As Sequoia Capital China-backed Shein nears a long-awaited IPO in the U.S., the hurdles it’s facing continue to stack up. The latest is the anticompetitive lawsuit that Chinese e-commerce platform Temu filed against the company just earlier this week, accusing Shein of orchestrating a “scheme” to block Temu’s growth in the U.S.
In the 100-page complaint, which was filed on Wednesday in a Washington, D.C. district court, Temu accused Shein of a whole number of anti-competitive practices, alleging that Shein “improperly seizes” its suppliers’ IP rights, sometimes without their knowledge, to prevent them from listing or selling similar products with Temu, and accusing Shein of “detaining merchant representatives” in its offices for “many hours” and threatening them with penalties for doing business with Temu, among other things, according to the court filings.
A Shein spokeswoman told Fortune that Shein believes “this lawsuit is without merit and we will vigorously defend ourselves.”
This isn’t the first time that Temu and Shein have gone toe-to-toe in court. The companies had previously traded lawsuits, with Temu alleging that Shein was bullying manufacturers and Shein alleging that Temu was telling influencers to make disparaging remarks about Shein. (Both companies dropped their respective lawsuits in October.)
A Temu spokesperson told Fortune that, while the company had dismissed earlier litigation against Shein, Shein’s “anticompetitive behavior has not only persisted but intensified,” they said, adding later: “Their actions are too exaggerated; we had no choice but to sue them."
Temu clearly is not looking to pull any punches in its latest claim. Here’s a particularly potent line from the lawsuit: “Shein’s business model is based on copying trendy designs, using its network of thousands of captive suppliers to manufacture copies of those designs, and reselling the copy with a Shein label attached. Shein is not a brand; it is a glorified label maker.” (A Shein representative didn’t respond to a request for comment on the claim)
Prior to this latest litigation, Shein already had its work cut out for it ahead of potential listing (and the company previously had declined to comment on a potential IPO). As I’ve written about earlier, Shein has made many enemies in Washington, D.C. And both Shein and Temu have been the target of an ongoing investigation by a new House Committee set up earlier this year.
Did you miss me? I spent the last week in Berlin and Dresden, Germany, wandering through the Christmas markets and drinking Glühwein to keep me warm. Here’s a photo of the enormous stollen at Dresden Striezelmarkt:
Now that I’m back, here are some of the things I’m catching up on:
—Blackstone’s hilarious new Taylor Swift-themed holiday video.
—The new team of lobbyists Paradigm started working with
—Why Boston-based venture firm OpenView collapsed
Crystal Ball…I am still taking predictions until mid-next week. Any Term Sheet reader can make a prediction for what next year will bring for private equity, M&A, and venture capital for the 2024 Crystal Ball edition. Send me an email at the address below. Please make sure to include “Crystal Ball” in the subject line so I don’t miss it.
Until Monday,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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