For generations, the French fashion house Hermès has been a powerhouse in all areas of the luxury accessories market. Still, it is their handbags that have helped sustain the brand’s level of status and success. Their most exclusive products, such as the Kelly, Birkin, or Constance bags, are so exclusive that they usually sell at a retail price above $10,000 and can easily resell for over $50,000. This price comes primarily from the bags’ hyper exclusivity. It is incredibly difficult to purchase a Birkin bag directly from the brand. Just a few are made each year, and are only sold in person at a small number of retail locations worldwide, where particular customers are offered the opportunity to purchase the bag in private rooms, according to the lawsuit.
Plaintiffs in California have filed a class action lawsuit against the fashion house, claiming that the brand’s business practices violate U.S. antitrust laws. The suit alleges the brand illegally offers Birkin bags to only customers who have a sufficient relationship or ‘purchase profile’ with the brand. Moreover, the suit claims Hermès tied the sale of Birkin bags to their ancillary products — such as belts, scarves and clothes — to coerce consumers into buying more items, even with knowledge that customers ‘will not get a Birkin bag,’ the suit stated.
The lawsuit alleges that Hermès is engaged in a ‘tying’ scheme, using its control over the luxury handbag market — the ‘tying product’ — to increase the sales of its other products — the ‘tied products’. The suit claims the iconic status of Hermès handbags reduces any relevant product market or competition, and that Birkin bags should be considered an individual market, or a ‘single-brand monopoly.’ The suit offers other examples of iconic fashion items that should be considered their own market spaces, such as Air Jordan and the Love bracelet. Hermès’ tying market is ‘any products sold at Hermès’ branded retail boutiques except for any Birkin, Kelly or Constance branded handbag,’ the suit stated. Such antitrust tying claims assert that success in the ancillary markets is due to the ‘coercion’ of customers who only wanted the tying product, in this case, the handbags.
Hermès asked the judge to dismiss the claim, calling it ‘far-fetched.’ The brand claimed it required no previous purchases for customers to buy a Birkin and that, even if the claims were true, such retail practices would not be illegal. The brand also claims Hermès handbags experience more than sufficient market competition and should not be considered a single-brand market, especially considering how rarely courts view products as independent market spaces. It claims the luxury handbag market is incredibly competitive and that ‘antitrust laws do not punish companies for creating better, more desirable products.’ The filing states that grouping all non-handbag Hermès products in the tied market is an artificial market definition, primarily because the plaintiffs’ definition ‘does not appear to reach beyond Hermès—even though Hermès faces clear competition from different sellers on the wide range of products it sells.’
Even if plaintiffs could prove the existence of the tying market, it would be complicated to prove that it leads to anticompetitive harm in the tied market.
The U.S. district judge overseeing the case, former antitrust lawyer James Donato, has been skeptical of the consumer lawsuit. He said the production and distribution of Hermès handbags are independent choices for the brand. He added, ‘The fact that a lot of your clients may not be able to get a Birkin bag is not a Hermès antitrust problem.’
Image by Wen-Cheng Li via Wikimedia Commons