Shein RICO Charges Explain—Here's Why The Giant Retailer May Be In Trouble

Even though fast fashion has detrimental effects on society, online retailer Shein garnered an estimated $30 billion in 2022. The China-based company – founded by Chris Xu – has managed to attract young women worldwide with its cheap, trendy clothes. Yet, Shein's prioritization of affordability and quick turnover has reportedly led to exploitative labor practices, environmental harm, and poor quality products. 

Now, a new lawsuit against the business has emerged on behalf of three designers claiming that Shein copied and profited from their products, with Shein facing RICO violations. RICO, the Racketeer Influenced and Corrupt Organizations Act, was established to combat organized crime and criminal enterprises like gangs and the mafia. Under the RICO Act, an entire organization is targeted by law enforcement, instead of just key individuals.

According to the lawsuit, the reproduced items weren't "truly exact copies of copyrightable graphic design." Reports suggest that the company has been involved in a consistent series of copyright infringements to produce an astonishing 6,000 new items each day. "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 says.

Krista Perry of Worcester, Massachusetts, found copies of her poster that read "Make It Fun" for sale on Shein and Romwe.com. She reached out to Shein to complain, and described her ordeal as "incredibly disheartening, insulting and downright evil to profit off of artists without their knowledge or permission." The company offered her $500 in compensation. The suit alleges that Shein often blamed these infringements on "low sales" and "third-party organizations for the theft." 

Two other designers, Jay Baron and Larissa Blintz, claim that Shein exactly copied their creations. As a result, Perry suffered "substantial damage to her business in the form of diversion of trade, loss of profits, and a diminishment in the value of her designs and art, her rights, and her reputation."

In the complaint, the plaintiffs claim that Shein made a "secretive algorithm" to recognize trends and "produce very small quantities of [its] items for sale" just in case the artist claims it was stolen. They argue, "The brand has made billions by creating a secretive algorithm that astonishingly determines nascent fashion trends – and by coupling it with a corporate structure, including production and fulfillment schemes, that are perfectly executed to grease the wheels of the algorithm, including its unsavory and illegal aspects."

Shein’s Questionable Business Practices

In a 2022 investigation conducted by CBC Marketplace, it was found that fast-fashion brands had a concerning statistic: One out of every five items of children's and adults' clothing and accessories were found to contain "elevated levels of chemicals—including lead, PFAs and phthalates – that experts found concerning." Shein is no exception. 

Scientists reportedly discovered that a Shein jacket for toddlers had almost 20 times the amount of lead that Health Canada considered safe for kids. The retailer addressed this issue, stating that the jacket and purse were removed from its website. "We are committed to continuous improvement of our supply chain," the company said. Are they really, though? 

Last year, several videos were made showcasing Shein products with alarming tags. Some of them read, "Need your help" and "Please help me," according to a TikToker named Michaela. Her video fueled speculation that Shein was running a sweatshop. According to an investigative journalist named Iman Amrani, the retailer allegedly exploited their employees by making them work up to 18 hours a day. "People who are working in these factories that provide clothes to Shein are getting paid less than 4 cents per item that they produce," explains Amrani, "and they have to produce these high volumes of clothes in order to keep up with the churn on the website."

Could this new lawsuit bring an end to fast fashion? Probably not, but it’s a step in the right direction. 

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