Hermès International and its U.S. subsidiary (collectively “Hermès”) are pushing back against the lawsuit being waged against them for allegedly tying the availability of the coveted Birkin bag to the sale of “ancillary” Hermès products, a practice that the plaintiffs claim violates U.S. antitrust and competition laws. In a newly-filed motion to dismiss, the French luxury brand is looking to escape the proposed class action lawsuit filed against it, arguing that the plaintiffs have not alleged adequate facts to back up their antitrust claims, fail to define the relevant market at issue, and do not demonstrate that it maintains the necessary market power to sustain anti-competition claims, among other shortcomings.
The lawsuit – which was originally filed with the U.S. District Court for the Northern District of California by Tina Cavalleri and Mark Glinoga (the “plaintiffs”) and subsequently amended to add new allegations and an additional plaintiff – accuses Hermès of running afoul of federal and state antitrust laws by conditioning access to its coveted Birkin and Kelly handbags on the purchase of other Hermès products. This serves to restrict competition and exploit consumer demand, according to the plaintiffs.
While the headline-making case aims to hold Hermès accountable for allegedly carrying out a scheme to “maintain supra competitive prices and engage in unlawful restraints of trade,” Hermès argues in its July 2 motion to dismiss that even in the amended complaint, the plaintiffs’ allegations “come nowhere close to fixing the fatal flaws in their claims.” In particular, Hermès contends that the plaintiffs’ Sherman Act Section 2 tying claim should be dismissed on four grounds …
> Market Or Monopoly Power: The plaintiffs fail to allege that it maintains monopoly power “in any well-defined market,” Hermès asserts. While the plaintiffs allege that it “dominates the claimed luxury handbag market,” Hermès argues that they have not provided facts to establish its share of the luxury handbag market and in fact, the complaint acknowledges that it competes with other elite luxury brands like Gucci, Prada, and Louis Vuitton, thereby, “fatally undermin[ing] any inference of market or monopoly power.”
> Willful Maintenance or Acquisition of Monopoly Power: Hermès asserts that the plaintiffs fail to plead that it willfully acquired or maintained monopoly power in the relevant market. Instead, the luxury goods company claims that they set out “conclusory allegations that [it] is dominant” in the market but not as a result of anticompetitive conduct, but thanks to a “combination of: (1) the success of the Hermès’ brand; and (2) the Birkin handbag’s reputation as a result of ‘[t]he intensive labor and craftsmanship and high-quality leathers’ required.”
The problem, per Hermès, is that “none of this conduct is remotely anticompetitive, and the plaintiffs do not allege otherwise.”
> Viable Tied Product Market: Hermès also maintains that the plaintiffs do not adequately allege a viable tied product market or effects, describing their arguments on this front as “facially unsustainable.” According to Hermès, the plaintiffs incorrectly group its products into a single “ancillary products” market, which includes “various disparate items” like jewelry, shoes, perfume, and home goods, resulting in a “contrived effort” that “fails as a matter of law.”
Alternatively, the plaintiffs “appear to allege that each category of ancillary products constitutes its own separate tied market,” Hermès states, arguing that even if the plaintiffs “could redefine the tied market from ancillary products to numerous separate markets for every single other product that Hermès sells, this would create another problem: Plaintiffs have not alleged substantial effects [on competition] in each of these supposedly tied markets.”
> Antitrust Standing: Finally, there is simply no antitrust injury at play here, per Hermès. The plaintiffs do not show that it excluded other sellers of the supposedly tied products, including jewelry, shoes, perfume, and home goods, Hermès asserts, and without allegations of exclusion, there is “no viable tying claim or harm to the competitive process.”
TLDR: “The amended complaint fails to remedy the fundamental deficiencies of the original complaint, including the lack of a properly defined market and the absence of any credible allegations of market power or anticompetitive conduct,” Hermès argues.
Beyond the Sherman Act-related pushback, Hermès also states that the plaintiffs’ California Cartwright Act and California Unfair Competition Law claims should be dismissed because they fail to allege harm to consumers or the competitive process.
As for what the plaintiffs do reveal in their amended complaint, according to Hermès, is the “true motive behind their lawsuit: Plaintiffs want on-demand access to Birkin and Kelly handbags so they can immediately resell them at higher prices.” If that “does not sound like the basis for a monopolization claim, it is because it isn’t one,” the Birkin-maker argues, stating that “nothing in the antitrust or unfair competition laws compels that outcome.” And mirroring an assertion from its initial motion to dismiss, Hermès maintains that “despite the continued unfounded assertions in the plaintiffs’ amended complaint, Hermès does not require a customer to purchase any other products before purchasing a Birkin or Kelly handbag … but, even if it did, that would not violate the law.”
With the foregoing in mind, Hermès says that the plaintiffs’ claims are insufficient under Federal Rule of Civil Procedure 12(b)(6), which allows for dismissal of complaints that fail to state a claim, since they have not (among other things) alleged any antitrust injury or harm to competition, essential elements of their key tying claim under the Sherman Act.
A hearing on Hermès’ motion to dismiss is scheduled for September 19, before Judge James Donato in San Francisco.
The case is Cavalleri, et al. v. Hermès International, et al., 3:24-cv-01707 (N.D. Cal.)
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