EDITOR’S NOTE | This article was originally published by The Business of Fashion, editorial partner of CNN Style
It’s so difficult to get your hands on an Hermès Birkin bag that it should be illegal.
That’s according to two would-be Birkin buyers who filed a complaint against the French luxury brand in a Northern California district court on March 19.
The plaintiffs accuse Hermès of exploiting the “incredible market power” that comes from the “unique desirability, incredible demand and low supply” of its most prestigious bag to drive up prices and increase its own profits. They claim that access to the Birkin bag, which is perpetually sold out, is dependent on the purchase of other products, which results in an “illegal tying agreement” that violates legislation antitrust [de combate às práticas de monopólio] from the USA.
Hermès’ arcane sales practices – in which the most desirable items, such as Birkin and Kelly bags, are made available intermittently and typically to customers who already have a history of purchasing from the brand – have been endlessly dissected in fashion circles. fashion and, more recently, they have become the subject of countless TikTok videos and Reddit threads about how to play “the Hermès game”, with social media users offering tips on how to get your hands on prestigious Hermès items through carefully coordinated interactions with sellers.
Last year, Hermès told Business of Fashion that it “strictly prohibits any sale of certain products as a condition of the purchase of others.”
Tightly controlled distribution (and scarcity) has helped make the Birkin one of fashion’s most coveted products and an asset class in its own right — prices can more than double on resale. Hermès’ ultra-exclusive positioning has seen Birkin sales continue to outperform the market, even as most other luxury brands see demand slowing from post-pandemic highs. Revenue increased 21% year on year in 2023, while net profit increased 28%.
But now, it has potentially landed the brand in legal trouble.
Play the “Hermès game”
Like most luxury houses, Hermès strictly controls its distribution – it sells its leather goods only through its own stores, where stock is never reduced. Birkin and Kelly bags, in particular, are not sold online and sometimes are not even displayed in stores.
The brand’s retail experience varies from city to city; local Hermès staff have a short rein in determining how their bags – for which demand outstrips supply – are sold. Some bags are allocated through waiting lists, others are made available at the seller’s discretion. Others are available on a first-come, first-served basis, especially at the brand’s headquarters in Paris. Customer preferences are recorded, but when they are offered a specific Birkin they don’t necessarily have to choose the style or color.
The ambiguity of the process has given rise to speculation about who receives a suitcase and why. TikToks, YouTube videos and Reddit threads about the “Hermès game” detail shoppers’ paths to obtaining so-called “quota bags” (even Hermès’ most loyal customers can only enjoy these styles a limited number of times per year ). Users give advice on what to say, how to dress and when and where to go to increase your chances of being successful. Shoppers share theories about how much they should spend on lipsticks, sweaters, sandals and dog beds to secure a deal or a preferred style – with some estimates running into the tens of thousands.
It is not yet known whether the case against Hermès will go to trial. However, the complaint could have sector-wide implications. Other luxury brands have been the subject of similar accusations, particularly in China, where shoppers have complained about rising barriers to accessing highly sought-after products. Alex Tai/SOPA Images/LightRocket/Getty Images
“You have to buy their shoes, their cushions… that $900 horse [cerca de 850 euros] to show our appreciation for the brand,” said one TikTok user. Another referred to the process as “pledge of brand loyalty.”
Others tell stories of how they managed to obtain sought-after bags without spending too much on other items, which suggests that the alleged practices are not completely systematic – or that some buyers are choosing to go overboard (perhaps because they are not willing to wait months for an ‘offer’). ).
Why does Hermès do this?
Hermès can only produce a certain number of bags per year and has to decide who gets them.
“Hermès is driven by supply and not demand,” says Erwan Rambourg, global director of consumer and retail studies at HSBC. “You’re not going to wave a magic wand and suddenly be able to produce a lot of products.”
The system could help preserve the balance between leather goods and other categories of Hermès’ business – which has long been a priority for the company as it employs thousands of French artisans specializing in skills such as silk weaving. , painting enamel bracelets or even screen printing your beach towels.
Saving the best Birkins for your biggest customers — or your highest spenders — might just be smart business. Furthermore, it generates mystique.
A more balanced sales mix and a long waiting list for key products help the brand maintain consistency year after year, making it more attractive to investors.
Prioritizing customers who spend a lot in other categories can also disincentivize retailers looking to sell bags at a profit.
Is it illegal?
The plaintiffs’ lawyers (the California-based legal teams Setareh Law Group and Haffner Law) allege that Hermès is violating regulations antitrust that prohibit the abuse of market power through the bundling of goods or their association with other purchases. The seller must also have sufficient market power to restrict free trade in a good. Microsoft, for example, was accused of the same type of violation antitrust for forcing users of its operating system to also use their browser in the 1990s.
The lawsuit alleges that buyers are required to purchase ancillary products (items such as scarves, pillows or shoes) before being allowed to purchase a Birkin bag. Sellers are “directed to make Birkin bags available only to consumers who have established a sufficient ‘purchasing history’ or ‘purchasing profile,'” the plaintiff’s attorney argues in the complaint.
The complaint pointed to the company’s commission structure — in which employees allegedly do not receive payment for the sale of a Birkin, but do receive it for other goods — as evidence of the scheme.
Hermès did not respond to a request for comment.
However, preferential treatment is a common business practice that does not violate legislation antitrust, explained Susan Scafidi, director of the Fashion Law Institute at Fordham University, who compares it to getting the best table in a restaurant. Plaintiffs must demonstrate that Hermès has specific requirements — whether it’s spending a certain amount or purchasing a certain number of products over a period of time — that almost all customers must meet before purchasing a Birkin.
The prevailing wisdom on how to get a Birkin suggests that there is no such clear protocol; Stories of customers walking into the Paris store to get a suitcase can make it difficult to prove the existence of a tying scheme. Furthermore, the proliferation of suitcases on the secondary market means that consumers have other ways of obtaining them, said Scafidi. Presumably, plaintiffs could purchase a Birkin on The RealReal, even if they could not do so directly from Hermès.
“It will be a very difficult case for the plaintiffs to win”, considered Scafidi.
Perhaps the most important issue for Hermès is that the process opens the publicity-shy brand and its practices to greater scrutiny.
What happens next?
Hermès will have to respond to the complaint, either with a discreet settlement or with a public statement in its own legal process. Whether the case goes to trial will depend, in part, on the time and money that the plaintiffs want to spend – such as, for example, collecting evidence and testimony. Once plaintiffs have filed a class action lawsuit, they will also have to obtain certification from the court that they can represent a class of people who have been treated in the same way.
Meanwhile, Hermès will have to strike a balance between reassuring sales associates and customers that its practices are legal and avoiding a lengthy lawsuit that could expose details about its business practices. The process is a non-issue for most investors, Rambourg pointed out.
A worker prepares a suitcase at a Hermès leather goods workshop in Allenjoie, France, on April 5, 2018. Sebastien Bozon/AFP/Getty Images
Still, the fashion industry at large will be watching the process unfold to assess the broader implications, as other high-end brands assess whether their own tactics could potentially meet the legal definition of subordination.
The industry runs on customer loyalty; Top buyers are regularly rewarded with access to exclusive presentations and collections. It is said that some luxury fashion houses reserve many items for special customers, while high-end watch brands have to find colorful tactics to juggle more customers than the watches they have to sell.
“You buy luxury to be part of the club,” noted Rambourg. “That’s what it’s all about. If the club is open to everyone, the objective will not be achieved.”
Regardless of the outcome, the lawsuit is the latest complaint that puts the way brands sell, not just what they sell, under greater scrutiny, with once-secret transactions now the subject of public — and legal — debate.
