What Happened With Shein? What is a Rico Charge Shein?
by Ushapriyanga | Updated Jul 14, 2023
Who Owns Shein?
Shein was established in 2012 by Chinese entrepreneur Chris Xu, also known as Xu Yangtian. Reports about his background vary, with some sources suggesting he is a Chinese-American who studied at George Washington University, while others indicate he was born in Shandong in 1984 and studied at Qingdao University of Science and Technology.
The lawsuit highlights a significant challenge in pursuing legal action against Shein due to its decentralized and complex organizational structure. It describes Shein as an ever-changing association of entities and individuals, making it difficult to pinpoint specific defendants. The lawsuit emphasizes that even designers with legal representation encounter obstacles in identifying the appropriate party to sue, leading to a reliance on discovery to clarify the matter.
To address this challenge, the claimants are alleging a violation of the RICO Act, which was specifically designed to tackle misconduct within larger enterprises by holding individual participants accountable. The lawsuit argues that unrepresented parties face significant barriers in navigating the legal process, while even plaintiffs with strong cases struggle to identify suitable defendants.
What Happened With Shein?
According to the lawsuit, Shein, a company known for producing a large volume of fashion items, is accused of creating products that are not merely similar to copyrighted designs, but are exact copies. Shein has faced consistent criticism regarding its inadequate labor conditions and the presence of elevated levels of harmful chemicals in its garments.
The lawsuit claims that Shein intentionally engages in copyright infringement as part of its strategy to introduce a staggering number of 6,000 new items every day to cater to its extensive customer base. This alleged behavior is considered a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).
In other words, the lawsuit asserts that Shein systematically replicates copyrighted graphic designs without any significant alterations. It accuses the company of deliberately infringing upon intellectual property rights in order to sustain its high rate of product output and meet the demands of its millions of customers.
By presenting the alleged infringing activities of Shein as a violation of RICO, the lawsuit implies that the company's actions are not isolated incidents but part of a larger scheme.
RICO provides a legal framework to address organized criminal behavior by allowing parties to file civil lawsuits and seek damages against individuals or organizations involved in a pattern of illegal activities. In this case, the claim asserts that Shein's consistent copyright infringement constitutes such a pattern, potentially exposing the company to substantial legal consequences.
What is a RICO Charge Shein?
The Racketeer Influenced and Corrupt Organizations Act (RICO) is a federal law that was established in 1970 as a means to combat organized crime. It encompasses a wide range of illegal activities, including racketeering, bribery, and extortion.
The company is accused of participating in a systematic copyright infringement scheme in its pursuit of creating 6,000 new products daily for its extensive customer base. These actions are alleged to constitute a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).
Accusing a company like SHEIN of RICO violations is a serious allegation that can have a significant impact on its business. In response to these allegations, many users on Twitter are speculating about the future of SHEIN and whether the company will shut down. This speculation has led some users to rush and make purchases on the platform, fearing that it may cease operations soon.
There are those who believe that these allegations are finally exposing the company's unethical practices, and they adopt a skeptical or critical viewpoint towards the situation. On the other hand, some users approach the matter with a lighthearted perspective and anticipate potential major discounts when or if the company eventually shuts down.
Shein Sued
On Tuesday, July 11, 2023, Shein, a prominent Chinese fast fashion retailer, was hit with a lawsuit accusing the company of engaging in criminal activities under the Racketeer Influenced and Corrupt Organizations Act (RICO).
The 52-page lawsuit alleges that Shein is involved in "intellectual property theft from U.S. designers, both large and small." This legal action follows a series of complaints and lawsuits filed against the company by various artists and brands.
The lawsuit, titled Perry, et al., v. Shein Distribution Corp., et al., was filed in a California court by three independent designers: Krista Perry, Larissa Martinez, and Jay Barron, as indicated by the Court Listener.
This latest lawsuit adds to the growing legal challenges faced by Shein, raising serious allegations of intellectual property theft and highlighting concerns regarding the company's business practices in relation to U.S. designers.
Shein Charged With RICO
The plaintiffs in the lawsuit have accused Shein and its related entities, such as Roadget Business and Zoetop Business, of engaging in copyright and trademark infringement. They claim that Shein deliberately produces, distributes, and sells exact copies of their creative work, which is allegedly ingrained in the company's design process and organizational structure.
According to the lawsuit, Shein utilizes a secretive algorithm that combines fashion trend predictions with a corporate structure, including production and fulfillment schemes. This alleged approach enables the company to appropriate the designs or artwork of independent designers. While these copied designs generate significant sales and profits for Shein, they cause substantial harm to the careers of independent designers.
Shein Lawsuit
The three designers involved in the lawsuit assert that they have already suffered and will continue to suffer significant damage to their businesses. They claim that the value of their designs, artwork, rights, and reputations is being diminished.
Although a thorough investigation is required to fully understand the inner workings of Shein's algorithm, the lawsuit provides insights into the brand's distribution model, which aims to avoid legal complications. Initially, Shein keeps the production of each new product at a low quantity of 100-200 per SKU (stock-keeping unit), as opposed to the typical 1000 units. This approach allows the company to gauge if any complaints regarding stolen designs arise. If such complaints occur, Shein can quickly settle with the affected parties.
Unlike larger brands like Nike, which have dedicated specialists, software, and resources to detect infringements and actively fight against them, small and independent designers often go unnoticed. This situation enables Shein to reap the benefits of their designs without facing significant repercussions. If customer demand justifies it, Shein proceeds to reorder the product for further sales.
What Happened With Shein-FAQs
The lawsuit accuses Shein of copyright and trademark infringement, specifically claiming that the company produces and sells exact copies of independent designers' work. It also alleges that Shein utilizes a secretive algorithm to appropriate designs and artwork.
The Racketeer Influenced and Corrupt Organizations Act (RICO) is a federal law enacted to combat organized crime. It covers a wide range of criminal activities, including racketeering, bribery, and extortion.
The lawsuit was filed by three independent designers named Krista Perry, Larissa Martinez, and Jay Barron in a California court.
According to the lawsuit, Shein's alleged copyright infringement significantly damages the careers of small and independent designers. It diminishes the value of their designs, artwork, rights, and reputations, impacting their business prospects.
Chris Xu, also known as Xu Yangtian, is the Chinese entrepreneur who founded Shein in 2012. Limited public information is available about him, and reports regarding his background vary. Some sources suggest he is a Chinese-American who studied at George Washington University, while others indicate he was born in Shandong in 1984 and studied at Qingdao University of Science and Technology.