Hermès Faces Class Action Suit Over Birkin Sales Practices

[acrowcounted]

I think it has more to do with this (not that i am saying I agree or disagree): https://www.ftc.gov/advice-guidance...s/single-firm-conduct/tying-sale-two-products

Understood, and my post was mostly facetious but this link does end in a poignant sentence which imo should throw the whole case out. H’s alleged tactics have no effect on competition; they sell only H proprietary goods.

“ the general rule is that tying products raises antitrust questions when it restricts competition without providing benefits to consumers.”

 

[TC1]

For the cost of 5 lawyers… they could get some great bags from trusted sellers *shrug* this seems like it’s for more attention than a bag.
And being “coerced” into buying something is not easy to prove. Did you get your CC out and sign the slip? Yeah, thought so.

 

[Veritybelle]

“ the general rule is that tying products raises antitrust questions when it restricts competition without providing benefits to consumers.”

I’m not a US antitrust lawyer but for this reason the arguments around market definition (if this suit proceeds) will be important. Ie, is competition adversely affected in the market for Birkins, or the market for Birkin and Kelly, or the market for H bags (noting the existence of a vibrant resale market), or the market for hand made luxury bags, or all luxury bags etc. Plaintiffs will seek to define as narrowly as possible and that could be interesting given Birkin especially is generally perceived as being in a class of its own.

 

[addiCCted]

maybe I don’t understand the legal definition of antitrust but how is this term even used if it’s just competition within the brand itself. It’s not like H is controlling other luxury handbag competitors.

 

[acrowcounted]

I’m not a US antitrust lawyer but for this reason the arguments around market definition (if this suit proceeds) will be important. Ie, is competition adversely affected in the market for Birkins, or the market for Birkin and Kelly, or the market for H bags (noting the existence of a vibrant resale market), or the market for hand made luxury bags, or all luxury bags etc. Plaintiffs will seek to define as narrowly as possible and that could be interesting given Birkin especially is generally perceived as being in a class of its own.

I think that part doesn’t matter actually, what would matter was the “market” of the birkin bait. Is the market “Hermes shoes” or just “shoes”?

The example given further up in that link is:
Example: The FTC challenged a drug maker that required patients to purchase its blood-monitoring services along with its medicine to treat schizophrenia. The drug maker was the only producer of the medicine, but there were many companies capable of providing blood-monitoring services to patients using the drug. The FTC claimed that tying the drug and the monitoring services together raised the price of that medical treatment and prevented independent providers from monitoring patients taking the drug. The drug maker settled the charges by agreeing not to prevent other companies from providing blood-monitoring services.


So extrapolated to our situation, the argument would be that Chanel is losing out on shoe sales because Hermes clients are getting all of their luxury shoes from Hermes instead because they are tied to the sale of the coveted Birkin bag. To me it’s not apples to apples and thus doesn’t fly, but the argument is there.

 

[addiCCted]

I also find it amusing that this method of shopping is romanticized when talking about the classic French consumer but vilified for US Hermes)

I also find that amusing. Smoking is also treated the same way interestingly enough.

So extrapolated to our situation, the argument would be that Chanel is losing out on shoe sales because Hermes clients are getting all of their luxury shoes from Hermes instead because they are tied to the sale of the coveted Birkin bag. To me it’s not apples to apples and thus doesn’t fly, but the argument is there.

Except Hermes is not the only one making bags or shoes. Consumers can choose to only purchase Hermes for whatever reason but I don’t think they should be liable for being more in demand and affecting competitor sales.

The other case was more like they’re holding a life saving drug for which there is no alternative and tying that to another product that the same company makes and restricting competition.

 

[Veritybelle]

So extrapolated to our situation, the argument would be that Chanel is losing out on shoe sales because Hermes clients are getting all of their luxury shoes from Hermes instead because they are tied to the sale of the coveted Birkin bag. To me it’s not apples to apples and thus doesn’t fly, but the argument is there.

That is an argument about “horizontal” anti-competitive conduct - ie conduct that is targeted against Hermès’ competitors for those products, thus one that they might seek to make (eg Chanel saying it was unfair competition in the market for shoes), but it’s not really the argument of these customers, who claim they are the victims of “vertical” anticompetitive conduct because they say they are prevented from buying the product they really want unless they buy the other products too. The market effect on, say, Chanel shoes is not relevant to that second specific question. Lots of “markets” potentially at play here though

 

[SDC2003]

And as I've stated countless times, prespend is not an actual policy of the store nor the brand. Hermes has fewer bags than people who want to buy the bags. They HAVE TO come up with a way to determine who to sell them to. The current solution seems to be for a consumer to have an on-going client relationship with the house. My experience has never been "buy this and I'll offer you that". Never. I am a good client, purchase things that I want and love and use and once in a blue moon, my SA likes to make me happy by surprising me with an amazing piece available for me to purchase. I do not consider this linked sales. (Also there is almost always at least one retort to any prespend advice that I give of "well I just walked in and they offered me 37 bags as a new client walk in!!" )

Should it be illegal to hold a table at a popular restaurant for a couple that comes in every Saturday night at 7pm for 20 years? Is that linked sales? (I'll sell you dinner next week so long as you buy one this week!!) Should a boutique hotel who orders 100 floral arrangements from a small floral shop each week not get first choice to the new exotic bloom that the vendor just delivered? What about volume discounts? Shouldnt that be illegal ("you can pay less linked to the purchase of more!!") In the US, a private company can choose not to sell to anyone they don't want to for any reason as long as the reason doesn't violate a protected class (age, disability, national origin, race, religion, sex, veteran status, and genetic information). It is perfectly legal to think: I won't sell to you because I don't know you well enough (because you haven't shopped here as much as someone else). Prespend calculations are just a way for clients to gauge the strength of the relationship vs other shoppers. (I also find it amusing that this method of shopping is romanticized when talking about the classic French consumer but vilified for US Hermes)

I'd really be curious to hear from these plaintiffs, or anyone who is vehemently against the current "relationship with the house" method of offering the coveted goods, how they would fix the problem without torpedoing the company's bottom line? If we are to believe that the only reason most clients are buying non-bag items is because of prespend, then eliminating the relationship model will annihilate revenue. If H increases bag production to meet demand, exclusivity will be annihilated and demand will follow for all of the company's good as the perceived prestige level falls. Even in the wishlist system as in Europe/UK, there is still obvious evidence of the highest spenders getting the most/best bags so that system would still be a violation no different than the current system. I'm guessing the proposed solution would be some form of "make it completely random...just make sure I'm one of the lucky ones who are randomly selected..." The only true way to eliminate the customer profile and make bags accessible without killing revenue or exclusivity would be for Hermes to increase the price of all bags by at least 5x (or more if 5x doesn't do the trick). But I'm guessing these plaintiffs don't want to spend $60k for a basic togo Birkin either...

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.

 

[allanrvj]

maybe I don’t understand the legal definition of antitrust but how is this term even used if it’s just competition within the brand itself. It’s not like H is controlling other luxury handbag competitors.

The concern from an antitrust perspective is that if consumers are allegedly required to purchase additional items, like a pair of shoes, from Hermès in order to have the opportunity to buy a Birkin bag, this practice could unfairly impact other shoe sellers. Consumers who might have preferred or otherwise chosen to buy their shoes from a different brand could feel compelled to buy Hermès shoes instead, simply because it's tied to their ability to purchase a Birkin bag. This could potentially reduce sales for other shoe brands and distort the competitive dynamics in the shoe market, giving Hermès an unfair advantage not because their shoes are preferred on their own merits, but because buying them is allegedly a precondition for obtaining a highly sought-after product in a completely different category.

Also, from an antitrust perspective, the primary concern is often consumer harm. If consumers are forced to purchase products they do not want (the ancillary products) to obtain a product they do want (a Birkin bag), this can be seen as harmful to consumers. It could lead to inefficiencies in the market, such as consumers paying more than they would in a competitive market or receiving less value.

 

[addiCCted]

The concern from an antitrust perspective is that if consumers are allegedly required to purchase additional items, like a pair of shoes, from Hermès in order to have the opportunity to buy a Birkin bag, this practice could unfairly impact other shoe sellers. Consumers who might have preferred or otherwise chosen to buy their shoes from a different brand could feel compelled to buy Hermès shoes instead, simply because it's tied to their ability to purchase a Birkin bag. This could potentially reduce sales for other shoe brands and distort the competitive dynamics in the shoe market, giving Hermès an unfair advantage not because their shoes are preferred on their own merits, but because buying them is allegedly a precondition for obtaining a highly sought-after product in a completely different category.

Also, from an antitrust perspective, the primary concern is often consumer harm. If consumers are forced to purchase products they do not want (the ancillary products) to obtain a product they do want (a Birkin bag), this can be seen as harmful to consumers. It could lead to inefficiencies in the market, such as consumers paying more than they would in a competitive market or receiving less value.

Thanks for the explanation. If they can even prove linked sales then they have to prove that is somehow affecting shoe sales in other brands. Good luck. I’m sure the oft heard phrase “correlation doesn’t mean causation” will get thrown in there.

 

[addiCCted]

It could lead to inefficiencies in the market, such as consumers paying more than they would in a competitive market

Great point. But I also feel luxury goods in and of itself is the definition of inefficient and paying more than market price

 

[Model T]

Now that I’ve found the right thread…..I truly cannot believe this. Our legal system is so unique and that’s wonderful but then suits like this come forward and you just have to wonder, what planet do these people live on?? Entitlement is at an ALL TIME HIGH

*end of rant* haha

 

[Veritybelle]

The concern from an antitrust perspective is that if consumers are allegedly required to purchase additional items, like a pair of shoes, from Hermès in order to have the opportunity to buy a Birkin bag, this practice could unfairly impact other shoe sellers. Consumers who might have preferred or otherwise chosen to buy their shoes from a different brand could feel compelled to buy Hermès shoes instead, simply because it's tied to their ability to purchase a Birkin bag.

Also, from an antitrust perspective, the primary concern is often consumer harm. If consumers are forced to purchase products they do not want (the ancillary products) to obtain a product they do want (a Birkin bag), this can be seen as harmful to consumers. It could lead to inefficiencies in the market, such as consumers paying more than they would in a competitive market or receiving less value.

the first point you make is an important antitrust policy, but I doubt the plaintiffs care about the effect on H’s competitors. What they care about is your second point.

 

[Veritybelle]

Thanks for the explanation. If they can even prove linked sales then they have to prove that is somehow affecting shoe sales in other brands. Good luck. I’m sure the oft heard phrase “correlation doesn’t mean causation” will get thrown in there.

Yes, it’s hard to see how they’ll win on either market definition or demonstrating the conduct occurs, or showing that conduct meets the necessary standard in terms of its anticompetitive effect.

 

[haute okole]

I would LOVE to see any attorney argue in court, with a straight face, that anyone is FORCED to buy Hermes shoes because they NEED a 5 figure purse as an administrative assistant and the male plaintiff who lives in Vernon, which is southeast of South Cental LA. Not that there is anything wrong with them having multiple “Berkins,” but come on. The lawsuit is just a stupid shakedown. What a waste of judicial resources.