By: Eleni Tsokolas
The fashion industry in general has always moved faster than the rest of the world, but there’s yet to be a brand as swift as Shein, which lists more than 6,000 new items on its website every day. But with great haste comes great waste, and the brand has been consistently under fire recently for a multitude of prospective legal issues pertaining to their questionable business operations. The latest of the complaints is an accusation of racketeeringviolations based on “egregious” copyright infringement of graphic designs produced by numerous independent artists. Shein has also been subject to tax evasion and unethical labor investigations by the Select Committee on the CCP, as well as being exposed for their profound disregard of environmental concerns. While each of these issues with Shein are distinct and demand attention and resolution respectively, they all collectively serve as a framework to guage the nature of corporate greed, exploitation, and cagey behavior within the online retailer’s business model and practices. Nevertheless, Shein’s problematic operations are the most ripe and palpable in the federal racketeering lawsuit filed in July of 2023.
The Racketeer Influenced and Corrupt Organizations (“RICO”)Act of 1970 was initially drafted with the intention to combat organized crime typically associated with the mafia. RICO charges can cover up to thirty-five various crimes (such as murder, arson, kidnapping, drug dealing, gambling, etc.), allowing prosecutors to compound charges in a criminal case by proving at least two of the thirty-five listed were executed in a pattern of racketeering. However, a civil RICO claim sets a lower bar, requiring proof that only one of the crimes be committed in a pattern of racketeering. In 2005, Congress authorized the addition of “criminal infringement of a copyright” as sufficient to constitute “racketeering activity,” which functions as a safeguard for consumer protection as well as mitigating the pervasiveness of commercial fraud. The RICO charges brought against Shein are grounded in this notion of criminal copyright infringement, as well as the highly elusive, “decentralized, even byzantine, structure” of the company, as asserted by the complaint. There have been more than fifty federal copyright and trademark infringement lawsuits filed against Shein in the United States, but plaintiffs encountering jurisdictional issues regarding the corporation have proven to bea significant barrier to restitution. The corporation has its headquarters in Singapore but is also heavily affiliated with Zeotop Business Co., a limited liability company in Hong Kong, as well as the company’s establishment of Shein Distribution Corporation (SDC) in Delaware. Zeotop ranks high among the organizational hierarchy and holds a significant position in Shein’s operations; however, plaintiffs bringing suit against Zeotop have been unsuccessful, for “they have yet to be subject to personal jurisdiction in the United States.” On the other hand, while the SDC is not beyond the bounds of the court’s jurisdiction, claims filed against the SDC have been to no avail seeing as Shein declared that their “foreign profits are not within reach and will not be disclosed.” Evidently, Shein has been dependent upon these confusing jurisdictional issues as a way to avoid accountability for their dubious operations.
The difficulties in establishing a proper defendant when filing a lawsuit against Shein is part of the rationale behind the decision to assert a RICO violation. The complaint noted that the allegation was “designed to address the misconduct of culpable individual cogs in a larger enterprise,” thereby diminishing Shein’s ability to circumvent liability. Turning back to the copyright infringements at hand, the complaint was filed on behalf of three designers in particular whose designs were blatantly ripped off by Shein. One of the artists, Krista Perry of Worcester, Massachusetts, made a distinct poster that displayed a graphic which said “Make It Fun,” only to find out that Shein and Romwe (its sister e-retailer site) had made exact copies of the print and were replicating it without her permission or consent. When Perry reached out to the company to complain, they offered her a measly $500, as if Shein was just a humble boutique and not valuated as a $100 billion dollar enterprise. This exemplifies the corporation’s extreme frugality and glaring indifference towards the working class, which are ostensibly fundamental to Shein’s operations, given the extensive allegations of human rights abuses, forced labor violations, wage theft accusations, import tax evasions, and considerable environmental waste. The RICO suit is a tactful litigation strategy to undermine Shein’s longstanding lack of legal accountability on multiple fronts and is a step in the right direction for independent artists to protect their intellectual property from misappropriation by superficially invincible corporations.
Student Bio: Eleni is a second-year law at Suffolk University Law School. She is a staff member for the Journal of High Technology Law. Eleni received a Bachelor of Arts degree in philosophy, classical studies, public law and political thought from DePaul University in 2022.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
