Bop Talk

UPDATE 6.17.24 A New Amended Complaint and a Third Plaintiff

So you might be wondering what’s going on in the California lawsuit against Hermès. When we last discussed the legal maneuvering, Hermès had made a motion to dismiss the Complaint on the ground that it failed to state a legal claim. That’s a pretty standard move. And Plaintiffs’ next step was to submit an Amended Complaint, attempting to correct the alleged deficiencies. In so doing, Plaintiffs added a few more things.

First, there’s a new and third Plaintiff to complain about Hermès sales practices regarding Birkins and Kellys (defined by them collectively as Birkins). Mengyao Yang claims that last fall she attempted to purchase a Birkin at the Hermès San Francisco boutique and was told that she’d first have to buy “Ancillary Products.” She says she spent over $10,000 on these items, which in the Amended Complaint are defined to be shoes, scarves, belts, clothing, jewelry, and home goods sold by Hermès. It’s not clear whether she was able to purchase a Birkin.

The Amended Complaint, in response to Hermès’ argument that Plaintiffs failed to allege a relevant market for antitrust purposes, now states: “The relevant market at issue is the market and/or submarket of luxury handbags in the United States, within which Defendants, through their Birkin handbags, exercise substantial market power. Defendants’ iconic Birkin bag, limited production, and high demand contribute to their dominant position in this market. Defendants’ dominant position in this market, characterized by high barriers to entry and brand recognition, allows them to control prices and engage in the anti-competitive conduct alleged herein to the detriment of consumers.”

Plaintiffs add several paragraphs alleging that there is no substitute for the Birkin: “The Birkin bag’s exclusivity, limited availability, and iconic status make it difficult to find a perfect substitute.” Not even from Gucci, Prada, and Louis Vuitton – and yes the Amended Complaint calls out those brands. In support, there are citations to former statements by Hermès about the uniqueness of its products and financial success, as well as to published media, including an article in PurseBop.

The Amended Complaint also discusses the luxury handbag market generally – that it operates differently than the general handbag market, with relative inelasticity as buyers of these high end products tend to be less sensitive to price. There are also allegations about how Birkins sell in the secondary market at premium prices (often multiples) of the retail pricing, claiming it allows Hermès to increase its prices.

Whether the above will be sufficient to sustain the Amended Complaint remains to be seen. Hermès again is asking the Court to dismiss the lawsuit. Plaintiffs are scheduled to respond by August 16, 2024, and Hermès may submit a further reply by September 9.

No legal claim here, says Hermès in its response to the California antitrust lawsuit. The first line of Hermès Motion to Dismiss the Complaint reads: “Plaintiffs fundamentally misunderstand the antitrust laws.” While Hermès denies that it requires customers to purchase other Hermès products before purchasing a Birkin or Kelly, it further argues that even if it did, that would not violate federal or state antitrust law. As it says in its Motion to Dismiss:

“The antitrust laws do not punish companies for creating better, more desirable products than anyone else.”

Hermès argues that Plaintiffs fail to allege the requisite proper tied product market, tied product, and market power. For purposes of a motion to dismiss, Plaintiffs’ factual allegations are assumed to be true.

Simplified here, Hermès says there is no claim of harm to the competitive process nor allegations that “Hermès has excluded other sellers of the supposedly tied products.” Hermès posits that all of Hermès’ business lines – homeware, jewelry, shoes, ready-to-wear, perfume, furniture – cannot be lumped into a single “product market” called Ancillary Product. There are other sellers of these multiple products: “This market definition does not appear to reach beyond Hermès—even though Hermès faces clear competition from different sellers on the wide range of products it sells.” In other words, Hermès does not wield market power.

Hermès Asks Court to Dismiss California Antitrust Case - UPDATE