Falling Apart at the Seams: Is Shein Fast Fashion Built to Last?
Fast fashion has flourished in the past half-decade, capitalizing on the post-COVID digital age and the short attention spans of trend-savvy Gen Z consumers. Shein, a Chinese-founded and Singapore-headquartered fashion company, is one of the giants of the industry, raking in $22.7 billion in 2022 alone.[1] Its affordability draws in a plethora of consumers while utilizing a business model similar to that of Amazon’s marketplace, with Time Magazine asserting, “a sprawling online marketplace brings together about 6,000 clothing factories in China under Shein’s label, while internal management software collects near-instant data about which items are selling and which aren’t to visibly boost the popular items.”[2]Most recently, Shein reportedly out-ranked Zara and H&M in categories like online sales and searchability.[3] However, the company continuously battles controversy regarding its business practices, sustainability and supply chain, labor standards, and intellectual property theft.[4]
In the newest series of Shein-targeted litigation, luxury clothing brand Chrome Hearts filed against the fast fashion company in the Central District of California, alleging trademark infringement.[5] Chrome Hearts accused Shein of using multiple of their infamous cross marks on cheaply made purses, tank tops, and hair accessories.[6] The complaint not only asks for monetary damages and injunctive relief, but also demands that defendants recall all infringing products so they may be destroyed.[7]
This is not Shein nor Chrome Hearts’ first legal battle over intellectual property.[8] As done before, Shein might argue Chrome Hearts’ trademarks are “invalid and unenforceable,” because the brand filed “with the intention to mislead” the United States Patent and Trademark Office (USPTO).[9] Shein has previously argued that certain marks are used in an “ornamental manner rather than as a source identifier,” which doesn’t typically constitute infringement and would thus defeat the Chrome Hearts suit.[10] However, Chrome Hearts will likely reach a voluntary settlement agreement with Shein as it has done recently with other defendants that infringe its well-known cross designs.[11]
Shein is despised not only by the world’s most luxury fashion brands but also by small, independent artists. Three of these artists are in the process of suing Shein for copyright infringement.[12] One claims Shein integrated her “Make it Fun” graphic into products, another asserts Shein stole an embroidered patch he created with the phrase “Hello, I’m Trying My Best,” whereas a third argues that Shein took her design of orange daisy overalls.[13] The filing in California federal court stated, “Shein has grown rich by committing individual infringements over and over again, as part of a long and continuous pattern of racketeering.”[14]
The independent designers brought suit under the Racketeer Influenced and Corrupt Organizations Act, or RICO, which primarily serves to deter organized crime, but as the Times emphasized, “racketeering also applies to ‘egregious copyright infringement.’”[15] Furthermore, this use of RICO against Shein is not an unacquainted accusation. “Shein has also been accused of other kinds of labor violations having to do with sweatshops and wage theft in China . . . and we don’t want to be a party to that,” said Fordham Law Fashion Institute Director, Susan Scafidi, referencing a bipartisan decision to use the Securities and Exchange Commission (“SEC”) to postpone Shein’s initial public offering until evidence of noninvolvement in forced labor related to the Uyghur Muslim Genocide could be produced.[16]
While the present RICO claims against Shein are still pending, the Congressional Select Committee on the Chinese Communist Party released a scathing report of Shein and its recent competitor, Temu, finding both companies are doing “next to nothing to keep its supply chains free from slave labor” and using “the de minimis loophole in [United States] import rules—dodging import taxes and evading scrutiny on the millions of goods they sell to Americans.”[17] This loophole refers to the shipping method utilized by companies like Shein and Temu, typically free of duties, taxes or government fees that traditionally apply to overseas retailers, which promotes the sale of cheaper goods and allows companies to disclose less information about their products and transactions.[18] Consequently, this greatly increases the likelihood of American importing of “narcotics, counterfeits and goods made with forced labor.”[19] In response, about a year ago, the United States imposed a ban on goods originating from Xinjiang, China, to strengthen the government’s stance that such goods are made with forced labor unless proven otherwise.[20]Fast fashion companies are undeniably affected by these sanctions. Last year alone, the Shein and Temu accounted for more than 30% of the de minimis shipments into the United States, about half of which originated from China.[21] This percentage will likely drop in coming years if retailers like Shein cannot prove that they conduct ethical business, or if they do not make necessary changes to ensure they are no longer participating in any illegal practices.
It remains to be seen what will come of Shein. While the company is growing exponentially, the danger of continuous rule-breaking casts doubts on whether the empire can withstand costly litigation and the negative reputation that comes with it. This, coupled with public backlash towards Shein’s questionable manufacturing, sustainability, and business methods, suggests the fast fashion mogul might be just as quick in its downfall.
Footnotes
