In 2024, Hermès, the French luxury house, faced a class-action lawsuit in California over its iconic Birkin bag, alleging that customers are forced to spend thousands of dollars on other products before they can purchase the famous Birkin bag.

 

The case raises significant legal questions about antitrust laws, unfair business practices, false advertising, fraud, misrepresentation, consumer protection, and the practices of exclusivity in luxury markets. Here’s a breakdown of the legal issues, the arguments on both sides, and the potential outcomes.

 

Background of the Lawsuit

 

The Birkin bag, renowned for its exclusivity and price range (from $12,000 to over $450,000)[1], has been a symbol of luxury for decades. The lawsuit alleges that Hermès engages in unlawful “tying” practices by requiring customers to purchase other Hermès products before qualifying to buy a Birkin. The plaintiffs argue this coerces customers into spending more than they otherwise would and inflates the bag’s true cost.[2]

 

Owning a Birkin handbag is a symbol of rarefied wealth, an icon of fashion.

 

Three plaintiffs, representing a broader class of affected consumers, claim they were misled or denied access to Birkin bags despite making significant purchases of Hermès products. They argue these practices violate federal antitrust laws, such as the Sherman Act, and California’s Cartwright Act, as well as state consumer protection laws.

Legal Issues

 

1. Antitrust Violations

 

• Tying Arrangements: Under antitrust laws, tying occurs when a seller conditions the purchase of one product (the “tying product,” here the Birkin bag) on the purchase of another product (the “tied product,” such as Hermès scarves, jewellery, or home goods). To prove an unlawful tying arrangement, the plaintiffs must demonstrate:

1. Separate Products – Two separate products or services are involved;
2. Coercion – The sale or agreement to sell one product is condition on the buyer’s agreement to purchase another product.;
3. Market power- the seller (Hermès) has significant market power in the tying product to enable it to restrain competition in the market for the tied product; and
4. The tying arrangement affects a “not substantial” amount of commerce.

Hermès disputes these claims, arguing that its practices do not force consumers to buy ancillary products. Customers could, for example, opt to purchase a Birkin on the resale market without buying additional Hermès goods

 

2. Market Definition

 

Defining the market is central to antitrust cases. Initially, the plaintiffs framed the market as “Birkin handbags,” suggesting Hermès monopolizes this unique product. Later, they expanded the definition to include “elitist luxury handbags” from brands like Chanel and Bottega Veneta. Hermès counters that these shifting definitions are artificial and do not reflect competitive realities.

The plaintiffs noted that Birkin handbags cannot be purchased from the Defendant’s website, instead consumers need to physically visit a Hermès retail store. But, unlike other Hermès products, customers cannot simply walk in and pick the Birkin handbag they want to purchase and buy it. In fact, there are no Birkin handbags displayed at all in retail stores. And if there is one, it will not be displayed on the sales floor for the general public.

The plaintiffs allege that only “customers who are deemed worthy of purchasing a Birkin handbag” will be shown this in a private room.

 

3. Consumer Protection Claims

 

False Advertising and Fraud: The plaintiffs allege Hermès misleads customers by implying that spending more on ancillary products increases their chances of securing a Birkin handbag. They suggest that customers who have established a sufficient “purchase history” or “purchase profile” will be offered the opportunity to buy a Birkin.

Hermès denies these claims and any wrongdoing, asserting that its sales representatives do not make binding promises about product availability.

 

Hermès’ Defence

 

Hermès has aggressively defended itself, filing motions to dismiss the case. Key points include:

• Lack of Antitrust Injury: Hermès argues that the plaintiffs fail to show harm to competition. The plaintiffs’ inability to buy Birkin bags does not demonstrate market-wide harm; instead, it reflects personal dissatisfaction.
• No Coercion: Hermès maintains that purchasing ancillary products is not mandatory, as customers can buy Birkin handbags on the secondary market. Thus, no consumer is “forced” into these purchases.
• Weak Market Claims: Hermès critiques the plaintiffs’ attempts to define narrow markets, calling them contrived and legally insufficient.

During a Hearing in September 2024, Judge Donato remarked that Hermès, as a private business, has a right to decide how to manage its inventory and pricing, even if that includes making a limited amount of Birkin bags available at exceptionally high prices”. Judge Donato suggested that Hermès’ actions might actually enhance market competition by providing opportunities to other luxury brands to attract customers who do not wish to spend on additional Hermès products.

 

 

Broader Implications for the Luxury Industry

 

Regardless of the outcome, this lawsuit could significantly impact the luxury market:

• Validation of Business Models: If the court sides with Hermès, it could encourage other brands to adopt similar exclusivity strategies, linking flagship products to ancillary sales.
• Increased Scrutiny: A ruling against Hermès could prompt regulators to scrutinize sales practices in the luxury sector, forcing brands to rethink exclusivity models.

 

Potential Outcomes

 

1. Dismissal of the Case: Hermès’ motion to dismiss argues that the claims lack legal merit. If successful, the case may end without a tria;.
2. Trial and Judgment: If the case proceeds, the plaintiffs must overcome substantial hurdles, including proving harm to competition and substantiating their market definitions.
3. Settlement: Given the high stakes and public attention, both sides might seek a settlement to avoid prolonged litigation and reputational damage.

 

Conclusion

 

The Hermès Birkin lawsuit spotlights the fine line luxury brands walk between exclusivity and consumer accessibility. This is however not the first time similar allegations have been made.

 

While the plaintiffs argue that Hermès’ practices are coercive and anti-competitive, the company defends its right to control its products’ distribution.

 

The case underscores how luxury brands navigate legal frameworks while maintaining their aura of exclusivity. As the legal battle unfolds, it will shape the future of luxury retail strategies and consumer rights in high-end markets.

[1] https://www.hermes.com/uk/en/content/106191-birkin/

[2] Case No 3:24-cv-01707 https://fingfx.thomsonreuters.com/gfx/legaldocs/znvnlealxvl/Second%20amended%20lawsuit%20Hermes%20Birken%20bag%202024.pdf