Hermès Faces Class Action Suit Over Birkin Sales Practices

[Capitaliste]

The fact that after 20 years you still have to prove loyalty demonstrate that it is not about loyalty but about milking you pre-spend for each quota bag. Loyalty is not something you should have to re-establish all the time. Once you've been deemed as loyal, you are loyal, unless you do something disloyal. Constantly proving your loyalty is about squeezing you $$.

I love this comment. I am glad that there is someone who can critically view the reality.

They would never sell B or K openly if there was unlimited supply, because they probably wouldn’t be selling as much jewelry, plates, baby blankets, lamps. Look at their financial results. Their numbers would go significantly down.

I also love this comment. Hermes is known for its leather bags and nothing else. The "pre-spend debate" itself proves that items from all other metiers do not sell themselves at Hermes.

 

[Veritybelle]

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.

This.

 

[addiCCted]

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’m very concerned about the state of our legal system if literally they won 13million bc it didn’t give people wings.

 

[Angiebbb]

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.

Do I say anywhere the case has anything to do with this case? I just mention that there would be no antitrust, false advertisement etc. cases if a business could do whatever it wants. That was a false advertising case.

Was that case baseless? Maybe. But there was a $13 million settlement. The U.S. is the country of the lawsuits. People sue for anything.

 

[Veritybelle]

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.

I'm not sure that entitlement and misrepresentation are necessarily related or not (contrast misrepresentation and the creation of a reasonable expectation), and it remains to be seen whether that sort of misrepresentation can be established (ie to the requisite standard of proof within the context of the suit).

There are examples of heritage brands being raised from the dead, so to speak, by a renewed commitment to quality, or a fresh approach to design (Gucci is the most obvious I suppose but there are others), so I wouldn't necessarily agree that if the same design and quality were offered by Coach, nobody would want it. I doubt that will happen though, because I don't see other brands being able to create what Hermès has created (ie quality, history, design, craftsmanship etc do combine to create something that is bigger than the sum of its parts and that sets Hermès apart from other brands IMO). I don't think there should be an assumption that every client is blindly chasing these bags only because of the hype. Plenty of longstanding customers actually do love the bags, appreciate the heritage and specifically value their quality.

 

[Veritybelle]

.

 

[MonsoonBirkin]

The big question here is how much of the unmet demand is genuine.

I'm of the belief all the unmet demand is created as part of their business model. But I think they also keep very, very close tabs on how much production is needed to satisfy their overarching business goals. Like someone else said, that could be for inroads into new markets. I think it's also to prevent backlash and resentment from new and long-standing customers alike, which at some point translates into customers taking their money elsewhere--after all, customers have a limit on how much they're willing to spend for a B/K before they walk. So I think they're ramping up more for that reason, rather than to give a B or K to anyone who walks through the door.

One thing I also wonder is how Hermes measures that gap and between its genuine demand for its products, and those bought with expectation of a bag. I wonder if the company does track the resale market and then say, "on average people buy our bracelets for 30% off our current MSRP." I at first thought they might work to close this gap... but then I'm like, "nah, they may not see that as a deficiency but rather, 'woohoo, we can get that extra premium!'" Maybe it's a bit of both. That's a big vulnerability.

I'm also trying to figure out if these practices can hurt luxury consumers shopping outside Hermes: Do other luxury companies loosely peg their own products to those from other brands? We know Chanel raised the price of their bags and H's bag prices were brought up as justification. But does Chanel also look at things like costume jewelry and keep it somewhat in line with other brands? And if they do... then doesn't Hermes keeping an artificially higher price on their items due to prespend negatively affect the consumer for all luxury costume jewelry?

And what about other brands that are like, "I found that the demand for my bracelets is at $400, which is just $200 shy of being competitive with other luxury brands." If Hermes's prices are moving the market rate artificially higher due to pre-spend, then are other businesses losing out on financial benefits conferred for being a luxury item on par with other brands?

These examples have tons of built-in assumptions that would either be difficult/impossible to prove, and could be flat-out wrong (for ex, I don't know if Hermes prices on their other items set the benchmark for other companies)... but def had me thinking about ramifications of H practices outside just its own buyers/company.

 

[Capitaliste]

I wonder if the company does track the resale market and then say, "on average people buy our bracelets for 30% off our current MSRP."

The answer is yes. Hermes can also use the economic cycle as well. Earlier this year, there has been a rumor of "1 QB per year [for this year] for established clients" in NYC. Hermes can intentionally reduce the supplies of BKs (i.e., making them rare) and this could be correlated with the dropping prices in the resale market (i.e., BKs are considered no longer exclusive bags) and the economic cycle in general.

Informed clients also make a decision based on the resale prices. Let's say, B30 costs $13,000 at the Hermes boutique, and the same B30 (BNIB) costs $24,000 in the resale market. The clients will need to consider either (1) $11,000 (=$24,000-$13,000) worth of buying non-leather items (e.g., RTW, shoes, etc.) and get the B30 from the Hermes boutique or (2) go get it from the resale market. The clients will of course weigh the pros and cons (e.g., stress, time/efforts, collecting more and more BKs, etc.) of these two routes.

 

[MonsoonBirkin]

Someone's perception of how they got a bag offer doesn't mean their perception was accurate.

Let's take @sosauce 's experience of point-blank being told if she spent money on a bracelet she didn't really want, she could get a bag. Is that an inaccurate perception that Hermes is tying its bags to the sale of other products?

The one thing the plaintiffs can't produce is a widely acknowledged recipe for scoring a bag.

How many customers with such similar stories would it take to convince you that the recipe is "spend enough money on other products and you'll get a bag?" Or do you find such experience to be insufficient evidence? And if you do, what evidence would it take to convince you that Hermes is making the sale of bags contingent on other things?

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.

You're right that there are no rules, which is part of the problem, here: shouldn't companies be required to disclose the cost of their items? If one cannot, in general, get a bag without buying other things and it's unknown how much spend is required... then doesn't that mean the actual cost of a bag isn't transparent? Isn't that a basic rule all companies must follow?

Hermes merely offers their quota bags to their best customers

How do you define "best customer?"

Honest questions, these queries aren't meant as an attack.

 

[aquatopaz]

Hermes will sooner settle with these two yahoos and pull out of all business in the United States before handing over these records to anyone (which would do nothing to prove “tying” anyway. The fact that shoppers at a store buy things, and some even buy bags, will be an uncontested fact as it’s not exactly newsbreakin

Interesting thread to read.
It would be interesting for the plaintiffs' attorneys to conduct a discovery on whether the birkin supply is truly limited and scarce as they made most of us to believe
For that reason, if the plaintiffs' attorneys can successfully get the judge to certify the class in this class action lawsuit, I think the case will be settled for $$$

There are rules governing discovery, so plaintiffs can't "fish". There are "trade secrets" which will bar plaintiffs from some information. There are also "privacy" expectations customers enjoy, which would bar plaintiffs from digging into who has been offered a bag. Hermes really has no choice but to fight this, and ask for records to be sealed. Just as paying ransoms incentivize crime, settling this case would incentivize more suits. They will first fight to have the case thrown out. They will drown the plaintiffs in motions. They will fight every discovery.

 

[aquatopaz]

Let's take @sosauce 's experience of point-blank being told if she spent money on a bracelet she didn't really want, she could get a bag. Is that an inaccurate perception that Hermes is tying its bags to the sale of other products?



How many customers with such similar stories would it take to convince you that the recipe is "spend enough money on other products and you'll get a bag?" Or do you find such experience to be insufficient evidence? And if you do, what evidence would it take to convince you that Hermes is making the sale of bags contingent on other things?



You're right that there are no rules, which is part of the problem, here: shouldn't companies be required to disclose the cost of their items? If one cannot, in general, get a bag without buying other things and it's unknown how much spend is required... then doesn't that mean the actual cost of a bag isn't transparent? Isn't that a basic rule all companies must follow?



How do you define "best customer?"

Honest questions, these queries aren't meant as an attack.

1) That customer better have great verbatim memory, because verbiage matters. Without it, it is just a customer's understanding. If an SA said it would definitely improve their chances, that's not the same. Not to mention that SA could have violated policy for the commission. That still isn't coercion, because the customer chose to purchase the bracelet. Common sense says they wanted that bracelet, otherwise they'd have to be certifiable to purchase it.
2) No number of customers with similar stories would convince me as long as there are customers with different stories. You would need to prove a direct correlation of $ spent to price of Birkin, with ratios matching across the spectrum of customers. If each "journey" is different, that means all their experiences are different. That's not really a sign of tying.
3) Best customer status probably includes those that spend ridiculous amounts without batting an eye, customers who regularly buy something, customers who obviously appreciate the brands offerings, even if they don't purchase everything, and customers who aren't entitled and rude,( though these are probably not the high rollers of customers). Entitled people with an attitude who DON'T spend buckets of $$$ are probably on the bottom of the list. I can only presume the latter is the category of the plaintiffs.

 

[aquatopaz]

Imagine if the appointed judge actually one of H client and her wishlist has not been fullfill despite spending 2:1 or more… 🤭

That judge would have to recuse under ethics rules.

 

[aquatopaz]

There lies the error.

People keep calling Birkins "limited edition", "hard to source", "precious", "scarce" (or whatever synonym you choose to use)--but they are not. And people keep comparing the details of the lawsuit with cheese or restaurant reservations, etc.

Special treatment or reserving things for top-tier or VIP customers is different from tying (which is what the lawsuit alleges) and/or requiring pre-spend with the promise of receiving an associated good.

If we can remember that, and stop continuously trying to diminish the merits of the plaintiffs' case or mock the plaintiffs & the attorneys' small grammatical error, we can have a more intellectual conversation.

They are scarce relative to the demand. If they weren't, they wouldn't be going for a premium on 3rd party sites. Hermes isn't DeBeers, locking bags in a vault for ever.

 

[aquatopaz]

I agree with 99% of this. I do corporate defense litigation. I think the one caveat I would say, is that generally trade secrets are not discoverable. Hermes has to establish whatever information it is seeking to protect is a trade secret, i.e. customer information. Once that burden is met, it shifts to the plaintiff to establish that the trade secret is necessary for the fair adjudication of the claims.

Customer information and history falls under privacy laws, as customers purchasing goods at Hermes have a reasonable expectation of privacy.

 

[MonsoonBirkin]

1) That customer better have great verbatim memory, because verbiage matters.

Ok. So if I'm understanding you, being explicit is important. This I'm not sure matters when the actions and the outcomes are the same. Let's say you have one customer who was told to buy x and they'll get a bag. The outcome is that the customer spends on the goods, and walks out with a bag. Then you have another customer who was told by their SA they need to "be a loyal customer and get to know the brand," so they buy a bunch of other objects. The outcome, even without the verbalization, is the same as the first customer: they spend on the goods, and walk out with a bag. Why, then, do the disparate experiences matter if the result of all of them points to a same outcome for both consumer and corporation? Both customers know to buy more if they want a bag. Hermes SAs know customers need to buy things for their bag nominations to get approved. Do the means have to be identical every time if the end result (arguably, tying) is what transpires?

Without it, it is just a customer's understanding. If an SA said it would definitely improve their chances, that's not the same. 2) No number of customers with similar stories would convince me as long as there are customers with different stories. You would need to prove a direct correlation of $ spent to price of Birkin, with ratios matching across the spectrum of customers. If each "journey" is different, that means all their experiences are different. That's not really a sign of tying.

And what you're also saying here, correct me if I'm wrong, is that as long as there is no set rule about the exact dollar amount, it is permissible to refer to spend as improving one's probability ("definitely improve").

Can't probabilities form into generally understood rules, assumptions, and standards, though? For example, if there's a less than 1% chance of dying in a plane crash, the repeated events of flying successfully deem planes as safe to fly. If a weedkiller reduces infestation by 2/3rds, it's deemed as a good product. These are all just technically patterns. Yet products are certified and regulated all the time based on these single data points that when taken as a whole, formulate a trend. I think it can be argued that when the experiences of Hermes customers are taken as a whole, it reveals the overarching trend of "spend money get bag."

Not to mention that SA could have violated policy for the commission. That still isn't coercion, because the customer chose to purchase the bracelet.

From my understanding, coercion as a legal definition means requiring the consumer to buy one product as a condition for buying another. Choosing to buy the product, even voluntarily, can still be coercion if it's a requirement to buy another item. But I'm happy to be corrected if my understanding of the law is wrong here.

3) Best customer status probably includes those that spend ridiculous amounts without batting an eye

So we agree that spending is at the heart of being deemed a "good" customer. Why do you perceive it as acceptable corporate practice to instruct customers to "be loyal" (ie, spend), but you denounce the company for explicitly instruct customers to spend to obtain a bag? To be clear I know that legally there's all the difference in the world, specifically from an evidentiary standpoint. But a racist who uses dogwhistles isn't any less racist because they use codewords. Hermes (which I'm not saying is as bad as a racist, y'all, don't come for me) is not any less mercenary for using terms like "be loyal to the brand" when they're still saying "spend more." And arguably, if I can point to enough times that they've explicitly instructed customers to prespend, it shows an increased probability that their corporate buzz words are a more genteel way of instructing the same thing as what they're outright banned from saying.