Hermès Faces Class Action Suit Over Birkin Sales Practices

[baghagg]

There are plenty of attorneys and judges participating in the purchasing practices at Hermes to know there's merit to these assertions ...

 

[880]

I don’t remember first year civil procedure, and I never knew much about antitrust. But, it appears from other members that do know, who have opined on this thread,* that the complaint may simply present an inadequate claim on its face to survive pre trial. (No one is denying that regular clients who spend in non bag categories, aka prespend, are considered to have a good chance of getting bags; simply that this complaint isn’t a violation of antitrust)

* starting with post 15 by @Ready2wear
Who posted a link to a critique of legal merits re the Sherman act; Cartwright act; and applicable state statutes;
The post of @Angiebbb re tying ;
The post of @LaurenHermesLover , # 106
The posts of @haute okole and @ouicestmoi re legal sufficiency of this particular complaint ; etc. . .
And, of course many others upthread

 

[MonsoonBirkin]

how is it relevant whether Hermes stock is artificially or organically low? Even if Hermes slows down production on purpose, is that somehow illegal? Every company should have the right to increase or decrease their production. Is that not right? It’s THEIR business. It’s called strategy. Is it now unethical or illegal to have strategy?

I don't think anyone was claiming that quantity restriction, organically or artificially, is the legal issue. They can have 1 Birkin or a million and it doesn't fly afoul of the law. The distribution of that one item is what can have legal ramifications. Certain sales strategies are illegal (hence the tying allegations).

For me, I have always understood stock restriction of Bs and Ks to be a corporate business decision. Case studies have been built on the choice to restrict supply. Some people here state it is not a business decision or even if it is, it was started by the clients, it's culture, it's a genuine inability to ramp up... those are the views I'm examining (and thanks to everyone for responding, I appreciate the thoughtful conversation).

 

[Angiebbb]

This is just my speculation because I am not affiliated with Hermes or their attorneys. I am familiar with Corporate defense litigation and typically Hermes will have an insurer who will hire litigation counsel. Plaintiffs have no attorneys fees because their attorneys appear to be contingency fee attorneys and will only collect a fee when/if they win. The Plaintiffs attorneys collectively would take 33 1/3% of the award pre trial. If there is a judgment after trial commences, Plaintiffs attorneys are entitled to 40% of the judgement. Plaintiffs, the two individuals so far, are responsible for all costs such as filing fees, photo copying costs, depositions costs, etc. Costs can be substantial and anybody who joins this class should be aware that they will shoulder costs. If plaintiffs lose, the plaintiffs must pay the cost of litigation and Hermes’ attorneys fees.

Hermes insurers will pay for the defense of the case and money awarded to Plaintiffs if the claim and award are covered claims under the insurance. Insurers typically recommend settling a case for “nuisance value” just to get rid of a case because the cost of litigation is burdensome even when Plaintiffs have a meritless Complaint. In a Federal Action, I would not be surprised if Hermes’ insurer recommends settling the case for $50k just to make the case go away. I also would not be surprised, given the publicity, that Hermes would rather fight for a dismissal.

Edit to add, Hermes trade secrets are not discoverable and that will be a whole separate fight if Plaintiffs fight the trade secret issue. Business practices that are not trade secrets are discoverable.

In the US you generally do not pay the defendant’s fees in case you lose unless one is sanctioned for bad faith litigation and the judge order the plaintiff to cover the defendant’s fees. Also, generally a big company like Hermes would not rely on counsel provided by an insurance company to defend an antitrust case. If there was a judgement/settlement then they would request payment to the insurance if they have insurance that covers antitrust litigation. They probably have at least one big law firm that they would use for litigation, or they would search for top antitrust defense litigation counsel. Also, since if this is certified it would be a class action lawsuit, the percentage the plaintiffs’ lawyers could be around 25-35 percent, and it might arrive to 40 percent if a complex case. This would be a case with settlement in the millions if the class is certified - this would never settle for 50k. No one that joins this class will ever have to pay a dime. One might get a $100 after the settlement is shared by everyone who ever placed a wish for a B or K which was not fulfilled during a certain number of years, for example (not sure that would be the criteria). Courts will determine what would be considered a trade secret, and I do not think their sales practices would be considered one in this case. I am not an antitrust attorney, but I’ve read a lot of case law in class action suits. I think the most difficult in this case will be the certify the class. I think Hermes will fight to have it dismissed and not certified. I have not researched if the firm that filed the suit has had success in the past with class action suits. Just a note that according to the American Bar Association, “lawyers should not bring or defend a proceeding that is frivolous, which means it lacks a basis in law or fact, or is intended to harass, delay, or embarrass the opposition.”

I have not read the petition, but the lawyers can still amend it if defective.

In the end, it does not matter what anyone thinks (if frivolous, baseless, that there is no prespend etc.), it is up for the plaintiffs to prove their claims by preponderance of the evidence (more likely than not).

It doesn’t matter what SAs tell clients either - Hermes is a for profit company and it is clear to most people that unless you spend in other items, you will not get a B or K. There are threads everywhere talking about prespend, “Hermes game”. Some associates actually tell their clients that “they have to work on their profile” if they want a bag. Hermes had to put a sign on one of its stores outside the U.S. saying it does not engage in tying. In China it is well known that one can get into a store, they will tell you how much you have to spend in each category, and in one hour you are out with the bag you want. I do not think their wishlist in the U.S. or anywhere is a real wishlist, as was mentioned like Tesla that people will be contacted in the order they placed their wish for a bag. Being loyal and nice also do not guarantee you will get a bag. I do think many SAs do take advantage when they see someone that can spend, and they will not offer a bag until that person spends more and more. It is like a casino. Hermes is smart, they know they could get sued for tying, so there are the lucky ones that will get in without prespend and get a bag, but the vast majority will have to spend sometimes multiple times the value of the bag to be able to be offered one. If that is tying or not, is up to the court to decide.

Once I was in this dinner that had many VVIP clients from Chanel (I am not one, but one of my friends is one of the biggest Chanel clients in the world) and they were all discussing how they could not get a KP without prespend. One of them said: why do you think I have three full dinnerware sets from Hermes? Then she mentioned she got tired of having to spend in categories she wasn’t interested in, and now she buys resale. She could spend millions at Hermes if she wanted to? She could. But she does not like the sales practices, she thinks it is absurd.

 

[MonsoonBirkin]

@MonsoonBirkin, I've been thinking more about your question regarding whether Hermes artificially restricts its supply, and I wanted to add that in some ways, I think France and French culture restrict supply.

Just some further thoughts...

Thanks for this.

I understand where you're coming from that every French worker produces less because of the cultural habits. But then... why not shift a leather worker's schedule from ancillary leather goods to making more bags? I understand it takes a while to be competent enough to make a B or a K, but I think even the people who make bags are also assigned to create other things. And why not hire/train even more French workers (even more than they have already done with their new factories and leather school)? Given that these possibilities exist, can one still posit that the restriction is organic in nature? I hear those such as @Sevenatenine and @HeartHermes that ramping up takes a while, but does the company not have business forecasters who can assess the deficiency and rectify it if they chose to?

I agree there are many factors that restrict supply of Bs and Ks. But given these things, do you disagree in any way with my personal conclusion which is: 1) the main reason Hermes restricts supply it is to make money, and 2) while there are efforts to increase production, Hermes has no desire or intention to change a model built on scarcity of these bags?

 

[haute okole]

In the US you generally do not pay the defendant’s fees in case you lose unless one is sanctioned for bad faith litigation and the judge order the plaintiff to cover the defendant’s fees. Also, generally a big company like Hermes would not rely on counsel provided by an insurance company to defend an antitrust case. If there was a judgement/settlement then they would request payment to the insurance if they have insurance that covers antitrust litigation. They probably have at least one big law firm that they would use for litigation, or they would search for top antitrust defense litigation counsel. Also, since if this is certified it would be a class action lawsuit, the percentage the plaintiffs’ lawyers could be around 25-35 percent, and it might arrive to 40 percent if a complex case. This would be a case with settlement in the millions if the class is certified - this would never settle for 50k. No one that joins this class will ever have to pay a dime. One might get a $100 after the settlement is shared by everyone who ever placed a wish for a B or K which was not fulfilled during a certain number of years, for example (not sure that would be the criteria). Courts will determine what would be considered a trade secret, and I do not think their sales practices would be considered one in this case. I am not an antitrust attorney, but I’ve read a lot of case law in class action suits. I think the most difficult in this case will be the certify the class. I think Hermes will fight to have it dismissed and not certified. I have not researched if the firm that filed the suit has had success in the past with class action suits. Just a note that according to the American Bar Association, “lawyers should not bring or defend a proceeding that is frivolous, which means it lacks a basis in law or fact, or is intended to harass, delay, or embarrass the opposition.”

I have not read the petition, but the lawyers can still amend it if defective.

In the end, it does not matter what anyone thinks (if frivolous, baseless, that there is no prespend etc.), it is up for the plaintiffs to prove their claims by preponderance of the evidence (more likely than not).

It doesn’t matter what SAs tell clients either - Hermes is a for profit company and it is clear to most people that unless you spend in other items, you will not get a B or K. There are threads everywhere talking about prespend, “Hermes game”. Some associates actually tell their clients that “they have to work on their profile” if they want a bag. Hermes had to put a sign on one of its stores outside the U.S. saying it does not engage in tying. In China it is well known that one can get into a store, they will tell you how much you have to spend in each category, and in one hour you are out with the bag you want. I do not think their wishlist in the U.S. or anywhere is a real wishlist, as was mentioned like Tesla that people will be contacted in the order they placed their wish for a bag. Being loyal and nice also do not guarantee you will get a bag. I do think many SAs do take advantage when they see someone that can spend, and they will not offer a bag until that person spends more and more. It is like a casino. Hermes is smart, they know they could get sued for tying, so there are the lucky ones that will get in without prespend and get a bag, but the vast majority will have to spend sometimes multiple times the value of the bag to be able to be offered one. If that is tying or not, is up to the court to decide.

Once I was in this dinner that had many VVIP clients from Chanel (I am not one, but one of my friends is one of the biggest Chanel clients in the world) and they were all discussing how they could not get a KP without prespend. One of them said: why do you think I have three full dinnerware sets from Hermes? Then she mentioned she got tired of having to spend in categories she wasn’t interested in, and now she buys resale. She could spend millions at Hermes if she wanted to? She could. But she does not like the sales practices, she thinks it is absurd.

Interesting, your take on attorneys fees is not supported by the relevant case law in the US District Court in California. Doesn’t matter, because this case will not be heard in the Northern District of CA because NONE of the parties have any connection to that location. A San Francisco judge will bounce the complaint for lack of jurisdiction.

 

[Angiebbb]

Thanks for this.

I understand where you're coming from that every French worker produces less because of the cultural habits. But then... why not shift a leather worker's schedule from ancillary leather goods to making more bags? I understand it takes a while to be competent enough to make a B or a K, but I think even the people who make bags are also assigned to create other things. And why not hire/train even more French workers (even more than they have already done with their new factories and leather school)? Given that these possibilities exist, can one still posit that the restriction is organic in nature? I hear those such as @Sevenatenine and @HeartHermes that ramping up takes a while, but does the company not have business forecasters who can assess the deficiency and rectify it if they chose to?

I agree there are many factors that restrict supply of Bs and Ks. But given these things, do you disagree in any way with my personal conclusion which is: 1) the main reason Hermes restricts supply it is to make money, and 2) while there are efforts to increase production, Hermes has no desire or intention to change a model built on scarcity of these bags?

I agree with you. I think that their strategy is genius. It upsets a lot of people (myself included), but they have no desire to make B or K widely available. Their profits would probably go down significantly. Hermes is not a fashion house like LV, Chanel or Dior. Most people know Hermes because of B or K, bags, SLG, bracelets, scarves, belts and shoes. I think this new winter WRTW collection is spetacular, but except for their cashmere sweaters and coats, Hermes is not the brand most people would think of when one thinks fashionable or luxurious RTW. The same for their MRTW, dinnerware, glassware, furniture, jewelry. Generally is not the name that will come to a person’s mind when looking to buy in such categories. They needed to increase sales in these categories, so look at their numbers.
If Hermes stopped offering K or B tomorrow, or relied on a true wishlist system, do you think they would have the profits they are having now? I sincerely doubt it. They would still sell scarves, belts, bracelets, shoes, bags and SLGs, but I think they would lose a significant number of customers who are buying in other categories.

I think that US customers that are long-standing customers and VVIP clients will never have issues getting the bags they wish for. It is more problematic for clients that became clients in the U.S. in the past year or so. High prespend is mostly required for such clients, and I think it becomes muddy and people get upset because no one knows exactly what it is. It seems to be random and highly dependent if you are lucky with the SA you get - some people spend less than 10k and get a B25 and others spend 30k and get no QB. I am all for long-standing clients and VVIP getting the LE bags and all their wishes, because it is only fair. However, with the newer clients, it does not seem the system is fair, and a lot of people get disappointed, myself included. Maybe they might have a more fair system in the future because of this lawsuit? Who knows.

 

[Sevenatenine]

Thanks for this.

I understand where you're coming from that every French worker produces less because of the cultural habits. But then... why not shift a leather worker's schedule from ancillary leather goods to making more bags? I understand it takes a while to be competent enough to make a B or a K, but I think even the people who make bags are also assigned to create other things. And why not hire/train even more French workers (even more than they have already done with their new factories and leather school)? Given that these possibilities exist, can one still posit that the restriction is organic in nature? I hear those such as @Sevenatenine and @HeartHermes that ramping up takes a while, but does the company not have business forecasters who can assess the deficiency and rectify it if they chose to?

I agree there are many factors that restrict supply of Bs and Ks. But given these things, do you disagree in any way with my personal conclusion which is: 1) the main reason Hermes restricts supply it is to make money, and 2) while there are efforts to increase production, Hermes has no desire or intention to change a model built on scarcity of these bags?

I think it's possible that they're not able to hire more leather artisans because they don't have any capacity left in their leather facilities. I would think that there wouldn't be an unlimited number of artisans that can fit in the already existing facilities...? That would be my guess on why they can't hire more than the said 200+ a year (I also saw some article that they're working on opening more facilities to house more of them eventually)

I think that they're not pushing all the leather artisans towards bag bc they're already short on many of the leather goods. Maybe it's just my boutique but I can't ever find certain items at my boutique, like slgs, charms, shoes, etc. They're not strictly a bag house and other items need production capacity too.

To tie back our discussion on bk production into the lawsuit, maybe that's why they were upset, they don't understand French way of slow production/expansion vs American way of fast consumerism lol us Americans want things fast, and we want it now 😂

 

[Angiebbb]

I am not Fab Diva, trade secrets are not discoverable in the US. Corporate manuals, bylaws, operations etc are discoverable even if they prove embarrassing to Hermes and helpful to Plaintiffs.

Also, please note that these Plaintiffs are wacky because they are LA residents suing a corporation domiciled in France and their New York offices, but chose a San Francisco courthouse. I mean, hello! I am sure the San Francisco judge is going to eyeroll all over the place.

They can for antitrust cases. Federal courts can hear cases brought under the federal antitrust laws or cases involving state law claims between parties from different states or countries as long as there is diversity jurisdiction.

I believe for antitrust cases personal jurisdiction exists if the defendant has sufficient minimum contacts with the forum state, and the cause of action arises from those contacts. Hermes has stores in California.

In antitrust cases fee shifting exists - a defendant may be asked to pay for the attorneys’ fees of the plaintiffs even if plaintiff loses.

In most of the U.S., each party pays its own fees, called the “American Rule”. I understand you mentioned that in CA is different, but in antitrust I doubt any judge would order plaintiffs to pay for defendants’ fees. There are a couple of famous cases on fee shifting in antitrust cases, what is crazy.

 

[Angiebbb]

The system at least in the US is quite opaque. For every one of us who contribute our own experience to the prespend thread, there are many who say that they walk in and are offered the bag of their dreams.

Plus, a class action of those coerced to buy beautiful luxury items. Good luck with that

ETA: re the post above that mentioned watches, Luxury watch companies that limit production (not referring to a large scale like Rolex here) do limit the offer of their most coveted models to current clients of the house. But, it’s hardly considered coercion and certainly not tied to acquisition of product.

Try, for example, walking into Patek to ask for the olive green faced limited nautilus lol

Men would generally never think about filing a lawsuit like this, but they could 😅😅😅 Although I think with watches is different because they are not asking/expecting you to “build your profile.” If you buy other entry level watches, great, more chances of getting the better ones. Although I hear that a lot of ADs do require purchase of less desirable watches to offer more desirable ones.

 

[Veritybelle]

However, with the newer clients, it does not seem the system is fair, and a lot of people get disappointed, myself included. Maybe they might have a more fair system in the future because of this lawsuit? Who knows.

This sentiment is really understandable, waiting endlessly for a longed-for bag is annoying and disheartening, but I do wonder what exactly a "fair system" looks like, and it's not clear to me that "fairness" can ever equal "no disappointment." Disappointment is surely what's at the heart of the complaint.

For example, my understanding is that the lottery in Paris came about because of the problems with the previous approach that caused unreasonable queuing outside FSH and disruption to the public. Would the plaintiffs prefer to stand for 12 hours in a queue on the street? Would that be "fair"? The Paris lottery may be "fair" but that doesn't alleviate the frustration of the thousands of people who apply unsuccessfully every day, nor the disappointment of those lucky people who do receive an appointment but are still not offered the B or K they were hoping for. Sure, Hermès could ramp up production, but, quite apart from the reality that Hermès is under no obligation to do that, even if it did continue to expand its production capability at some point it would mean Hermès would be moving away from its heritage, which is fundamentally not especially scalable. It would no longer be Hermès and the coveted Birkin would no longer be so coveted.

 

[allanrvj]

One of the plaintiffs is male and based from his name, he seems to be of the ethnicity of the country where I'm originally from.

I'm getting secondhand embarrassment. lol

 

[Angiebbb]

This sentiment is really understandable, waiting endlessly for a longed-for bag is annoying and disheartening, but I do wonder what exactly a "fair system" looks like, and it's not clear to me that "fairness" can ever equal "no disappointment." Disappointment is surely what's at the heart of the complaint.

For example, my understanding is that the lottery in Paris came about because of the problems with the previous approach that caused unreasonable queuing outside FSH and disruption to the public. Would the plaintiffs prefer to stand for 12 hours in a queue on the street? Would that be "fair"? The Paris lottery may be "fair" but that doesn't alleviate the frustration of the thousands of people who apply unsuccessfully every day, nor the disappointment of those lucky people who do receive an appointment but are still not offered the B or K they were hoping for. Sure, Hermès could ramp up production, but, quite apart from the reality that Hermès is under no obligation to do that, even if it did continue to expand its production capability at some point it would mean Hermès would be moving away from its heritage, which is fundamentally not especially scalable. It would no longer be Hermès and the coveted Birkin would no longer be so coveted.

A fair system to me would be tying 😅😅, at least you know how much you are spending and what you are getting. I believe the FSH lottery is very different, because it is very hard but it doesn’t require any spending. The leather appointments also seem to be the luck of the draw unless you have some spending (until last year, this year it seems to be harder even with prespend). But I think if one goes to Paris a few times a year and goes a couple of days to FSH each time, this person will get an appointment at least a couple of times a year. I think the hardest at FSH these days is to get a leather specialist as your SA.

 

[Veritybelle]

I believe the FSH lottery is very different, because it is very hard but it doesn’t require any spending.

True, but my point is that the lottery (fair because random) doesn’t alleviate the disappointment of the majority. To me that’s the issue with this lawsuit - the law is not there to validate the plaintiffs’ disappointment; it is concerned with different matters entirely.

 

[MonsoonBirkin]

I think it's possible that they're not able to hire more leather artisans because they don't have any capacity left in their leather facilities.

So do you think Hermes identifies a shortage of Bs and Ks as a problem needing correction, and that's why it's ramping up production? If you hold that its scarcity issue is a bottleneck, does that mean you believe the company would shift to a model in which everyone willing to pay the price to buy a B or a K could obtain one, if only its facilities/production capability permitted it?

If not (because you recognize the economic value Hermes gains from its system of scarcity), then why ramp up production? Is it to lower the average general spending band required to obtain a bag? Is it then possible that Hermes recognizes that if people have to spend so much money to obtain a bag, they start losing customers and reducing the sales in its other metiers?