Most people know you can’t just “get” an Hermès Birkin, a semi-structured custom-made bag, with every bag being uniquely hand-made. Some are made from crocodile hide, while others are adorned with gold and diamonds. The fact that each bag is handmade augments the waiting time to acquire the accessory: Each piece takes months to craft with stores receiving irregular shipments of the product. Demand thus outpaces supply, leading to exorbitant prices that reach the millions.
If one dreams of acquiring this pinnacle of luxury, they need to spend years building a rapport with a sales associate. This might involve buying up to $30,000 worth of Hermès totes, sandals, or scarves — which the consumer might be ambivalent about, at best — just to access the waitlist for a Birkin bag. Only then are customers given a survey on what kind of bag they would like. However, when they are called into the private showing room, the sales associate will probably show them a Birkin largely different from the one of their dreams. Still, the consumer will feel obligated to buy the bag anyway or risk their future chances at procuring their dream Birkin.
Thus, in the hunt for their dream bag, many turn to the resale market.
Tina Avalleri and Mark Glinoga, two frustrated Californian shoppers, however, took another path. The pair filed a class action lawsuit against Hermès, attesting that its sales practices violate antitrust legislation. While the case seems frivolous, yet another irrelevant suit brought forth by entitled socialites which will have no impact on the rest of society, it is insightful for two reasons. First, The suit provides a unique glimpse into the world of antitrust legislation, as well as highlighting how decisions in any sector, even one as insulated as the fashion industry, can impact the entire economy.
Antitrust legislation has a long history in the United States, from the 1887 Interstate Commerce Act to the Sherman Act, Federal Trade Commission Act, and Clayton Act. Antitrust regulations exist to protect consumers by encouraging healthy competition amongst firms in the market, keeping prices low while ensuring product quality, and preventing monopolies. While most suits revolve directly around mergers and acquisitions, which may give corporations monopoly power over an industry, Hermès has instead been accused of tying. Tying, in layman’s terms, means requiring customers to buy products in a group instead of individually. As defined by the U.S. Securities and Exchange Commission, responsible for maintaining fair competitive markets, proving tying requires the bundling of two or more distinct products and forcing the customers to buy the product as a bundle without giving them the choice to buy the products individually.
Despite the seemingly clear definition, there is room for confusion: The SEC and Sherman Act hold contradictory stances on issues of market regulation. Additionally, it can always be argued that a multitude of products are an instance of tying, as sellers can always break the product down into smaller component pieces. For instance, shoes could be sold individually instead of being tied into a pair, or gift sets at Victoria’s Secret could be broken up, requiring the sale of individual miniature bottles. This has led to a myriad of contradictory U.S. Supreme Court rulings, as in the cases of Kodak, Microsoft, and Illinois Tool, thus failing to establish explicit guidelines to distinguish between legal and illegal ties. Other fashion houses also encourage the building-up of “sales profiles,” with Louis Vuitton requiring customers to purchase other LV pieces to be shown the Pharrell Williams’ menswear collection or Rolex dealers requiring shoppers to purchase Tudor, Rolex’s sister company, products first.
Evaluating the merits of the case per the guidelines laid out in “Competition And Monopoly: Single-Firm Conduct Under Section 2 Of The Sherman Act: Chapter 5” suggests that the case lacks little legal grounding. Generally, tying is only deemed illegal if the following four conditions are met: (1) two separate products or services are involved, (2) the sale or agreement to sell one product or service is conditioned on the purchase of another, (3) the seller has sufficient economic power in the market for the tying product to enable it to restrain trade in the market for the tied product, (4) a not insubstantial amount of interstate commerce in the tied product is affected.
In the case of the Birkin, the lawsuit has alleged that Hermès abused their market power by coercing shoppers to build up a profile at Hermès by purchasing ancillary products to get the opportunity to buy a Birkin. This can be seen as anti-competitive as the ancillary products were being purchased for the expressed purpose of acquiring a Birkin while having many market alternatives. After all, practically identical scarves or sandals are sold by other luxury fashion retailers, fulfilling conditions one and two as there are “two [otherwise] separate products” being packaged and sold together with the sale of a Birkin “conditioned on the purchase of [other items].” This is the strongest part of the case, with Glinoga attesting he was “told on each occasion he needed to purchase other items and accessories” when trying to purchase a Birkin in 2024. The desperation for a Birkin is evident by the exorbitant prices they draw on resale markets, which reach up to $250,000 — and these are just the non-diamond-studded ones!
However, despite a general understanding that auxiliary purchases are required to be offered a Birkin, there is no clear-cut protocol that proves that “the sale or agreement to sell one product or service is conditioned on the purchase of another.” Hermès itself asserts that it “strictly prohibits any sale of certain products as a condition to the purchase of others.” Avalleri and Glinoga have submitted, however, that despite explicit proof, the necessity of the purchase of auxiliary products can be implied by the commission system for sales associates. Associates do not receive commissions, which make up the bulk of their salary on Birkins, only on ancillary products. This suggests Hermès wants them to encourage clients to build up purchase history before being sold a Birkin. Additionally, many ex-sales associates have admitted they were the gatekeepers to the elusive Birkin and highlighted the importance of brand loyalty.
However, despite meeting the first two conditions, the case falls flat on conditions three and four. Condition four is unlikely to be met as no judge or jury will rule that a “substantial amount of interstate commerce in the tied product [other luxury items] is affected” by Birkin sales. Proving condition three requires Hermès to have a monopoly over the tied products, which are other luxury products like shoes or scarves. This is unlikely to be proven since the sales of other luxury items have not been significantly impacted. As a result, Hermès filed for dismissal in the San Francisco Federal court, stating the plaintiffs have not met the required legal test to prove tying given that “Hermès faces clear competition from different sellers on the wide range of products it sells.”
Proving Hermès has “sufficient economic power in the market for Birkin handbags to coerce customers into purchasing tied [ancillary] products” is additionally challenging. While the Birkin bag is only sold by Hermès, it has many close substitutes with many similar bags on the market manufactured by YSL, Ferragamo, Louis Vuitton, and Burberry. Additionally, buyers are able to purchase the bag in good condition from resellers online without having to purchase ancillary products, voiding this line of argument. Thus, while conditions one and two may be met, the plaintiffs will struggle to prove Hermes was able to establish a monopoly. Failing to satisfy conditions three and four essentially renders the suit frivolous.
While the suit is unlikely to help Avalleri and Glinoga get their hands on Birkins, it begs the question of why they would go to the lengths of suing for one. While the outcome of the decision may appear trivial and only relevant to the fashion world, it should give pause to the ultra-rich, encouraging them to reflect on why the Birkin has achieved its coveted status, and whether there are limits to what the ultra-rich can acquire with their wealth.
Beyond the displays of luxury fashion houses, this suit has the potential to cause ripple effects in the rest of the world. If a court rules that Hermès has a monopoly over the Birkin, it is unclear what repercussions it would have for other signature products. Would McDonald’s now be considered to have a monopoly because of the Big Mac despite it not being distinct from other closely substitutable burgers by competing fast-food chains in anything but name? Would they be required to sell Kids Meals’ toys — arguably nearly just as coveted — separately? Will airlines require you to purchase seats with all the currently optional add-ons, driving up prices?
A ruling dictating that the Birkin is not an instance of tying could permeate throughout the economy, setting a precedent about anti-trust legislation that alters practices in otherwise unrelated industries.
