The Gray Market: Why contemporary dealers and collectors are monitoring an antitrust lawsuit over Birkin bags

The global luxury brand Hermès has been hit with a lawsuit in California alleging that the sale strategy for its most sought-after handbag, the Birkin, violates federal and state antitrust statutes. The complaint has perked up the ears of several art business veterans based on the similarities between how Hermès allegedly selects who can acquire Birkins and how commercial gallerists select who can acquire new works by their most in-demand artists. But my conversations with multiple antitrust experts suggest that the lawsuit and the provocative comparison to the art market are both dead on arrival.

The plaintiffs in the complaint, filed in California’s northern district on 19 March, are Tina Cavalleri and Mark Glinoga, two longtime Hermès customers who claim they tried to purchase Birkin bags but were told by sales associates that they had not spent enough money on the brand to qualify for the privilege. The lawsuit goes on to accuse Hermès of directing “an illegal scheme and conspiracy” in which clients who only want a Birkin must first strengthen their “purchase profile” by buying an untold amount of “ancillary” Hermès products, such as belts, scarves and non-Birkin handbags.

Furthermore, the complaint alleges, even when a customer earns the chance to acquire a Birkin, they will only “be given the opportunity to purchase the specific Birkin handbag which they are shown”, adding: “For all practical purposes, there is no way to order a bag in the style, size, colour, leather and hardware that a consumer wants.” In other words, there is no optionality; a client either agrees to buy the Birkin they’re offered or turns it down with no guarantees as to when—or if—they will be offered another.

The lawsuit has been structured to expand to class action status if additional customers wish to join. The plaintiffs are seeking a court-ordered end to Hermès’s alleged preferential sales of Birkins, as well as unspecified damages (with interest), the payment of their lawyers’ fees and any other relief the court may deem appropriate.

Reading their accusations against Hermès should have given almost any participant in, or student of, the contemporary art market a case of déjà vu. Collectors and advisers have complained during recent boom times that getting access—or at least the hope of access—to new works by some galleries’ most in-demand artists has depended on first buying an untold number of works by other, less sought-after artists on the same roster. Similarly, when these same dealers do offer clients a fresh-from-the-studio piece by an artist with a waiting list, the offers often mirror those alleged in the Birkin lawsuit: take this one or leave it (and risk being shunted to the back of the line for who knows how long).

Based on the number and diversity of art professionals who sent me an article about the Birkin lawsuit in the days after its filing, I can tell you that plenty of people in our industry are wondering if this case could blow a gaping hole into the way primary market dealers operate. After consulting with multiple antitrust experts, I’m here to tell those folks that the only minor impediment to that outcome is that the antitrust case against Hermès has almost no prayer of moving forward—and neither would that of any art collector interested in suing a gallery on the same basis.

Untying the law

The crux of Cavalleri and Glinoga’s complaint is the allegation that Hermès’s purported sale strategy for Birkins qualifies as an instance of what antitrust law calls “tying”. “‘Tying’ means you have substantial market power in X, and if people want the X they have to buy the Y,” says George Hay, a professor of law at Cornell University and a former official in the US Department of Justice’s antitrust division.

The “X” and “Y” in Hay’s framing could be any two products or services controlled by the same entity. If a major development company builds a number of condo towers but will only sell a unit (call it “X”) to people who also agree to sign up for a weekly cleaning service from the maintenance company it owns (call it “Y”), that would be an example of illegal tying in the US. (European antitrust law is different, but that’s another column.)

To a novice, this scenario looks problematic for both Hermès (if it really is selling Birkin bags the way the plaintiffs allege) and any gallerist who pressures collectors to buy other works from their programme before offering them the work they actually want. To an antitrust expert, however, it misses a fundamental point about who antitrust law has been written to protect.

“The law in the US focuses on how you got your monopoly and how you keep your monopoly, meaning how you kill off competitors. This [Hermès] complaint has nothing to do with that,” says Hay, adding: “The focus of tying law is not on the people buying the X, it’s on the people selling the Y.”

In other words, for an antitrust lawsuit to succeed in a US court, it doesn’t have to show that the defendant’s business practices are unfairly hurting consumers; it has to show that the defendant’s business practices are unfairly hurting competitors in the “tied” market (aka the market for the thing consumers begrudgingly buy to get something else they really want).

This means Cavalleri and Glinoga’s complaint would have to make a strong case that the way Hermès supposedly sells Birkins unjustly damages the sellers of other belts, scarves and luxury accessories by syphoning away business for those items to Hermès instead. It also means that, in theory, anyone suing a dealer for preferential distribution of a hot artist’s new work would have to make a strong case that said dealer was unjustly damaging the other galleries who represent the less wanted artists whose works he is treating as prerequisite purchases.

But to accomplish either of these goals in the US, the plaintiffs and their lawyers would have to overcome a mountain of antitrust precedent.

Gagosian’s solo stand of new Jadé Fadojutimi paintings sold out before the opening of Frieze London in 2022.

David Owens

Brands (and artists) are not markets

Mark Lemley, a professor at Stanford Law School and a practising lawyer in cases on intellectual property, antitrust and internet law, seconds Hay’s pessimism about the Birkin complaint’s prospects in court.

“I’m sceptical there is an antitrust problem here,” he wrote in an email. “Many companies, including wineries, with limited availability and great demand allocate that demand to their best customers. I am not sure that is a problem, and certainly not unless there is a risk of monopolising an actual market, which doesn’t seem true here. Lots of people want Birkins, but there ARE other bags, after all.”

This last point, about what constitutes a market in an antitrust sense, is key to the lawsuit against Hermès. “There’s lots of case law that says a brand doesn’t make a market,” Hay says. “In the overall sale of handbags, Birkins must have trivial market share,” he adds. For the antitrust case against Hermès to have merit, “you’d have to define the market very narrowly as Birkin bags, and courts are very reluctant to define a market as a brand”.

This precedent should give pause to any collector considering suing an art dealer in the US for preferentially parcelling out new works by sizzling hot artists. For such a hypothetical lawsuit to succeed, the court would have to break away from decades of case law by ruling that the market in question is only for, say, Jadé Fadojutimi paintings instead of all paintings—just as the Hermès lawsuit’s only hope for success hinges on a court ruling that the market in question is only for Birkin bags instead of all handbags.

Hay is unequivocal about the prospects of a court defining an art market so narrowly. “That would be absurd,” he says. “From an antitrust perspective, If I say, ‘I only sell to my regular customers. I have a few paintings from very desirable artists. I don’t sell to people off the street,’ there’s nothing wrong with that.”

Even if there was, the plaintiffs would probably have a tough time proving it in court. Doing so would depend on turning up evidence of a concrete, top-down policy enumerating exactly what a client must do before they will be offered a new piece by a sought-after artist on the gallery’s roster. It is highly unlikely to me that a programme like this exists at any commercial gallery anywhere on earth. The overwhelming majority of them are, to put it diplomatically, too idiosyncratic to formalise such a set of benchmarks, and the minority with sophisticated behind-the-scenes operations are also savvy enough to know that doing so could entail real legal exposure.

For the same reason, I doubt Hermès would be in significant danger even if the court were to allow Cavalleri and Glinoga’s lawsuit to proceed to the discovery phase. But there seems to be little chance of that happening based on the history of US antitrust litigation. The Birkin complaint is probably doomed to fail, and anyone interested in applying a similar legal argument to the art market may want to think twice before following its trail into a US court.

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