allegations from regional rival Temu, Chinese fast-fashion giant Shein is facing a legal storm as a new lawsuit accuses the company of maintaining its competitive edge through "egregious" copyright infringement practices that amount to racketeering. This case, filed on behalf of three designers, claims that Shein has systematically copied and sold their designs, constituting a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). Take a look at the details of this high-profile lawsuit, the controversies surrounding Shein, and the implications of the RICO Act in this legal battle.

What's the lawsuit about?

The lawsuit against Shein, filed in a California federal court, has sent shockwaves through the fashion industry. It is brought forward by three designers who allege that their unique designs were not merely taken as inspiration with some creative liberties, but in fact, Shein sold exact copies of copyrightable graphic design to millions of customers.

The key allegation in this lawsuit is that Shein has been consistently engaging in a pattern of copyright infringement as part of its strategy to introduce a staggering 6,000 new items every day. This relentless copying of designs is deemed to be a violation of the RICO Act.

Shein's remarkable success

Shein's ascent to becoming the largest fashion retailer in the world, with annual sales exceeding $30 billion, is noteworthy. This figure surpasses the combined sales of popular fashion brands such as H&M and Zara. The rapid growth of Shein has made it a preferred destination for shoppers looking for trendy yet affordable clothing.

A closer look at the accusations

One of the designers involved in the lawsuit, Krista Perry of Worcester, Massachusetts, made a disheartening discovery that her graphic poster design, titled "Make It Fun," was available for sale on Shein's platform. Perry described it as insulting, and downright evil to profit off of artists without their permission. Shein's response to her complaint was an offer of just $500, which the lawsuit claims was made as if Shein were a small-scale operation rather than a global fashion powerhouse.

The lawsuit goes on to claim that Shein's typical pattern when accused of copyright infringement is to downplay the issue, blame a third-party organization for the theft, and offer a vague apology, with little accountability.

Two other designers, Jay Baron of Burbank, California, and Larissa Blintz of Los Angeles, are also plaintiffs in the lawsuit. Jay Baron's artwork, "Trying My Best," and Larissa Blintz's "Orange Daisies" clothing were reportedly duplicated by the online retailer, causing significant damage to their businesses and reputations.

Shein's business structure

One of the challenges in pursuing Shein in court is its decentralized and ever-evolving structure. The lawsuit describes Shein as a "loose and ever-changing association-in-fact of entities and individuals." This complexity can make it difficult for designers to identify the appropriate defendant, even when they have legal representation.

What is the RICO act?

The Racketeer Influenced and Corrupt Organizations Act, commonly known as RICO, was enacted in 1970 to combat organized crime. While it is often associated with combating organized crime, the RICO Act has also been utilized in cases of white-collar crimes, such as the Enron accounting scandal and Bernie Madoff's financial pyramid scheme. In this lawsuit, the claimants argue that Shein's egregious copyright infringement constitutes racketeering, and have thus invoked the RICO Act to address the misconduct.

Congressional scrutiny and forced labor

The Shein lawsuit comes amidst increased scrutiny against the company. In May, a bipartisan group of lawmakers asked the Securities and Exchange Commission (SEC) to halt Shein's initial public offering (IPO) until concerns about the use of forced labor in its production units were addressed. Shein has also faced allegations of labor violations, including sweatshops and wage theft in China.

Shein's response

Shein has responded to these allegations by stating that its policy is to comply with the customs and import laws of the countries in which it operates and that it has "zero tolerance" for forced labor.