Deep Dives
Temu has taken the U.S. market by storm since it launched in 2022, with its parent company PDD Holdings reporting revenue of $13.36 billion for the second quarter of this year – an increase of 86 percent compared to the same three-month period last year. Founded in 2015 by Colin Huang (who previously launched Pinduoduo, a popular online marketplace in China) and making a splash stateside by connecting consumers with “millions of merchandise partners, manufacturers and brands,” the majority of which are based in China, Temu’s appeal lies in its offering of “the cheapest option for anything you might need,” as Wired put it recently. And “it works.”
Amid rising scrutiny of Temu and its closest rival, Shein, stemming from enduring allegations of intellectual property infringement, evasion of U.S. trade laws, mishandling of consumers’ data, and offering up potentially dangerous and/or illegal products, we took a dive into the state of Temu’s legal dealings.
In particular, we looked at the lawsuits waged by – and against – Temu and its subsidiaries/related entities, namely, Boston, Massachusetts-headquartered Whaleco, Inc., which operates the Temu e-commerce site, and owner PDD Holdings, among others (collectively, “Temu”) in federal courts in the United States in order to get a handle on what the legal landscape looks like for the company that has nabbed the title of one of the fastest-growing e-commerce companies in the world.
After reviewing Temu-specific court documents filed between December 16, 2022 (when the first lawsuit was filed against the company in the U.S.) and October 20, 2024, we found the following …
> Temu has filed – and been on the receiving end of – new lawsuits since the end of 2022 when the first wave of litigation was initiated against the company in federal courts in the U.S.
By our count, Temu is currently facing upwards of 20 ongoing cases.
Meanwhile, at least 10 lawsuits that Temu has filed against other parties are currently underway in federal courts in the U.S.
> The bulk of the litigation waged against Temu comes in the form of intellectual property cases, with plaintiffs primarily alleging that Temu has engaged in copyright, trademark, and/or patent infringement. On the issue of infringement, Temu says that it is “committed to protecting everyone’s intellectual property and [has] a comprehensive policy to that end.”
In a number of other cases, different and/or additional causes of actions have been alleged against Temu, including …
(1) Telephone Consumer Protection Act. In more than one lawsuit, Temu and its corporate entity, Whaleco, have been accused of “harassing and annoying” consumers with spam sales calls and texts that direct them to Temu’s. In one such suit, Plaintiff Phyllis King accuses Whaleco of violating the Telephone Consumer Protection Act (“TCPA”), which prohibits companies from telemarketing to individuals that have registered with the national do-not-call list.
King’s complaint, which was filed in federal court in Massachusetts in July, emphasizes that do-not-call registrations must be honored indefinitely unless canceled by an individual or removed by the database administrator. Since that has not happened in her case, King claims that Whaleco’s “annoying and harassing calls” should be addressed under the TCPA, which can result in penalties of $500 per violation, with willful violations going up to $1,500 per violation.
(2) False Reference Pricing. Temu has been sued for allegedly duping consumers by advertising fake sales. In one proposed class action, Plaintiff Eli Silva accuses Temu of “creat[ing] an illusion of savings on its website by advertising misleading strikethrough prices and fictitious savings based on those prices. Temu perpetrates this scheme, per Silva, by advertising a strikethrough price – i.e., the product’s full, non-discounted price – which it typically displays in strikethrough typeface (e.g., $5.00).”
Using “misleading strikethrough prices to artificially increase the perceived value of Temu products, Temu harms consumers by inducing them to pay more for its products and make purchases they would not have otherwise made,” according to Silva, who sets out claims under California’s False Advertising Law and California’s Consumer Legal Remedies Act.
(3) The Americans with Disabilities Act. Plaintiff Sylinia Jackson filed a proposed class action complaint against Temu over the accessibility of its e-commerce site in January 2023. Jackson alleged that Temu failed to “design, construct, maintain, and operate their website to be fully accessible to and independently usable by [her] and other blind or visually impaired persons.” She voluntarily dismissed the suit just over a month later in February 2023.
> The lawsuits that have been/continue to be waged against Temu in the United States are primarily being filed in federal courts in Illinois, New York, Massachusetts, and California.
> As distinct from Shein, which has seen sued by the likes of Nirvana’s holding company, Dr. Martens owner Airwair International, Dolls Kill, Chrome Hearts, eyewear-maker Oakley, Ralph Lauren’s PRL USA Holdings, Stussy, and jewelry brand Alison Lou, the bulk of the lawsuits waged against Temu have been filed by individuals or lesser-known companies/brands, such as Shenzhen Kangmingcheng Technology Co., Discount Decorative Flags, LLC, Ilustrata Servicos Design, Ltd., etc.
> On average, the bulk of the lawsuits that have been waged against Temu have been voluntarily dismissed by the plaintiffs as a result of settlements between the parties.
The legal activity involving Temu has not exclusively been waged by others; since 2022, Temu has filed at least 20 lawsuits of its own, targeting others for allegedly counterfeiting or infringing its trademarks and/or engaging in cybersquatting by using its name in their domains.
For instance, in the counterfeiting, cybersquatting, unfair competition, and false designation of origin complaint that it lodged with a federal court in Illinois in November 2023, Temu alleged that a group of defendants – identified by domains, such as temuapp.biz, temucouponcodes.com, boujeecoupons.com, etc. – made use of the trademark-protected Temu brand name to dupe consumers into believing that it is affiliated with an array of “fake apps and websites.” That case resulted in a default judgment in favor of Temu.
In terms of the Temu-filed cases that have been resolved, the bulk of them resulted in default judgments in favor of Temu or were voluntary dismissed by Temu as a result of out of court settlements with the defendants.
In addition to the aforementioned lawsuits that have been filed by – and against – Temu, the retailer has been locked in an enduring clash with its rival Shein (whose corporate entity is Roadget Business PTE). A timeline of the various cases that have pitted the two ultra-fast fashion titans against one another is as follows …
> Dec. 2022 – Roadget Business PTE. Ltd. v. Whaleco, Inc. (1:22-cv-07119)
Shein filed suit against Temu in federal court in Illinois, alleging that Temu “willfully and flagrantly infringed SHEIN’s exclusive and valuable trademark and copyright rights,” and engaged in a scheme to boost its own growth in the American market by “impersonating [the] SHEIN brand on social media, trading off of the well-known SHEIN trademarks, and using copyrighted images owned by Roadget as part of [its own] product listings.”
Alleging claims of trademark counterfeiting, trademark dilution, and copyright infringement, Shein alleged that instead of “fairly competing” with SHEIN when it first launched its U.S. online shopping site in September 2022 “by, for example, offering comparable products at a lower price or by offering a more diverse array of products for selection and purchase by consumers,” Temu has “deliberately engag[ed] in unfair competition by exploiting the SHEIN brand.”
Shein landed a win in an early round of the case when the court granted its request for an emergency temporary restraining order as to its trademark and copyright infringement claims.
The case came to a close on October 26, 2023 when the parties lodged a stipulation of dismissal without prejudice with the U.S. District Court for the Northern District of Illinois.
> Jul. 2023 – Whaleco Inc. v. Shein US Services, LLC (1:23-cv-11596)
Temu responded to the Shein-initiated case with a lawsuit of its own. In the complaint that it filed with a federal court in Massachusetts on July 14, 2023, Temu claimed that in the wake of its expansion into the U.S., Shein “chose not to compete on the merits by offering better prices, terms, service, or quality,” and instead, has opted to carry out an “scheme of coerced exclusivity, threats, intimidation, and direct financial punishments,” which amounts to conduct that is “the opposite of competing fairly and within the bounds of applicable law.”
In the wake of its launch and expansion in the U.S., Temu argued that Shein – faced with “direct competition from another platform capable of taking on its business model” – “retaliated with … threats, intimidation, false assertions of infringement, and attempts to impose baseless punitive fines” on suppliers with the aim of “lock[ing] up the supply chain” and undermining Temu’s “ability to offer similar products at prices that are consistently lower than Shein’s.”
In particular, Temu pointed to “at least four strategies” that Shein is allegedly utilizing in order to stifle competition. Specifically, Temu said that Shein: (1) forces manufacturers to enter into adhesion agreements that effectively create exclusive supplier relationships with it and threatens manufacturers with onerous fines and penalties if they supply product to Temu; (2) forces manufacturers to sign loyalty oaths certifying that they will not do business with Temu, but which are silent as to any other competitor or potential competitor; (3) issues public penalty notices and imposes extrajudicial fines on disobedient manufacturers for supplying product to Temu; and (4) sends numerous false notices of copyright infringement to Temu in order to disrupt sales of products that are offered for sale on Temu.
The case came to a close on October 26, 2023 (the same day as the Shein-filed case above) when the parties lodged a stipulation of dismissal without prejudice with the U.S. District Court for the District of Massachusetts.
> Dec. 2023 – Whaleco Inc. v. Shein Technology LLC (1:23-cv-03706)
Temu lodged a wide-ranging lawsuit against Shein with the U.S. District Court for the District of Columbia, claiming that China-founded, Singapore-based Shein was engaging in a “mafia-style” scheme to intimidate suppliers and abuse the U.S. legal system in order to “illegally interfere with Temu’s business.” In the complaint, Temu alleged that in response to its success in the U.S. market, Shein “hatched a desperate plan to eliminate the competitive threat” posed by Temu.
In addition to interfering with its supply chain, Temu alleged that Shein was also “manipulating the U.S. Copyright Office, misusing the Digital Millennium Copyright Act procedures designed to protect legitimate rights holders, subverting the U.S. legal process to disrupt Temu’s operations and damage Temu’s valuable brand, and [engaging in] the unlawful copying of Temu’s intellectual property.”
The case is still underway before the U.S. District Court for the District of Columbia. Shein filed a motion to dismiss in March 2024, arguing that Temu lacks Article III standing and has failed to state a plausibale claim.
> Aug. 2024 – Roadget Business PTE. LTD., v. PDD Holdings, et. al. (1:24-cv-02402)
Shein’s corporate entity Roadget Business Pte. Ltd. filed a new lawsuit against Temu in an Illinois federal court, accusing Temu of counterfeiting, trade secret theft, and trademark and copyright infringement, as well as intentionally confusing customers with a misleading and fraudulent business model. In the lawsuit, which is currently underway, Shein claims that while Temu “masquerades as an e-commerce ‘marketplace,’” in reality, “nothing could be further from the truth.”
Specifically, Shein maintains that Temu is not actually a marketplace platform at all, and instead, “controls every aspect of its sellers’ activity” and encourages sellers to “infringe the intellectual property rights of others,” including its own.
Shein alleges that its IP has been “strategically ripped off” by Temu in various ways, including via “imposter” social media accounts intended to confuse consumers and unlawful use of its trademark and advertising material, as well as by providing influencers with guidelines directing them to make disparaging statements about Shein.
The case is still underway before the U.S. District Court for the District of Columbia. Temu filed a motion to dismiss on October 16, 2024, arguing that Shein lacks the necessary personal jurisdiction to wage claims against it.