Hermès Faces Class Action Suit Over Birkin Sales Practices

[textilegirl]

I think this makes for a good thought exercise, for sure!

One reason I've heard elsewhere as to why the company doesn't do this is because it would cause a (likely precipitous) decline in the sale of their other items. I think they want to be perceived as competitive in things like RTW and jewelry as other brands, even though the resale value of BNIB items indicates they're not. So, the hope may be that those who only bought a sweater because it helped them get a Birkin may be converted to buying RTW because they find it's actually good quality and they like the design. Then maybe they'll buy RTW independent of its tie with a bag. Customer acquisition (even for its other departments) is expensive, and if it becomes free due to prespend, that's HUGE. The customer who buys from all metiers with no perception that it links to a bag is "the ideal customer" because it's what provides the most longevity to the brand. I don't fault the company for this, but it points to a small issue:

Most businesses have to innovate and design to keep competitive. Hermes runs the risk of using prespend as a crutch. Hermes acquired a customer for its jewelry but it needs to retain her too. It's very easy for a company to become complacent and tempting as well.

So yeah, I think they don't just triple the price of Bs and Ks is because it serves their overall business, esp for the other departments that could use some boosting. Plus it might allow them to experiment more than they would otherwise: "we're gonna branch out into watches! It's going to be difficult to make inroads but let's give our SAs a high commission on these items and a few extra SO offers for the season to emphasize focus on these new offerings." In essence, bags can provide a nice subsidy and reduce some of the risk. They can't do that if there's a set price on Bs and Ks. I believe this is also the reasoning for why it intentionally limits production, and even if it could wave a wand and have B/K supply meet demand, it would not do so.

It’s clear there’s dumping of ancillary product on the secondary market but it may not indicate that Hermes isn’t competitive in the RTW category. (I’m NOT sure they want to be competitive as evidenced in part by what they put out and who’s designing it.) The dumped products might rather indicate that some of the people who buy it have no intrinsic interest in it, it’s merely, as they see it, a means to an end. Thus it’s over- bought.

Hermes probably thinks it’s very competitive in the market they want to attract, and based on the RTW offerings I don’t think that market has changed very much, and certainly not in any radical, fashion-forward way.

As for your point about innovation, I think many would agree that some innovation is lacking. I certainly think it’s time for Pierre Hardy to find something else to do for example, but I do like some of the petit H items. I believe in reuse and recycling so I’m not deterred by the argument that they’re sweeping the shop floors and selling what’s in the dust bin to make money. I’ve seen how much silk doesn’t pass quality control and it would be heartbreaking were it simply destroyed as some companies have done. (Me, sipping on the Kool-aid )

As for boosting the other departments, before the BKC social media blow-up, I wonder if the balance between metiers was more in line, because the client who liked the bags would probably like the other stuff too. I’m thinking back to when ‘old lady bags’ like the bolide, and GHW were in vogue . The current focus on quiet luxury (what-ever, and is that even still a ‘good thing’?) has helped broaden the appeal but for sure not enough to balance out the bag-centric people.

I’m still thinking that a few more hefty price increases should do the trick. They can set the price wherever they want to. They’ll have plenty of funds for experimentation in other areas too.

ETA: I wanted to clarify my statement about Hermes’ goals in the RTW metier. I don’t think their RTW agenda is to be competitive with other fashion houses; I think they’ve been content to go their own ‘equestrian inspired, double-faced cashmere, silk twillaine way because that’s who their customer has been historically. Social media has put them on blast, and in some fashion circles they’ve been found wanting.

 

[aquatopaz]

It would not be hard to prove, just reading the agonizing threads here and on reddit, shows that it is an absolute known tactic.
Is it why the stock is tanking on the Bourse de Paris?
Anyways, this will be settled as the plaintiffs will just be given their choice of bags for little to no cost.

Doubtful as that would open the doors to many more similar lawsuits. Hermes has no choice but to fight it out.

 

[aquatopaz]

@stephbb9 , was that case thrown out?

Hermes ‘s insurance provider might demand that they settle, IDK

I always assumed that the reason why Hermes restricts product and has moved away from waiting lists must be at least in part, (perceived as ) better: for their bottom line; for the perceived value of their products; and for their shareholders. I’m not sure that being fair to walk ins, who want a popular bag and who will never be seen again, plays into Hermes corporate awareness at all.

At the end of the day, the clients Hermes wants will probably stick around: aspirational clients; some lifestyle clients; some loyal OG clients; and some high net worth.

This lawsuit might shore up the resale prices of some bags,* but there are a lot of mini K’s out there that no one is buying for 3X plus retail price. If someone bought birkin bait and gambled on making money reselling a bag, that’s on them.

*ETA: @acrowcounted , I had the vague notion that a lawsuit reinforcing the belief that these bags are difficult to purchase at retail might increase demand for reseller bags. (I don’t really see this lawsuit going anywhere, but I’m no expert). The softening demand for anncillary goods even at below retail, secondary market prices, might discourage those who don’t care for the items on their own merit.

Why would Hermes's insurance be able to demand anything? Insurance covers many things, but did Hermes purchase insurance to cover them from lawsuits for allegedly breaking the law? Of course, they didn't actually break the law. That's just the entitled crybabies' assertion.

 

[aquatopaz]

That's the thing: there are full videos where people analyse spend ratios and talk openly about how much they had to spend to get the bag, sometimes as per their SAs. Usually it's people writing-in... These can be sub-poena'd I guess?

So if enough people testify that it is happening, isn't it happening? MeToo anyone? Are hundreds of people all fuzzy and can't remember etc.?
Better can you be fuzzy and not remember etc. when you have arms' long posts online talking about your journey and your pre-spend? When you have pages and pages of posts and comments on the Purse Forum proving that you know exactly what it's all about? How you've been playing the game all along and understanding its rules? Can you come in court later and act fuzzy?

Maybe online posts are not receivable. But should the person behind the post receive an injuction to testify in court, can you come and deny everything you've written? All those years of Forum participation, you'll deny all of it in court?

Can Jane Doe, who goes online as Jane123 come in court and say "your honour, all these details are quite fuzzy now, you know it happened last year" and then, have posts from 2 months ago on the Purse Forum about how she's gunning for a Himalaya Birkin and is 2 to 1 into her pre-spend or whatever...
Again, not a lawyer but...dang, that would be rock&roll.

But he said / she said + testimony is the basis of a lot of lawsuits, most famously all lot of the MeToo cases.

Someone's perception of how they got a bag offer doesn't mean their perception was accurate. The one thing the plaintiffs can't produce is a widely acknowledged recipe for scoring a bag. The one major lament amongst those hoping for a B/K is that Hermes does NOT let them know what the "rules" of the "game" actually are. This is probably because there are no rules. Hermes merely offers their quota bags to their best customers and if they have extra, to those lucky enough to be in the right place at the right time or who love the brand as a whole and have a great rapport with their SA.

 

[aquatopaz]

I would assume Hermes corporate is lawyered up enough to not get caught but there is no way they don’t know about these practices. And if they *wanted* to discourage it, they could pay sales people commission on the quota bags and then there would be no more “quota bags”. But they don’t, so that tells us a lot.

All it tells you is that Hermes sees no reason to offer a commission on products that sell themselves and are impossible to keep in stock. Sounds reasonable to me.

 

[880]

they didn't actually break the law. That's just the entitled crybabies' assertion.

Agree with you all points. I’ve made it pretty clear that I think this case has no legal merits to stand on

When companies purchase insurance, it was my layman understanding that litigation defense is part and parcel of that. I think someone else responded that Hermes of course would have the clout and the resources to hire the best antitrust attys )regardless of the desires of any insurance provider. Whether or not Hs defense attys feel settlement is a wise course of action or not, IMO , doesn’t have any correlation with the merits of this case

 

[2cello]

Why would Hermes's insurance be able to demand anything? Insurance covers many things, but did Hermes purchase insurance to cover them from lawsuits for allegedly breaking the law? Of course, they didn't actually break the law. That's just the entitled crybabies' assertion.

There are usually clauses in commercial insurance contracts that give the insurance company leverage to financially “encourage” the insured to accept a settlement that the insurer seems reasonable. Lawyers can be more expensive than the plaintiff’s demand so insurance companies often seek early settlement whether the plaintiff’s allegations have merit or not. Hermes could choose to take the financial hit, however, if it didn’t want to. And it’s possible Hermes is self-insured and third party insurance wouldn’t be a factor anyway.

 

[Angiebbb]

It’s clear there’s dumping of ancillary product on the secondary market but it may not indicate that Hermes isn’t competitive in the RTW category. (I’m NOT sure they want to be competitive as evidenced in part by what they put out and who’s designing it.) The dumped products might rather indicate that some of the people who buy it have no intrinsic interest in it, it’s merely, as they see it, a means to an end. Thus it’s over- bought.

Hermes probably thinks it’s very competitive in the market they want to attract, and based on the RTW offerings I don’t think that market has changed very much, and certainly not in any radical, fashion-forward way.

As for your point about innovation, I think many would agree that some innovation is lacking. I certainly think it’s time for Pierre Hardy to find something else to do for example, but I do like some of the petit H items. I believe in reuse and recycling so I’m not deterred by the argument that they’re sweeping the shop floors and selling what’s in the dust bin to make money. I’ve seen how much silk doesn’t pass quality control and it would be heartbreaking were it simply destroyed as some companies have done. (Me, sipping on the Kool-aid )

As for boosting the other departments, before the BKC social media blow-up, I wonder if the balance between metiers was more in line, because the client who liked the bags would probably like the other stuff too. I’m thinking back to when ‘old lady bags’ like the bolide, and GHW were in vogue . The current focus on quiet luxury (what-ever, and is that even still a ‘good thing’?) has helped broaden the appeal but for sure not enough to balance out the bag-centric people.

I’m still thinking that a few more hefty price increases should do the trick. They can set the price wherever they want to. They’ll have plenty of funds for experimentation in other areas too.

ETA: I wanted to clarify my statement about Hermes’ goals in the RTW metier. I don’t think their RTW agenda is to be competitive with other fashion houses; I think they’ve been content to go their own ‘equestrian inspired, double-faced cashmere, silk twillaine way because that’s who their customer has been historically. Social media has put them on blast, and in some fashion circles they’ve been found wanting.

They might have a shot at RTW being competitive if their collections from now on look like the FW collection that will arrive in stores this summer which looks spectacular.

I believe if they were happy with the popularity their RTW has now they wouldn’t be “tying”😆Even Loro Piana and Brunello are innovating on their collections, they needed to do something new. They needed to move away from that “old lady style.”

I think the small Bolide is super cute.

Even if they increase prices like Chanel (or more), if their bags were freely available for purchase, it still would not arrive at the numbers they have now. Ask any reputable jeweler what they think of Hermes’ jewelry. They think the prices are astronomical for what it is. How many people you know that have Hermes furniture? Now people are buying pool tables, rowing machines to get LE bags. I was in a store in Europe once and the SAs were making fun that this couple was coming in to buy a rowing machine. “Who would buy that?” They opened the store earlier the next day just for them, it was 50,000 euros.

It is really incredible two bags would have that power.

 

[Angiebbb]

Why would Hermes's insurance be able to demand anything? Insurance covers many things, but did Hermes purchase insurance to cover them from lawsuits for allegedly breaking the law? Of course, they didn't actually break the law. That's just the entitled crybabies' assertion.

It is for a court of law to decide if they broke the law or not, if the class will be certified etc. If the attorneys didn’t think they had a shot at getting a settlement in this case they would not have filed it, they could be sanctioned for bad faith litigation. It a rule from the American Bar Association.

Rule 3.1: Meritorious Claims & Contentions​

A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law.

I have not read the entire complaint, but even if it looks bad, they can amend it. The most difficult part is to certify the class.

There is insurance for litigation. It might cover cases like this or not, depending on the policy they have. There has been a lot of litigation if antitrust disputes are covered under a certain policy.

Insurance Coverage for Antitrust Disputes

 

[Angiebbb]

Interesting....I didn't know there were classes of tying. Thanks for explaining.

I just still don't see where its wrong for a company to have even prespend as a preliminary requirement for more limited and coveted item. I haven't really kept up with the legal status of things, but is it still legal to have exclusive members only clubs that withhold services to the general public if they don't pay their minimum fee? Maybe I'm too much of a reductionist but I feel like its very similar vibes? Of course we can argue the nuances where they are dissimilar, again my assertion that maybe I'm too much of a reductionist.

Or is the argument that people have paid the fee but aren't getting the tee times they wanted?

Private clubs like Soho House, Casa Cipriani etc.? Those exist and some are thriving. Let’s use Soho House as an example: it is a private club set up by creatives for creatives. If you work in that field you will most likely be able to join within a year of applying in a competitive market. If you are in other fields you might become a member if a board likes your profile. Once you are in, everyone pays the same fee. Soho House is a bit different because many people were grandfathered with the fees when they first joined. There are many sports clubs, countries clubs etc., but those are all social clubs with a stated mission and they can admit whomever they see fit as long as they are not discriminating based on race, creed or religious grounds. There is litigation for discrimination in country clubs.
It is a very different case, they are not taking your money for other services and putting you on a wishlist that you might get a membership “if you build your profile.” They generally don’t take any money for application until you become a member.

 

[haute okole]

It is for a court of law to decide if they broke the law or not, if the class will be certified etc. If the attorneys didn’t think they had a shot at getting a settlement in this case they would not have filed it, they could be sanctioned for bad faith litigation. It a rule from the American Bar Association.

Rule 3.1: Meritorious Claims & Contentions​

A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law.

I have not read the entire complaint, but even if it looks bad, they can amend it. The most difficult part is to certify the class.

There is insurance for litigation. It might cover cases like this or not, depending on the policy they have. There has been a lot of litigation if antitrust disputes are covered under a certain policy.

Insurance Coverage for Antitrust Disputes

Honestly, anyone who has spent anytime in a courtroom sadly knows that many unscrupulous attorneys and their equally shady clients good give two craps about this when defendants settle for nuisance value just to shoo the damn gnats away. With all due respect, the article you quoted is irrelevant to the case at hand.

 

[sammidutchgirl]

This is what they tell clients day in and day out but their practices say otherwise. Does H really HAVE to sell bags this way? No it can choose a different route like it did before with wait lists. I get the demand is higher now but they’ve also invested in more artisans. But let’s be real too. This whole process of exclusivity is manufactured by H. If people want to keep drinking the H koolaid they can but more people are wisening up.

It’s one thing for a brand to favor clients for their loyalty and of course we see that happen all the time. You’re a prime example. But the reality is that there are plenty of long time clients and newbies who are told time and time again they need to spend and spend more.

If the bags lose their prestige because of the loss of prespend then perhaps the bags aren’t so prestigious to begin with. Given the brand heritage they will be fine. If they collapse due the elimination of their manufactured abusive games then perhaps they don’t deserve to be held in such high esteem after all.

Literally the sanest comment in this entire thread.

 

[sammidutchgirl]

The Patek case sounds very different from this H suit. But the entitlement factor is interesting in both situations, isn’t it. It’s the Veruca Salt effect!

It’s not entitlement if a person asks a sales associate how they can get an item and then they are told directly they have to spend X amount of money to get that item. That is not entitlement. Everyone is so used to being abused by these luxury brands all for status. If the exact same design and quality was offered by Coach, you wouldn’t want it. It’s quite obvious it’s not the “design” that people seems to really care about.

 

[textilegirl]

They might have a shot at RTW being competitive if their collections from now on look like the FW collection that will arrive in stores this summer which looks spectacular.

I believe if they were happy with the popularity their RTW has now they wouldn’t be “tying”😆Even Loro Piana and Brunello are innovating on their collections, they needed to do something new. They needed to move away from that “old lady style.”

I think the small Bolide is super cute.

Even if they increase prices like Chanel (or more), if their bags were freely available for purchase, it still would not arrive at the numbers they have now. Ask any reputable jeweler what they think of Hermes’ jewelry. They think the prices are astronomical for what it is. How many people you know that have Hermes furniture? Now people are buying pool tables, rowing machines to get LE bags. I was in a store in Europe once and the SAs were making fun that this couple was coming in to buy a rowing machine. “Who would buy that?” They opened the store earlier the next day just for them, it was 50,000 euros.

It is really incredible two bags would have that power.

The bags only have the power that people give them. What I think might still be lost in all of this is that no one is forced to buy either the bag or whatever is being allegedly pushed as ancillary to the bag. There’s no entitlement to a bag; it’s not a regulated monopoly product. Hermes is a private commercial enterprise entitled to charge whatever price it chooses for its products and to sell them to whomever they wish. They’re can lie about what’s available for purchase or suggest a look at offerings that may be of no interest. They may engage in ‘milking the cow’ or stringing someone along with repeated purchases and no bag in sight. Disappointing, maybe unpleasant to experience or even reprehensible but there’s always the choice to buy something or somewhere else. It remains to be seen whether the plaintiffs can make a case here. So far I’m still on Team Skeptical.

 

[Angiebbb]

The bags only have the power that people give them. What I think might still be lost in all of this is that no one is forced to buy either the bag or whatever is being allegedly pushed as ancillary to the bag. There’s no entitlement to a bag; it’s not a regulated monopoly product. Hermes is a private commercial enterprise entitled to charge whatever price it chooses for its products and to sell them to whomever they wish. They’re can lie about what’s available for purchase or suggest a look at offerings that may be of no interest. They may engage in ‘milking the cow’ or stringing someone along with repeated purchases and no bag in sight. Disappointing, maybe unpleasant to experience or even reprehensible but there’s always the choice to buy something or somewhere else. It remains to be seen whether the plaintiffs can make a case here. So far I’m still on Team Skeptical.

There would be no antitrust, false advertising, unfair and deceptive practice lawsuits if businesses could do whatever they wanted.

A court in the U.S. approved a class action settlement of $13 million for deceptive advertising by Red Bull, and there was great focus on the slogan “Red Bull gives you wings.” I particularly think Red Bull is more effective than coffee, but they had to settle. Red Bull certainly wouldn’t give anyone wings.

What will happen to the case is up to the court. I don’t think it is a slam dunk case, but I also don’t think it is completely baseless. I only saw one article that had some views of an attorney specialized in antitrust; I haven’t seen one talking about class action lawsuits in an antitrust matter. I am particularly interested in those views to learn.