Hermès Faces Class Action Suit Over Birkin Sales Practices
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Is the assumption that bar is difficult to meet here or will in any way be a factor to this lawsuit? Also I don't think it always does require going through an int'l treaty. My understanding is that if in a federal court, alternative service can be considered (ie, no Hague Convention or Letters of Rogatory required). Service to its NY corporation could suffice and the court could easily grant that. Any CA lawyer want to weigh in? I'd defer to them rather than my own interpretations. Anyway, the cool thing is, there should be published proof of filing in the courts so maybe that'll show up to discuss further. Fun aside: I was amused to read the Ninth Circuit actually upheld email as proper service to shady foreigners trying to evade law.
Also need to ninja edit to state the obvious for this comment and all every other word I've said on this topic: THIS AIN'T LEGAL ADVICE. I'M NOT THEIR LAWYER. I'M NOT YOUR LAWYER.
I may not even be a lawyer! And for the sake of me not wanting to mislead anyone, assume I am not but that I'm someone sharing general observations with the rest of y'all. Sanctions (punishing the lawyers for what's knowingly bad conduct) for venue choice is highly unlikely when this could very well be the proper venue. This action happened at a CA Hermes store, to CA customers and residents, and is being brought forth by CA attorneys practicing in their own circuit. If this happened to, say, Denver residents who were shopping in a DC store, who came back to Colorado attorneys who practice law in the 10th circuit and they decided to sue with the help of a firm in the 9th circuit knowing the consumer laws are more favorable ("Hermes has stores here too, judge, and we could probably find customers who had this experience, so what's the problem?") I'd agree that's suss. And even then it would get tossed, but sanctions? That's... unlikely.
Based on your understanding of jurisdiction, is there a more proper venue for this case? I see from the Complaint that this is a NY company but location of events is one of the strongest determinants of venue jurisdiction. That points to CA. Hermes may try to argue NY is better, but that to me would be an example of a corporation throwing up road blocks for the sake of it and engaging in a war of attrition against the Plaintiffs, which big firms are known to do all the time. But based solely on the facts of this Complaint as it's been filed, that's a far weaker argument than the Plaintiffs seeking remedy in CA.
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Respectfully, @880 , that's not what venue means in this context: as it relates to the law, venue is describing an exact location where the lawsuit should be filed.
As it relates to this lawsuit, I do not believe that to be a legal consideration (certainly at this stage being referenced, probably throughout the case) that the Plaintiffs can buy Birkins on the secondhand market. The issue here is whether the company's actions are tying one of their product to the other, and the effects of that on the consumer and broader market if proven true. Now, if you take what you said as a thought exercise, "if people can get a bag elsewhere, should they feel aggrieved when they can't get one in the store?" Then that's a valid perspective! Me, I love my resale bags.
I PMed you. I am a CA litigator who has represented a large American company and its international (branch) in Federal Court in Los Angeles. And I have seen sanctions awarded to defendants who successfully had Complaints dismissed based on forum non conveniens in both State and Federal Courts, many times.Is the assumption that bar is difficult to meet here or will in any way be a factor to this lawsuit? Also I don't think it always does require going through an int'l treaty. My understanding is that if in a federal court, alternative service can be considered (ie, no Hague Convention or Letters of Rogatory required). Service to its NY corporation could suffice and the court could easily grant that. Any CA lawyer want to weigh in? I'd defer to them rather than my own interpretations. Anyway, the cool thing is, there should be published proof of filing in the courts so maybe that'll show up to discuss further. Fun aside: I was amused to read the Ninth Circuit actually upheld email as proper service to shady foreigners trying to evade law.
Also need to ninja edit to state the obvious for this comment and all every other word I've said on this topic: THIS AIN'T LEGAL ADVICE. I'M NOT THEIR LAWYER. I'M NOT YOUR LAWYER.
Sanctions (punishing the lawyers for what's knowingly bad conduct) for venue choice is highly unlikely when this could very well be the proper venue. This action happened at a CA Hermes store, to CA customers and residents, and is being brought forth by CA attorneys practicing in their own circuit. If this happened to, say, Denver residents who were shopping in a DC store, who came back to Colorado attorneys who practice law in the 10th circuit and they decided to sue with the help of a firm in the 9th circuit knowing the consumer laws are more favorable ("Hermes has stores here too, judge, and we could probably find customers who had this experience, so what's the problem?") I'd agree that's suss. And even then it would get tossed, but sanctions? That's... unlikely.
Based on your understanding of jurisdiction, is there a more proper venue for this case? I see from the Complaint that this is a NY company but location of events is one of the strongest determinants of venue jurisdiction. That points to CA. Hermes may try to argue NY is better, but that to me would be an example of a corporation throwing up road blocks for the sake of it and engaging in a war of attrition against the Plaintiffs, which big firms are known to do all the time. But based solely on the facts of this Complaint as it's been filed, that's a far weaker argument than the Plaintiffs seeking remedy in CA.
Thanks @MonsoonBirkin , I meant shopping venues as referenced by @haute okole in an earlier post. . .Respectfully, @880 , that's not what venue means in this context: as it relates to the law, venue is describing an exact location where the lawsuit should be filed.
Now, if you take what you said as a thought exercise, "if people can get a bag elsewhere, should they feel aggrieved when they can't get one in the store?" Then that's a valid perspective! Me, I love my resale bags.
I private messaged you tooI believe her point contested plaintiffs viewpoint that H was the only place where one could obtain a B. If I recall correctly it was a preliminary issue perhaps relating to market power (not yet reaching the tying issue)
, but I am no legal expert particularly in this area lol
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Ok. Then as is the ethical responsibility for me to state: I defer to your judgment as an attorney who is practicing in the state of California since your experience > mine.
Having said that--I will send you a Twilly if the Plaintiffs in this case actually get sanctioned on the grounds for which you speak. 😜
Hahaha, no thanks, but I will take a Berking.
I’ve been thinking - the bourbon world functions similarly to Hermes, albeit with a few less 0’s on prices (usually). DH is a bourbon guy and we had the following exchange at our local wine & spirits shop recently. For context, this shop is 2 blocks from our house and we buy regularly from them but don’t spend a whole lot - I mean like less than $1k / year (I like wine ok?! 
). The shop employees know us by sight, although not by name. We popped in to get a bottle of wine and DH was looking at the bourbons when one of the owners started chatting with him:
Owner: you looking for anything in particular today?
DH: no just browsing
Owner: we’ve got some [insert rare bourbon name here] in the back if you’re interested. We don’t put it out on the shelves otherwise it’d be gone in a second, but since you’re a regular, it’s available if you want it. We literally have people that follow the delivery trucks around and buy it up as it gets unloaded.
DH: really? How much?
Owner: $80 [DH says this is a $150 bottle on the secondary market]
DH: Great, I’ll take one.
These “rare” bourbons are produced in limited quantities, be it due to a longer aging process, special edition recipe, or what have you. Either through real or artificial scarcity, demand outpaces supply for these bottles. They can be difficult to find in store, maybe only released once a year, and typically go for a premium price on the secondary market (Sound familiar!?)
Back to my bottle shop experience recently, it was pretty clear that the bottle of bourbon was “tied” to our patronage/loyalty to the store aka “being a good customer”* rather than tied to explicitly buying x or y product, again sounds exactly like my personal experience with H.
I only recently, this last visit, brought up “quota” bags with my SA, more specifically that I’d like to add a new bag with a strap as my next bag and the convo naturally gravitated to the Kelly & Constance (among others). I only (“only” in H world lol
) spend a few thousand $ per year (<$5k), mostly on shoes and leather goods. My SA and I had an open convo about leather types of each bag, likely availability of what, etc and she said “it just comes down to when we get x or y in!” I totally get that means depends on when they get x or y relative to who else wants it 😁but not once has she ever mentioned “building a profile” in different categories, suggested I try out different maisons, or tried to hint at me buying more. In fact she talks me out of things! Clearly I’ve not gotten the bag we discussed yet, so who knows how it’ll work out, but I’ve been working with her for 5 years and would hope at this point she’s not just blowing smoke up my a**. I very much left with the impression that if she has something that matches what I’m after, it would be available to me.
I can only speak from my personal experience, and in no way want to diminish or dismiss those who have had different encounters of SA’s being more explicit on buy x to get y.
*I would consider spend/$$ just 1 aspect of being a “good customer” along with consistency, ease of doing business with, among other qualitative factors.
Totally OT, but DH tells me that in his convos with bourbon store owners, it seems their stock of rare bourbons is very much tied to the purchase of x number of cases of less desirable liquor from their distributors. Literally as explicit as “well I’ve got a case of [rare bourbon] and I’ll sell it to you if you buy 10 cases of fireball too. So the tying is more from distributor to store front, rather than store to consumer. Interesting to think what if each of our boutiques’ stock of bags was tied to their sale of other goods!?
If you’ve made it this far, thank you for sticking with my ramblings. All in all, this seems to be a very shades-of-grey issue for H, certainly not black and white and I’ll be interested to see how it plays out.
). The shop employees know us by sight, although not by name. We popped in to get a bottle of wine and DH was looking at the bourbons when one of the owners started chatting with him:Owner: you looking for anything in particular today?
DH: no just browsing
Owner: we’ve got some [insert rare bourbon name here] in the back if you’re interested. We don’t put it out on the shelves otherwise it’d be gone in a second, but since you’re a regular, it’s available if you want it. We literally have people that follow the delivery trucks around and buy it up as it gets unloaded.
DH: really? How much?
Owner: $80 [DH says this is a $150 bottle on the secondary market]
DH: Great, I’ll take one.
These “rare” bourbons are produced in limited quantities, be it due to a longer aging process, special edition recipe, or what have you. Either through real or artificial scarcity, demand outpaces supply for these bottles. They can be difficult to find in store, maybe only released once a year, and typically go for a premium price on the secondary market (Sound familiar!?)
Back to my bottle shop experience recently, it was pretty clear that the bottle of bourbon was “tied” to our patronage/loyalty to the store aka “being a good customer”* rather than tied to explicitly buying x or y product, again sounds exactly like my personal experience with H.
I only recently, this last visit, brought up “quota” bags with my SA, more specifically that I’d like to add a new bag with a strap as my next bag and the convo naturally gravitated to the Kelly & Constance (among others). I only (“only” in H world lol
) spend a few thousand $ per year (<$5k), mostly on shoes and leather goods. My SA and I had an open convo about leather types of each bag, likely availability of what, etc and she said “it just comes down to when we get x or y in!” I totally get that means depends on when they get x or y relative to who else wants it 😁but not once has she ever mentioned “building a profile” in different categories, suggested I try out different maisons, or tried to hint at me buying more. In fact she talks me out of things! Clearly I’ve not gotten the bag we discussed yet, so who knows how it’ll work out, but I’ve been working with her for 5 years and would hope at this point she’s not just blowing smoke up my a**. I very much left with the impression that if she has something that matches what I’m after, it would be available to me.I can only speak from my personal experience, and in no way want to diminish or dismiss those who have had different encounters of SA’s being more explicit on buy x to get y.
*I would consider spend/$$ just 1 aspect of being a “good customer” along with consistency, ease of doing business with, among other qualitative factors.
Totally OT, but DH tells me that in his convos with bourbon store owners, it seems their stock of rare bourbons is very much tied to the purchase of x number of cases of less desirable liquor from their distributors. Literally as explicit as “well I’ve got a case of [rare bourbon] and I’ll sell it to you if you buy 10 cases of fireball too. So the tying is more from distributor to store front, rather than store to consumer. Interesting to think what if each of our boutiques’ stock of bags was tied to their sale of other goods!?
If you’ve made it this far, thank you for sticking with my ramblings. All in all, this seems to be a very shades-of-grey issue for H, certainly not black and white and I’ll be interested to see how it plays out.
Great example; my wine shop gets allocations of special products in exactly the same way, and it’s explicit at the wholesale level. I’m a ‘good’ customer and have been offered hard to find, low production wines and spirits because of my relationship with the shop. (I like wine too and they know me by nameI’ve been thinking - the bourbon world functions similarly to Hermes, albeit with a few less 0’s on prices (usually). DH is a bourbon guy and we had the following exchange at our local wine & spirits shop recently. For context, this shop is 2 blocks from our house and we buy regularly from them but don’t spend a whole lot - I mean like less than $1k / year (I like wine ok?!
Owner: you looking for anything in particular today?
DH: no just browsing
Owner: we’ve got some [insert rare bourbon name here] in the back if you’re interested. We don’t put it out on the shelves otherwise it’d be gone in a second, but since you’re a regular, it’s available if you want it. We literally have people that follow the delivery trucks around and buy it up as it gets unloaded.
DH: really? How much?
Owner: $80 [DH says this is a $150 bottle on the secondary market]
DH: Great, I’ll take one.
These “rare” bourbons are produced in limited quantities, be it due to a longer aging process, special edition recipe, or what have you. Either through real or artificial scarcity, demand outpaces supply for these bottles. They can be difficult to find in store, maybe only released once a year, and typically go for a premium price on the secondary market (Sound familiar!?)
Back to my bottle shop experience recently, it was pretty clear that the bottle of bourbon was “tied” to our patronage/loyalty to the store aka “being a good customer”* rather than tied to explicitly buying x or y product, again sounds exactly like my personal experience with H.
I only recently, this last visit, brought up “quota” bags with my SA, more specifically that I’d like to add a new bag with a strap as my next bag and the convo naturally gravitated to the Kelly & Constance (among others). I only (“only” in H world lol
I can only speak from my personal experience, and in no way want to diminish or dismiss those who have had different encounters of SA’s being more explicit on buy x to get y.
*I would consider spend/$$ just 1 aspect of being a “good customer” along with consistency, ease of doing business with, among other qualitative factors.
Totally OT, but DH tells me that in his convos with bourbon store owners, it seems their stock of rare bourbons is very much tied to the purchase of x number of cases of less desirable liquor from their distributors. Literally as explicit as “well I’ve got a case of [rare bourbon] and I’ll sell it to you if you buy 10 cases of fireball too. So the tying is more from distributor to store front, rather than store to consumer. Interesting to think what if each of our boutiques’ stock of bags was tied to their sale of other goods!?
If you’ve made it this far, thank you for sticking with my ramblings. All in all, this seems to be a very shades-of-grey issue for H, certainly not black and white and I’ll be interested to see how it plays out.
)
I thought it was interesting hearing about the Hermes commissioning structure. 0% on B or K
This is a really interesting experience, @Ceeje89 ! The only thing that makes me think the bourbon experience of rewarding loyal customers isn't usually the same as Hermes is this sentence: "We literally have people that follow the delivery trucks around and buy it up as it gets unloaded." I'm sure there's a whole lot in the distribution contract between him and the brand, but I want to ask your liquor guy: "If you and the brand know the bottle sells resale for significantly more, why isn't the company raising the price of the bottle? Who are those guys who follow the trucks to buy that bourbon, and do they give you anything in exchange for the head start? And if the company's giving it to you to reward customers, why are you sending it out the door to the first person who wants it? If it's being used for 'loyalty' and 'repeat business,' how do you quantify those things when as I see it, there's an equally lucrative alternative that once the bottle comes in, you buy it yourself out of your own pocket and resell it (again, contract, but what incentives/disincentives exist to prevent that kind of black market)?" With the shop owner, there's a legit argument to be made that he owns the business, benefits when it's profitable, and gets customers shopping at HIS store instead of the many others. It is worth it for him to use that bottle as customer inducement than it is for him to sell onwards to resellers. There's competition with wholly separate business entities licensed to sell the same products. But because Hermes is generally the ultimate owner and distributor of its products (funky airport shops and the likes notwithstanding which incidentally don't get many if any QBs), it does not necessarily have the same deterrents and incentives as the liquor owner, who is a third party to the brand/products.
But as I see it, Hermes has much the same situation as the liquor owner. There's money on the table here, too: the difference between that exclusive handbag's MSRP and value on the resale market. Hermes is smart, and knows this cost differential exists. That's still money Hermes wants in its pockets, but how does it get it? Why not just raise the price to the MSRP to capture it?
I believe it's because it wants to get this differential by getting the customer to buy as much as possible before receiving a bag. Tying is more lucrative than raising the price for several reasons. But Hermes has a problem: this lucrative bag needs to be passed on from HQ and to SAs, who also know this bag resales for a whole lot of money. With them now in possession of an asset, technically they could buy it from their own pocket once it comes in the shop and make money off of it. Even if forbidden, they could get a ghost shopper to come in "at the right time," take a cut, and do it for them. But the business doesn't want that--it still wants the SA to be incentivised to receive these handbags through higher sales, but it also needs the bag to go to legitimate, loyal customers. Under this scenario, the SA/SM is not "rewarded" at all by this spread, and they need to be, or else they will reward themselves. Hence, commission. Which is why I think it features heavily in this lawsuit.
Commission does two things: incentivises the SA to reward herself by selling more things knowing it has a bag to dangle (which results in tying), and disincentivizes her from selling the bag out the door to a reseller and pocketing a cut. Most SAs do the former, and when the SAs act in an honest way, it is only then that the business can see how much it can reasonably expect the consumer to buy in other things, before being given the chance to buy a bag (tying). In other words, a business can then figure out that prespend ratio, and weigh it against the resale BNIB values to ensure they're somewhat in alignment. These are essential metrics the company needs, which is also why I think there ARE not just rules, but statistics the company maintains about prespend ratios. China's overt about the spend. Western countries may be more flexible (hence the discrepancies in anecdotes), but these data points must aggregate to a general over-under figure.
What this points to is another unfortunate thing: If this is the existing system, then on average, SAs cannot give bags to those with a significantly lower spend on a consistent basis. Managers will never allow it. Reason being, it raises a huge red flag that the SA in collusion with the SM is engaging in theft or backdoor collusions with retailers. Yet again, if the business knows that it CAN make x spread by selling the bag at MSRP, and other honest SAs/SMs are meeting approximate prespend ratios to exceed that spread (hence make the company more money than it would have by selling full MSRP)... then why is this particular SA/SM repeatedly failing to do that? Love and fresh air? No, it signals they are keeping that "money on the table" through an underhanded method in which the brand is cut out of the transaction. This is also why SMs must approve bags, and likely have to account for their own decisions to corporate: it's a check and balance against bribes/collusion that leave H from taking that spread money. When a lower-spend customer is presented to the SM for approval, it is my theory that it is likely subsidized by higher spenders who get a bag so to stay in line with other divisions, it's weighed against how much that particular SA has sold already, it's weighed against that customer's ability to bring long-term revenue based on their consumer data, and/or with the understanding they'll have to spend more for bag 2. In either case, no such thing as a free lunch for the customer. Hermes will ALWAYS recoup that money, one way or the other.
I believe Hermes corporate does look at SMs and SAs, weigh their prespend metrics against OTHER stores, too, and quite easily figure out if there's any underhanded behavior when these prespend ratios aren't aligning with other stores. In accounting, cash theft is picked up very easily in a similar manner: if an employee works on Sunday and only 5% of customers are paying in cash, while when a different employee works on Sunday and shows that 40% of customers are paying in cash, it very obviously points to the first employee engaging in theft. Similarly, if one division is consistently giving bags to all its customers with low spend "because they're great people," Hermes is most certainly wondering if it's this, or because there's collusion. As always, "follow the money." Using this type of forensic accounting is a great way to ensure there's no bribing/collusion and that bags are being distributed normally, but in order to use this tool, it means it HAS to have pre-spend data to catch/collect it in the first place.
And so this game is born. I'm pretty sure this is why the commission structure is a valuable part of this case--it links incentivizing tying, and is required to develop its prespend metrics deriving from tying. So, after thinking about all of this, I allege that "The Hermes Game" started exactly when the value of the bag on the resale market became more than the MSRP. Who did that or how, I'm not sure. But I think when Hermes recognized their bags were selling for more on the resale market, rather than raise its MSRP, it chose to ensure it was recouping that cost in another, significantly more brilliant (possibly illegal) way.
But as I see it, Hermes has much the same situation as the liquor owner. There's money on the table here, too: the difference between that exclusive handbag's MSRP and value on the resale market. Hermes is smart, and knows this cost differential exists. That's still money Hermes wants in its pockets, but how does it get it? Why not just raise the price to the MSRP to capture it?
I believe it's because it wants to get this differential by getting the customer to buy as much as possible before receiving a bag. Tying is more lucrative than raising the price for several reasons. But Hermes has a problem: this lucrative bag needs to be passed on from HQ and to SAs, who also know this bag resales for a whole lot of money. With them now in possession of an asset, technically they could buy it from their own pocket once it comes in the shop and make money off of it. Even if forbidden, they could get a ghost shopper to come in "at the right time," take a cut, and do it for them. But the business doesn't want that--it still wants the SA to be incentivised to receive these handbags through higher sales, but it also needs the bag to go to legitimate, loyal customers. Under this scenario, the SA/SM is not "rewarded" at all by this spread, and they need to be, or else they will reward themselves. Hence, commission. Which is why I think it features heavily in this lawsuit.
Commission does two things: incentivises the SA to reward herself by selling more things knowing it has a bag to dangle (which results in tying), and disincentivizes her from selling the bag out the door to a reseller and pocketing a cut. Most SAs do the former, and when the SAs act in an honest way, it is only then that the business can see how much it can reasonably expect the consumer to buy in other things, before being given the chance to buy a bag (tying). In other words, a business can then figure out that prespend ratio, and weigh it against the resale BNIB values to ensure they're somewhat in alignment. These are essential metrics the company needs, which is also why I think there ARE not just rules, but statistics the company maintains about prespend ratios. China's overt about the spend. Western countries may be more flexible (hence the discrepancies in anecdotes), but these data points must aggregate to a general over-under figure.
What this points to is another unfortunate thing: If this is the existing system, then on average, SAs cannot give bags to those with a significantly lower spend on a consistent basis. Managers will never allow it. Reason being, it raises a huge red flag that the SA in collusion with the SM is engaging in theft or backdoor collusions with retailers. Yet again, if the business knows that it CAN make x spread by selling the bag at MSRP, and other honest SAs/SMs are meeting approximate prespend ratios to exceed that spread (hence make the company more money than it would have by selling full MSRP)... then why is this particular SA/SM repeatedly failing to do that? Love and fresh air? No, it signals they are keeping that "money on the table" through an underhanded method in which the brand is cut out of the transaction. This is also why SMs must approve bags, and likely have to account for their own decisions to corporate: it's a check and balance against bribes/collusion that leave H from taking that spread money. When a lower-spend customer is presented to the SM for approval, it is my theory that it is likely subsidized by higher spenders who get a bag so to stay in line with other divisions, it's weighed against how much that particular SA has sold already, it's weighed against that customer's ability to bring long-term revenue based on their consumer data, and/or with the understanding they'll have to spend more for bag 2. In either case, no such thing as a free lunch for the customer. Hermes will ALWAYS recoup that money, one way or the other.
I believe Hermes corporate does look at SMs and SAs, weigh their prespend metrics against OTHER stores, too, and quite easily figure out if there's any underhanded behavior when these prespend ratios aren't aligning with other stores. In accounting, cash theft is picked up very easily in a similar manner: if an employee works on Sunday and only 5% of customers are paying in cash, while when a different employee works on Sunday and shows that 40% of customers are paying in cash, it very obviously points to the first employee engaging in theft. Similarly, if one division is consistently giving bags to all its customers with low spend "because they're great people," Hermes is most certainly wondering if it's this, or because there's collusion. As always, "follow the money." Using this type of forensic accounting is a great way to ensure there's no bribing/collusion and that bags are being distributed normally, but in order to use this tool, it means it HAS to have pre-spend data to catch/collect it in the first place.
And so this game is born. I'm pretty sure this is why the commission structure is a valuable part of this case--it links incentivizing tying, and is required to develop its prespend metrics deriving from tying. So, after thinking about all of this, I allege that "The Hermes Game" started exactly when the value of the bag on the resale market became more than the MSRP. Who did that or how, I'm not sure. But I think when Hermes recognized their bags were selling for more on the resale market, rather than raise its MSRP, it chose to ensure it was recouping that cost in another, significantly more brilliant (possibly illegal) way.
I had no idea until this lawsuit.
I wonder if other brands do some kind of scaled commission to push a particular new bag or other items (example houseware/exotics). If its "common practice" then Hermes isn't doing the norm?