Nelly Group appeals Shein ruling to challenge corporate accountability and fair competition in Europe.

In a scenario reminiscent of a modern "David versus Goliath" struggle, the Nelly Group has initiated legal action against the Chinese fast-fashion giant Shein for copyright infringement. The dispute, which began with allegations of unauthorized image use, recently saw the Swedish Patent and Market Court rule against an Irish Shein subsidiary, finding it liable for using copies of the Swedish online retailer’s images without permission. However, two other Shein subsidiaries involved in the case were acquitted of similar allegations. Nelly Group's CEO, Helena Karlinder-Östlundh, confirmed in an interview that the company has filed an appeal with the aim of clarifying how responsibility is apportioned within the complex Shein Group corporate structure and examining the proportionality of the initial judgment. The case has raised questions about the boundaries of fair competition for e-commerce providers operating in Europe.

Karlinder-Östlundh stated that Nelly Group has no regrets about taking legal action. She explained that Shein "illegally used our copyrighted images and published them on its website as though they were its own." When Nelly brought the infringement to Shein's attention, the Chinese company disputed ownership and refused to provide assurances against future violations. While acknowledging the litigation has been costly and time-consuming, Karlinder-Östlundh believes pursuing the case is essential. She expressed concern that if non-European e-commerce providers are allowed to flout European laws, it severely undermines the concept of a level playing field for European retailers.

A significant challenge highlighted by Nelly Group throughout the process has been Shein’s corporate structure. Karlinder-Östlundh noted that Shein appears to employ a multi-entity structure, with several different companies responsible for various aspects of its operations in Sweden. This structure required Nelly to invest significant time and resources simply to determine which company was responsible for which element of the infringement, making accountability "as difficult as possible." She further suggested that Shein's strategy might be deliberate; throughout the proceedings, Shein initially denied any wrongdoing, only changing its position to admit infringement shortly before the main hearing. Even then, Shein claimed that only a single company within its complex structure was responsible, giving the impression that the multi-entity setup serves as a deterrent to others pursuing legal action.

The outcome of the initial court judgment added to Nelly Group’s frustration. Despite the judgment explicitly stating that all three of Shein's legal entities contributed to the infringement and that it would not have been possible without all three, only one entity was held fully accountable. Karlinder-Östlundh expressed surprise at this contradictory verdict, noting that she had anticipated a clear outcome: either Shein violated Nelly’s rights or it did not. Furthermore, due to the judgment's wording, Nelly was ordered to pay a portion of Shein’s legal fees, an amount that ultimately surpassed Nelly’s own legal costs. The CEO called this outcome confusing, stating it did not make sense that a judgment could find all entities responsible but only hold one accountable for the consequences.

Nelly Group's CEO argues that this outcome points to a "structural flaw" in the current legal framework. She believes this weakness must be addressed to ensure European retailers can confidently compete knowing that non-European companies will face the same consequences for infringements. Following the initial ruling, Nelly Group filed an application for leave to appeal, fully aware of the potential for additional costs. The company hopes to draw attention to this issue at a legislative level, believing European politicians and legislators need to take it seriously. While current EU regulations like the Digital Services Act focus primarily on consumer protection, Karlinder-Östlundh argues there is a critical need to strengthen competition safeguards. She advocates for a clear and effective procedure that restricts market access for all retailers operating in the European market when they fail to observe established rules.