Shein is the world’s largest fashion retailer – but not all is as it seems.
A mammoth lawsuit has recently emerged, accusing the company of violating the Racketeer Influenced and Corrupt Organizations Act, commonly known as the RICO Act.
But why?
What lies beneath the world’s fashion powerhouse? Could this be the end of the world’s largest fashion retailer?
Find out why!
Three Designers and a Fashion Retailer
Chris Xu, also known as Xu Yangtian
In 2012, Chinese entrepreneur Chris Xu, also known as Xu Yangtian, founded Shein. Shein has annual sales of almost $30 billion in 2022, more than H&M and Zara combined.
However, in a new lawsuit on Tuesday (July 11, 2023), three independent designers accused the fast fashion retailer of infringement-related racketeering activities. A lawsuit was filed in California federal court.
According to the lawsuit, Shein stands accused of engaging in a pattern of copyright infringement.
The alleged infringement is purportedly part of their strategy to produce an astounding 6,000 new items every day to cater to their extensive customer base.
This results in the violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).
What is RICO Act?
…and how it helps thousands of designers?
According to the Justice Department, they designed the Racketeer Influenced and Corrupt Organizations Act of 1970 as a way to combat the exploitation of legal businesses by organized crime.
The RICO Act has also found application in prosecuting white-collar crimes. High-profile cases such as the Enron accounting scandal and Bernie Madoff’s financial pyramid scheme have been subject to prosecution under the RICO Act.
Typically, racketeering involves engaging in illegal activities such as extortion or fraud.
However, the RICO Act includes a civil section that enables its utilization for consumer protection or safeguarding against commercial fraud.
“Secretive Algorithm”
In the lawsuit, the plaintiffs allege that Shein created a “secretive algorithm” to identify growing fashion trends and “produce very small quantities of [its] item for sale” – as 100-200 units per SKU – in the case that an artist claims “the design was stolen”.
“Shein has grown rich by committing individual infringements over and over again, as part of a long and continuous pattern of racketeering, which shows no sign of abating,” the suit alleges.
Designers without an attorney “face an utter brick wall,” the lawsuit added, noting that even people with lawyers by their side can struggle to find “an appropriate defendant.”
As a result, the claimants are accusing a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO Act).
This alleged violation has now become a significant focal point in the case, drawing considerable attention and scrutiny from both legal experts and the public alike.
“Disheartening, Insulting, and Downright Evil”
One of the designers who is suing Shein, Krista Perry of Worcester, Massachusetts, discovered copies of a graphic poster with the words “Make It Fun” for sale on Shein and a sister site, Romwe.com.
Perry complained to Shein via contact forms on its websites about the copy. She describes it as “incredibly disheartening, insulting and downright evil to profit off of artists without their knowledge or permission.”
Shein wrote back with an offer of $500.
“Shein made its offer as if it were a mom-and-pop operation rather than one of the richest enterprises in the world,” the suit alleges.
Two other designers, Jay Baron of Burbank, California, and Larissa Blintz of Los Angeles, claim that Shein replicated “truly exact copies of [their] copyrightable graphic designs”.
Barron’s “Trying My Best” artwork, which they claim was also copied by Shein, is not only a registered copyright but the phrase was also trademarked by Barron.
As a result, the plaintiffs argue that they “have suffered and will continue to suffer substantial damage” to their businesses and “a diminishment in the value of their designs and art, their rights, and their reputations”.
Baron created an artwork titled “Trying My Best,” and Shein allegedly copied and sold it. Shein allegedly copied Blintz’s clothing design called “Orange Daisies” as well. This copying of Blintz’s design has been a matter of concern and contention in the ongoing dispute between the two parties.
What will happen to Shein?
While Shein has faced many lawsuits in recent years, the newest complaint stands out due to its inclusion of a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO). This particular lawsuit highlights the significance of the RICO claim in the legal action against Shein.
The artists have accused Shein of “multiple acts of racketeering and criminal copyright infringement” and are seeking past and future damages, as well as compensation for legal fees and injunctive relief to “prevent further racketeering activity”.
“SHEIN takes all claims of infringement seriously, and we take swift action when complaints are raised by valid IP rights holders.” Spokesperson from Shein stated to The Independent,
They emphasized the company’s commitment to addressing infringement issues promptly and seriously. We will vigorously defend ourselves against this lawsuit and any claims that are without merit.”
Will this be the end of Shein?
What this taught us?
This story, accusing Shein of violating the Racketeer Influenced and Corrupt Organizations Act (RICO Act), imparts several important lessons. It teaches us several important lessons about the implications of such violations.
1. The Power of Intellectual Property (IP)
IP rights, such as copyright and trademarks, play a crucial role in protecting artists and designers from unauthorized use of their work. This case highlights the significance of respecting and upholding these rights.
2. The Impact of Fast Fashion
Shein’s rapid production of thousands of new items daily raises concerns about the potential infringement of intellectual property.
The fashion industry’s demand for constant novelty and quick turnaround times may inadvertently lead to unethical practices. This highlights the importance of adopting responsible and sustainable approaches within the industry.
3. The Importance of Consumer Awareness
As consumers, let us stay informed about the practices of the brands we support.
Being knowledgeable about the companies we endorse is crucial. This case sheds light on the allegations against Shein. It serves as a reminder for us to research and carefully consider the ethical implications of our purchasing decisions.
4. The Significance of Legal Recourse
Laws like the RICO Act serve to protect individuals and businesses from organized and systemic misconduct.
The lawsuit against Shein serves as evidence that legal action possesses the power to hold companies accountable for their actions. It showcases how taking legal measures can have a significant impact on ensuring corporate responsibility and adherence to the law.
5. The Ongoing Struggle for Artists
Independent artists face challenges when their work is infringed upon. This case highlights these difficulties.
Creating an environment where artists can safeguard their creative output becomes essential. Additionally, it highlights the significance of providing them with the means to seek appropriate legal remedies when necessary.
Conclusion
In conclusion, the world’s largest fashion retailer has brought serious concerns regarding copyright infringement and violation of the RICO Act.
The lawsuit filed by three independent designers accuses Shein of engaging in a pattern of copyright infringement through its rapid production of thousands of new items each day. The designers claim that Shein’s actions not only violate their intellectual property rights but also constitute a long and continuous pattern of racketeering.
This case emphasizes the significance of intellectual property rights, the impact of fast fashion on ethical practices, the importance of consumer awareness, the role of legal recourse, and the ongoing struggle for artists to protect their creative output.
As the lawsuit unfolds, observers await Shein’s response and whether it will face consequences for its alleged actions.
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