In Cavalleri vs. Hermès International, Cavalleri and Glinoga, who are longtime Hermès customers, have brought a class action suit in California, claiming that they tried to purchase Birkin bags but were told by sales associates that they had not spent enough money on the brand to qualify for the privilege and that they should purchase ancillary products in order to get the chance to “potentially obtain a Birkin bag”.
The lawsuit alleges that Hermès’ practice of allegedly limiting access to its most coveted bags (such as the Birkin) only to individuals who have already established ‘purchase histories’ in its stores – which is to say, have spent substantial sums buying other Hermès products, such as scarves, shoes, and belts – is an unlawful tying arrangement, violative of US antitrust law.
Birkin has defended its sales strategy in interviews by arguing that its sales associates do not receive commissions on Birkin bags, and that the strategy is a reflection of consumer loyalty rather than coercive tying, akin to commonplace loyalty programs.
The high-end luxury market, whether for apparel, accessories, or real estate, is, of course, inherently discriminatory – your socioeconomic status determines whether you may participate. It’s certainly not fair, but is it illegal?
LAW AND LUXURY
The Birkin bag is defined by the fact that it is not just expensive but virtually unattainable. It is an infamous symbol of luxury and exclusivity, and has long been in the cultural zeitgeist: in a 2001 episode of Sex and the City, Samantha is told of a five-year waiting period for a Birkin bag, which leads her to pretend she’s buying it for the actress Lucy Liu.
The Hermès lawsuit claims that Hermès “unlawfully ties” the sale of Birkin handbags to the sale of other products, which results in monopolization, restraint of trade, and unfair competition, and violates US antitrust law. Do these claims have merit?
For the plaintiffs to succeed, they would need to prove two things: one, that the Birkin bag enjoys a monopoly, and second, antitrust injury, which must be established by demonstrating both individual harm and broader market injury of the type that antitrust laws aim to prevent.
That would seem to be a stretch in this case. First, the Birkin bag is highly sought after but it by no means enjoys a monopoly in the luxury bags segment. Birkin itself sells many other luxury bags under different brands, and competes with many other companies such as Gucci, Ferragamo, and Ralph Lauren in the luxury bag space. In other words, a consumer has several alternatives. Second, while there may been injury to the plaintiffs’ ego, it would be difficult to prove antitrust injury in the legal sense. Consumers are not being harmed, they may simply choose not to purchase the tied items (the scarves, shoes, and belts), and neither is the tied market – one could argue it is in fact benefitting.
THE BIRKIN DEFENSE
Hermès has retained a trio of famous antitrust veterans from the law firm Latham & Watkins to represent it. In its response, filed on May 9, 2024, Latham listed four reasons for the dismissal of the case.
First, that the plaintiffs had failed to establish that Hermès possesses market power or a monopoly over handbags. According to Latham, the conclusion that Birkin or Kelly handbags constitute their own product market is “erroneous and unsupported by factual allegations”.
Second, that the plaintiffs had failed to define the tied product market, and grouped all products, excluding the handbags in question, into a single category of “Ancillary Products”. Third, that the plaintiffs had also failed to establish an exclusion of other sellers from the tied products.
Lastly, that the plaintiffs, under Section 2 of the Sherman Act did not allege monopolistic behaviour by Hermès, but accused Hermès of creating and carrying “iconic” products that have a cult following, which Latham does not consider to be unlawful.
Latham also disputed the plaintiffs’ claims of violation of state laws under the Cartwright Act and the California Unfair Competition Laws, arguing that the plaintiffs failed to establish the prongs of Cartwright Act: a tying arrangement wherein the sale of a product was linked to the sale of a tied product; the party having sufficient market share to coerce the sale of the tied product; significant amount of the sale was affected in the tied product; and the complainant suffering pecuniary damage.
Latham has called Cavalleri’s and Glinoga’s claims “far-fetched” and “implausible” and asked the Court to dismiss the complaint in its entirety.
CONCLUSION
In navigating the complex terrain of antitrust laws, Hermès faces a delicate balancing act between defending its business practices and safeguarding its brand. Other luxury fashion brands are likely following the progress of this legal battle closely, as the case may have implications for their own sales strategies. A favorable outcome for the plaintiffs could signal a shift in the way luxury brands conduct their business, and potentially open the floodgates for similar antitrust lawsuits. Conversely, a victory for Hermès may reaffirm the legality of a tying-based marketing and sales strategy focused on maintaining the exclusivity of a high-end product.
