Shein Targeted In RICO Lawsuit Alleging 'Systemic' Criminal Activity

Controversial fast-fashion giant Shein is accused of committing “systemic and repeated” copyright infringement against independent designers in a federal lawsuit that equates its global business practices to organized crime.

The lawsuit filed Tuesday in California on behalf of three U.S. artists claims the China-based online retailer has knowingly carried out “large-scale and systematic intellectual property theft” in a civil violation of the federal Racketeer Influenced and Corrupt Organizations Act, or RICO.

“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 lawsuit states. “It is not an exaggeration to suggest that Shein’s pattern of misconduct involves commission of new copyright and trademark infringements every day.”

RICO, originally created for mob prosecutions in 1970, can be used by individuals and organizations to file civil claims against racketeering activities that are performed as an ongoing criminal enterprise, according to the Department of Justice.

In Shein’s case, the company is accused of utilizing a “secret algorithm” that identifies emerging fashion trends before they widely catch on. It then reproduces these styles for a profit, all while stealing the artist’s uncredited work.

The lawsuit’s three plaintiffs, designers Krista Perry, Larissa Martinez and Jay Baron, shared side-by-side comparisons of their copyrighted work and Shein’s merchandise which they said was illegally produced, distributed and sold by the company.

Attorney David Erikson, who is representing the artists, said it’s possible that more artists and designers could join their lawsuit.

“Given the attention this lawsuit is receiving, we are already receiving a number of calls from others with similar stories,” Erikson told HuffPost in an email Thursday.

A representative for Shein said the company will “vigorously defend ourselves against this lawsuit and any claims that are without merit.”

“SHEIN takes all claims of infringement seriously, and we take swift action when complaints are raised by valid IP rights holders,” the company said in a statement to HuffPost.

Perry, one of the artists in the lawsuit, said her copyrighted work was twice ripped off by Shein. After the first time, which resulted in Shein offering $500 compensation, the company reached out to ask if it could feature her work in its merchandise. Perry declined this offer, according to the lawsuit, while citing Shein’s past unauthorized use of their work. Later, Perry said she saw that the company was again selling copycat products of her work without permission or payment.

The lawsuit alleges that Shein specifically targets the work of lesser-known artists who are less likely to catch wind of the theft, take legal action, or who would likely settle for a small payment if caught.

“When Shein copies a small or independent designer, the most likely outcome (without brand protection specialists and specialized software on the lookout) is that the infringement will go unnoticed. Under those circumstances, Shein reaps all the benefits of stealing and featuring the design that its technology had identified as valuable enough to take: it makes sales and keeps it customers’ eyes glued to the Shein site and app for that much longer,” the lawsuit states.

The suit is just the latest to blacken the company, which has also been investigated for utilizing unlawful sweatshop labor practices and for including hazardous chemicals — including lead — in its merchandise. The company also faces scrutiny over its products’ global impact on the environment.

It’s been reported that the company has been attempting to go public in the U.S. market for the past several years but has faced blowback from U.S. lawmakers over its labor practices.

Shein has denied that it uses forced labor and has said that it works in compliance with all local and regional laws and adheres to ethical sourcing standards.

A 2022 investigation by Bloomberg News, however, found that cotton used in Shein products originated from a region in China that is known for using forced labor. Companies in the U.S. are prohibited under law from importing cotton and other products from that region because of its known worker abuse.

That same year Shein acknowledged, following an investigation by the UK’s Channel Four, that two of its Chinese factories were breaking local labor laws. It said it would invest $15 million towards improving its factories.