On March 19, 2024, Tina Cavalleri and Mark Glinoga sued the luxury design house Hermès for violations of federal antitrust and state unfair competition law. The lawsuit alleges that Hermès unlawfully restricts customers by permitting only those with a “sufficient purchase history” to buy its renowned Birkin handbags. The plaintiffs allege that the company’s sales associates pressure customers into purchasing additional Hermès products like scarves, shoes, and jewelry in order to have an opportunity at acquiring the coveted Birkin. The lawsuit is seeking class action status on behalf of thousands of American consumers who have either purchased Hermès goods or were compelled to buy those goods to acquire a Birkin.
But it’s just a handbag?
Established in 1837, Hermès is a French luxury design house specializing in leather goods, accessories, and ready-to-wear. Once known for its equestrian accessories, Hermès is now known as one of the most exclusive and luxurious fashion houses in the world, with its most famed bag–the Birkin–becoming one of the most sought-after status symbols in the world. Birkin handbags, crafted meticulously in limited quantities, are priced between $12,000 and $450,000 in private sales. The resale market for Hermès bags is also flourishing, with prices equal to or even higher than their initial retail value, making Hermès handbags, especially Birkin, an investment piece. Hermès carefully regulates the manufacturing and distribution of Birkin bags, so they are typically made to order with waiting lists that can extend over multiple years. The resulting scarcity and exclusivity fuel the desirability and lofty price of the iconic Birkin bag.
The lawsuit states that Cavalleri, who has frequently shopped at Hermès boutiques, spent tens of thousands of dollars on Hermès products before acquiring a Birkin. However, when Cavalleri later inquired about purchasing an additional Birkin, she was informed that the bags were reserved for customers who regularly support the business. Recognizing she would need to spend substantially more to obtain another Birkin, Cavalleri ultimately did not buy a second bag. Likewise, Glinoga intended to buy a Birkin handbag in 2023, but a sales associate told him that purchasing additional items was necessary for a chance at getting a Birkin. The lawsuit stated that Glinoga tried “multiple times to buy a Birkin bag yet was informed each time that he must buy other products and accessories first.”
Antitrust Background
Under Section 2 of the Sherman Antitrust Act, “tying” arises when a company offers a product for sale, but with the requirement that the buyer also acquires a separate, or “tied” product, or at the very least commits to not purchasing that product from any other supplier. Under California’s Cartwright Act, tying arrangements are specifically prohibited. According to Section 2 of the Sherman Act and Section 16727 of the Cartwright Act, the plaintiffs must first prove that the Birkin bag has market/ monopoly power, and second, plaintiffs must prove that the tied market, encompassing items such as shoes, scarves and others required for the purchase of a Birkin handbag, causes harm to competition. In essence, it must be proven that the products in this tied market would cause harm to competitors in those marketplaces as well.
Who will prevail?
Although securing a Birkin handbag is notoriously burdensome, it doesn’t seem that the plaintiffs will prevail in their antitrust suit. It will be difficult for plaintiffs to prove that the Birkin handbag has a monopoly because Hermès is selling their own trademarked product (the Birkin handbag), and they do not have a monopoly on luxury or designer handbags. Chanel, Dior, and Saint Laurent, all of which are French luxury houses, sell exclusive and high-end handbags. Aside from the Birkin, Hermès also sells other highly sought-after handbags such as the Kelly, Constance, and the Evelyne. There is also the option of the second-hand market, making the Birkin available outside of an Hermès boutique. Being a Birkin handbag alone is not distinct enough to hold monopoly power. Just like a Honda Civic; Honda is the only company that makes and sells Civics, but that does not mean there is a monopoly on Civics, Honda makes and sells other cars too. Moreover, there are plenty of other car companies, such as Toyota or Chevrolet, that sell other affordable and reliable cars.
It is also very likely that the plaintiffs will not be able to prove that the tied products (shoes, belts, and jewelry that customers buy to become qualified for a Birkin) will harm competition in those markets. While Hermès’ business strategy is to make customers spend a certain amount of money to become eligible for a Birkin, this does not harm competition, i.e. other jewelry stores, or belt makers. No customer is absolutely forced to buy jewelry or belts from Hermès; they do so because they want a Birkin. Although this may be inconvenient and expensive for customers, those same customers can and will go to other stores to buy belts and jewelry instead. These other stores may even by next to or across the street from an Hermès boutique. It’s improbable that jewelry stores and belt makers have suffered harm as a result of the purchasing of the tied Hermès products.
While this lawsuit will have a substantial impact on the plaintiffs and future Hermès shoppers, it will also have a profound impact on the fashion world. If Hermès’ business practices are not found to be violations of antitrust law, we may see a growth in this type of business strategy from other high-end luxury designers; some of which have already begun a similar practice. We also might see the Birkin itself become even more limited in quantity. For those who are hopeful to buy a Birkin in the future, perhaps it’s time to set your sights on another handbag.
Sources:
Cyrus Moulton, Lawsuit against Birkin bag maker Hermes is ‘a nonstarter’ in antitrust law, Northeastern expert says, NORTHEASTERN GLOBAL NEWS (Apr. 2, 2024).
Emma Bowman, Hermes accused of antitrust violations by customers who tried to buy a Birkin bag, NPR (Mar. 21, 2024, 6:47 PM).
Herb Scribner & Rachel Tashjian, ‘Hermes has it in the bag’: Legal experts weigh Birkin lawsuit, WASH. POST (Mar. 21, 2024, 11:42 AM).
Julie Zerbo, Does an Antitrust Case Over Hermes Birkin Bags Have Legs? THE FASHION LAW (Mar. 22, 2024).
Mike Scarcella, Hermes sued in antitrust class action over Birkin bag sale, REUTERS (Mar. 20, 2024, 11:27 AM).
Saman Shafiq, Hermes Birkin accused of exploiting customers in class-action lawsuit filed in California, USA TODAY(Mar. 21, 2024, 2:28 PM).