Chinese fast-fashion retailer Shein is facing a new lawsuit in which designers allege the clothing maker’s copyright infringement is so aggressive it amounts to extortion.
The lawsuit filed this week alleges Shein is violating the Racketeer Influenced and Corrupt Organization Act, better known as RICO, a federal law originally created to prosecute organized crime.
The legal proceeding states that “Sheen became rich by repeatedly committing individual abuses, as part of a long and persistent pattern of extortion, which shows no sign of abating.”
In an orchestrated effort to create as many as 6,000 new items per day, Shein uses a “byzantine game of corporate structure” to defraud the designers, a coordinated illegal operation that could best be combated through the use of the RICO Act, according to the lawsuit.
The lawsuit is the latest in a series of difficulties Shin has faced. In May, a bipartisan group of more than two dozen lawmakers asked the Securities and Exchange Commission to halt Xin’s initial public offering until it can prove it is not using forced labor from the country’s Muslim Uighur population.
The lawsuit, filed by three fashion designers in the US District Court for the Central District of California, alleges that “Sheen produced, distributed, and sold replicas of their creative work.”
The civil lawsuit states in this case that they are exact copies of copyrighted graphic designs that appear on SHEIN products.
The designers are seeking unspecified damages and seeking an injunction to prevent the racketeering from continuing.
“Shin takes all reports of infringement seriously and acts quickly when filed by intellectual property rights holders,” it said in a statement on Friday. “We will vigorously defend this lawsuit and any unsubstantiated claim.”
Shein hasn’t said if it plans to go public this year, but there are reports that the company is raising funds in anticipation of a US listing before the end of the year.
Peter Pernot-Day, a spokesperson for Shein, stated that the company takes transparency throughout its supply chain very seriously.
However, a congressional report last month sharply criticized Chen & Teemo, another Chinese fashion retailer.
The report is part of an ongoing congressional investigation into products offered to American consumers that may be made through forced labor in China. As part of the investigation, the commission sent letters in early May to the brands Nike and Adidas, as well as Shein and Temu, asking for information on their compliance with the anti-forced labor law.