The cult of mystery — and status — that surrounds the Hermès Birkin bag is the subject of a new lawsuit. Here’s why

(CNN) — It’s so hard 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 have accused 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 their own profits. They allege that access to Hermès’ perpetually sold-out Birkin bag is predicated on the purchase of other products, resulting in an “illegal tying arrangement” that violates US antitrust law.

Hermès’ enigmatic selling practices — where the most desirable items, like Birkin and Kelly bags, are offered intermittently and usually to clients who already have a purchase history at the brand — have been endlessly dissected in fashion circles, and more recently have become the subject of countless TikTok videos and Reddit threads about how to play “the Hermès game,” with social media creators offering tips on how to get your hands on prestigious Hermès items through carefully coordinated interactions with sales associates.

Last year, Hermès told Business of Fashion it “strictly prohibits any sale of certain products as a condition to the purchase of others.”

Tightly controlled distribution (and scarcity) helped make the Birkin one of fashion’s most consistently covetable products and an asset class all its own — prices can more than double at resale. Hermès’ ultra-exclusive positioning has meant Birkin sales have continued to overperform in the market even as most other luxury brands see demand slowing from post-pandemic highs. Revenue rose 21 percent year-over-year in 2023, while net profit was up 28 percent.

But now, it’s potentially landed the brand in legal trouble.

Playing the ‘Hermès game’

Like most luxury houses, Hermès tightly controls its distribution — it sells its leather goods only through its own stores, where stock is never marked down. Birkin and Kelly handbags, in particular, aren’t sold online and sometimes aren’t even displayed in stores.

The brand’s retail experience varies from city to city; local Hermès staff are given a long leash to determine how its handbags — for which demand outstrips supply — are sold. Some bags are allocated via waitlists, others offered at the sales associate’s discretion. Others are reportedly offered on a first-come-first-serve basis, particularly at the brand’s original flagship location in Paris. Clients’ preferences are registered, but when customers are offered a particular Birkin, they don’t necessarily get to choose the style or color.

The ambiguity of the process has sparked speculation around who gets a bag and why. TikToks, YouTube videos and Reddit threads on the “Hermès game” detail shoppers’ paths to nabbing so-called “quota bags” (even the most loyal Hermès customers are only allowed to indulge in these styles a limited number of times a year). Creators offer advice on what to say, how to dress, and when and where to go to better their chances of scoring. Customers share theories about how much to spend on lipsticks, sweaters, sandals and dog beds to secure an offer or a preferred style — with some estimates climbing into the tens of thousands.

“You have to buy their shoes, their pillows … that little $900 horse to show your appreciation for the brand,” asserted one TikTok user. Another referred to the process as “pledging allegiance to the brand.”

Others tell stories of snagging sought-after bags without spending heavily on other items, suggesting that the alleged practices are not completely systematic — or that some shoppers are choosing to go overboard (perhaps because they are unwilling to wait months for a bag offer).

Why would Hermès do this?

Hermès can only produce so many of the handbags each year, and it has to decide who gets them somehow.

“(Hermès) is driven by supply, not demand,” said Erwan Rambourg, global head of consumer and retail research at HSBC. “It is not going to wave a magic wand and suddenly be able to produce a lot of products.”

The system could help to preserve balance between leather goods and other categories in Hermès’ business — which has long been a priority for the company, as it employs thousands of French artisans specialized in skills like weaving silks, painting enamel bracelets or even silk-screening its beach towels.

Saving the best Birkins for their biggest — or highest-spending — clients could simply be savvy business. Plus, it drives mystique.

A more balanced sales mix and long waitlist for key products help the brand maintain consistency year-over-year, making it more appealing to investors.

Prioritizing clients who spend heavily on other categories could also de-incentivize resellers looking to flip bags for a profit.

Is it illegal?

Counsel for the plaintiffs (the legal teams at California-based Setareh Law Group and Haffner Law) claim Hermès is in violation of US antitrust regulations that prohibit abuse of market power through bundling goods or tying them to other purchases. A seller also must have enough market power to restrain the free trade of a good. Microsoft, for example, was accused of the same type of antitrust violation for compelling users of its operating system to also use its browser in the 1990s.

The lawsuit alleges shoppers are required to buy ancillary products (items like scarves, pillows or shoes) before being allowed to purchase a Birkin handbag. Sales associates are “directed to only offer Birkin handbags to consumers who have established a sufficient ‘purchase history’ or ‘purchase profile,’” claimed counsel for the plaintiff in the complaint.

The complaint pointed to the company’s commission structure — where staff allegedly don’t receive payment for sale of a Birkin, but do for other goods — as evidence of the scheme.

Hermès did not reply to a request for comment.

Preferential treatment is a common business practice that doesn’t violate antitrust law, however, said Susan Scafidi, director of the Fashion Law Institute at Fordham University, who compares it to getting the best table at a restaurant. The plaintiffs have to show that Hermès has specific requirements — whether spending a certain amount or buying a certain number of products over a period of time — nearly every customer must meet before purchasing a Birkin.

The prevailing wisdom on how to get a Birkin suggests there isn’t as clear-cut a protocol; Stories of walk-in customers nabbing a bag at the Paris flagship could make it harder to prove the existence of a tying scheme. Plus, the bag’s proliferation on the secondary market means a consumer has other avenues for obtaining one, said Scafidi. Presumably, the plaintiffs could buy a Birkin from The RealReal even if they can’t from Hermès directly.

“It’s going to be a really tough case for those plaintiffs to win,” said Scafidi.

Perhaps the bigger issue for Hermès is that the lawsuit opens the publicity-shy brand and its practices up to further scrutiny.

What happens next?

Hermès will have to respond to the complaint, either with a quiet settlement or a public statement in a court filing of their own. Whether the case goes to trial will depend in part on how much time and money the plaintiffs want to spend on discovery — gathering evidence and testimony. Because the plaintiffs filed a class action lawsuit, they will also have to get certification from the court that they can represent a class of people who have been treated the same way.

In the meantime, Hermès will need to strike a balance between reassuring sales associates and clients that its practices are legal while avoiding a drawn-out court process which could expose details about their business practices. The suit is a non-issue for most investors, said Rambourg.

Still, the fashion industry at large will be watching the lawsuit’s progression to gauge the wider implications, as other high-end brands evaluate whether their own tactics could potentially line up with the legal definition of tying.

The industry runs on customer loyalty; top shoppers are regularly rewarded with access to exclusive gatherings and collections. Some luxury fashion houses have been said to set aside many items for special clients, while high-end watch brands have to find colorful tactics for juggling more clients than they have timepieces to sell.

“You buy luxury to be part of the club,” said Rambourg. “That’s what it’s about. It defeats the purpose if the club is open to everyone.”

Regardless of the outcome, the lawsuit is the latest complaint putting how, not just what, brands sell under increased scrutiny, with once-cloistered transactions now the subject of public — and legal — debate.

Read more stories from The Business of Fashion here.

The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.