Hermes: Ninth Circuit appeal arguments in Birkin bag ‘tying’ antitrust class action Feb 2026

Ninth Circuit Appeal Docket 25-16012: The February 12 Hearing Record

The oral arguments presented before the Ninth Circuit Court of Appeals on February 12, 2026, in the matter of Cavalleri et al. v. Hermès International et al., mark a pivotal moment in the enforcement of American antitrust law within the luxury sector. The appeal, docketed as No. 25-16012, challenges the September 17, 2025, dismissal with prejudice by U. S. District Judge James Donato, who ruled that the plaintiffs failed to plausibly allege an unlawful “tying” arrangement under the Sherman Act. The hearing record reveals a sharp collision between the plaintiffs’ theory of “implicit coercion” and the district court’s demand for rigorous market definition.

The Procedural Baseline

The appeal rests on a factual record established over eighteen months of litigation in the Northern District of California (Case No. 3: 24-cv-01707). The original complaint, filed in March 2024, and the Second Amended Complaint (SAC), filed in October 2024, alleged that Hermès implemented a scheme whereby consumers were required to purchase “ancillary products”, such as shoes, scarves, jewelry, and home goods, to build a “profile” sufficient to qualify for the purchase of a Birkin or Kelly handbag. Judge Donato’s dismissal in September 2025 held that the plaintiffs failed to define a coherent “tied product market” and could not demonstrate that Hermès possessed sufficient market power to restrain trade.

During the February 12 session, appellants argued that the district court applied an evidentiary standard at the pleading stage that nullified the “per se” illegality of tying arrangements. The core of the appellants’ argument is that the “profile” requirement functions as a de facto contract, forcing consumers to spend thousands of dollars on unwanted items to access the “tying” product (the Birkin). The defense maintained that the practice constitutes legitimate brand curation and that scarcity alone does not equal antitrust injury.

The Market Definition Dispute

A central point of contention in the hearing record is the definition of the “relevant market.” The plaintiffs attempted to define the tying market as “elitist luxury handbags,” a sub-segment where they claimed Hermès holds dominant power. Judge Donato rejected this definition in his 2025 order, characterizing it as “vague” and unsupported by economic reality. The record shows the following in market theories:

The appellants argued on February 12 that the district court erred by refusing to accept the “elitist” distinction, citing the Birkin’s unique status as an asset class that appreciates in value, unlike standard luxury goods. They contended that for antitrust purposes, a product with no substitutes constitutes its own market. The panel questioned whether “investment value” transforms a consumer good into a distinct market, a legal theory that tests the boundaries of the Eastman Kodak Co. v. Image Technical Services precedent.

The “Kaleidoscope” of Tied Products

The “tied product” argument faced intense scrutiny. In the dismissed SAC, plaintiffs alleged that the requirement to buy ancillary goods harmed competition in those specific sectors. Judge Donato’s dismissal order famously referred to this as a “kaleidoscope of products,” ruling that lumping together shoes, belts, and porcelain trays into a single “ancillary market” was legally insufficient. He noted that the plaintiffs failed to show how Hermès’ conduct specifically restrained competition in the market for scarves or the market for shoes.

At the appeal hearing, counsel for the plaintiffs pivoted to a “foreclosure of choice” argument. They posited that the aggregate effect of the tying arrangement siphoned millions of dollars away from competitors in various sectors, regardless of whether those sectors were defined individually or shared. The record indicates the judges pressed for data on the “volume of commerce” affected, a necessary element to trigger a Sherman Act violation. The plaintiffs pointed to the high price point of the ancillary spend, frequently exceeding the $10, 000 cost of the bag itself, as evidence of substantial economic impact.

Coercion vs. Curation

The method of the alleged tie remains the most factually dense portion of the record. Unlike a written contract stating “you must buy X to get Y,” Hermès use a system of sales associate discretion. The plaintiffs describe this as a “hidden lottery” where the purchase history is the only variable the consumer can control. The appeal record highlights the following mechanics alleged by the plaintiffs:

“Consumers are not told the specific threshold required to ‘unlock’ a Birkin. yet, sales associates are instructed to offer Birkin bags only to clients with a specific ‘profile’ of ancillary spending. This opacity does not remove the coercive element; it amplifies it by inducing over-spending in a desperate bid to qualify.”

Hermès’ defense relied on the argument that “willingness to pay” and “brand loyalty” are valid metrics for allocating scarce goods. They the 2023 Ninth Circuit ruling in Epic Games v. Apple, arguing that a business has the right to choose its customers and that frustration over exclusivity does not constitute an antitrust injury. The defense reiterated Judge Donato’s finding that “antitrust laws are not designed to prevent disappointment.”

The “Per Se” vs. “Rule of Reason” Standard

A technical serious component of the February 12 hearing involved the standard of review. Tying arrangements can be “per se” illegal if the defendant has market power and the tie is explicit. The district court dismissed the case partly because it found the plaintiffs failed to plead the necessary market power to invoke the “per se” rule. On appeal, the plaintiffs argued that the unique economic properties of the Birkin, specifically its demand curve which defies standard elasticity, confer market power even without a traditional monopoly market share. They urged the Ninth Circuit to reinstate the case to allow for discovery, which would reveal the internal algorithms Hermès uses to determine customer eligibility.

The record of the hearing concludes with the panel taking the matter under advisement. The outcome hinge on whether the Ninth Circuit believes the “elitist handbag” market definition is plausible enough to survive a motion to dismiss, or if the district court was correct in demanding a more conventional economic framework. The decision determine whether luxury brands can continue to use “spend history” as a gatekeeper for their most coveted products or if such practices violate the Sherman Act’s prohibition on restraint of trade.

Sherman Act Section 1 and 2: The Specific Tying Allegations Reviewed

The legal architecture of *Cavalleri et al. v. Hermès International* rests on a precise application of the Sherman Antitrust Act, specifically Sections 1 and 2. While the public fascination centers on the exclusivity of the Birkin bag, the legal filings detail a systematic economic structure allegedly designed to distort market competition. The plaintiffs’ case, which faced dismissal in the Northern District of California on September 17, 2025, before reaching the Ninth Circuit, articulates a theory of “coerced tying” that challenges the foundational operations of the ultra-luxury sector.

The Mechanics of the Alleged Tie

At the core of the complaint lies the accusation of a *per se* illegal tying arrangement under Section 1 of the Sherman Act. A tying arrangement exists when a seller conditions the sale of one product (the tying product) on the buyer’s purchase of a second product (the tied product). The plaintiffs identify the **Birkin and Kelly handbags** as the “tying products”, items of such high demand and low supply that they confer significant market power. The “tied products” are identified as “ancillary products,” a category encompassing Hermès’ ready-to-wear clothing, scarves, shoes, jewelry, and home goods. The complaint alleges that Hermès does not explicitly write this requirement into a contract enforces it through a “purchase profile” system. Customers must build a sufficient “purchase history” of these ancillary items to be “deemed worthy” of an offer to buy a Birkin. The structural enforcement of this tie, according to the filings, is financial. The plaintiffs presented data showing that Hermès sales associates receive a **3% commission** on the sale of ancillary products (shoes, scarves, belts) **0% commission** on the sale of Birkin or Kelly bags. This compensation model creates a direct financial incentive for staff to withhold the high-demand handbags until a customer has expended significant capital on other merchandise.

“The nominal retail price of a Birkin bag is a facade, masking a hidden lottery system that forces consumers to purchase substantial amounts of Hermès ancillary products.” , *Plaintiff’s Second Amended Complaint (2025)*

Market Definition and Monopoly Power

To sustain a claim under Section 2 of the Sherman Act, which prohibits monopolization, the plaintiffs attempted to define a specific relevant market. They proposed a market for **”Elitist Luxury Handbags”** in the United States. Within this narrow definition, the complaint asserted that Hermès holds a dominant position, controlling between **60% and 75%** of the market share. This definition sought to exclude broader luxury handbags from competitors like Gucci, Louis Vuitton, or Prada, arguing that the Birkin and Kelly possess unique cross-elasticity of demand, meaning a price increase in a Birkin does not cause consumers to switch to a Chanel flap bag. The plaintiffs argued that the Birkin is an asset class unto itself, distinct from functional fashion accessories.

The “Kaleidoscope” of Ancillary Products

A serious point of contention in the district court proceedings was the definition of the “tied market.” The plaintiffs aggregated all non-handbag Hermès products into a single “ancillary products” market. Judge James Donato, in his September 2025 dismissal order, characterized this as a “kaleidoscope” of non-substitutable goods. The court found that lumping together items, ranging from $500 silk scarves to $50, 000 furniture, failed to define a coherent market where competition was harmed. The logic follows that if Hermès forces a customer to buy a scarf, the harm to competition must be shown in the *scarf market*. By aggregating all products, the plaintiffs failed to show how Hermès’ practices specifically injured competition in the markets for shoes, jewelry, or home goods individually.

Judicial Scrutiny and Dismissal

Judge Donato’s dismissal of the Second Amended Complaint highlighted three fatal deficiencies in the plaintiffs’ Sherman Act theories: 1. **Market Definition:** The court rejected the “Elitist Luxury Handbag” market as factually unsupported. The judge noted the reliance on “random soundbites” and outdated articles rather than rigorous econometric data to prove that Birkins occupy a market separate from other luxury bags. 2. **Coercion vs. Scarcity:** The court distinguished between an antitrust violation and a business strategy based on scarcity. The ruling posited that a business has the right to choose its customers and that “relationship-based retailing” does not automatically constitute illegal coercion. 3. **Market Power:** Without a valid market definition, the claim of 60-75% market share collapsed. The court ruled that the plaintiffs did not demonstrate that Hermès had the power to raise prices or exclude competitors in a properly defined market.

The Appeal Strategy

The appeal to the Ninth Circuit focuses on correcting what the plaintiffs view as the district court’s overly rigid pleading standards. The appellants that the “purchase profile” requirement is a functional tie that achieves the same anticompetitive effect as a contractual tie. They contend that the “ancillary product” market definition is sufficient because the *harm* is the foreclosure of consumer choice across *any* category the consumer is forced to buy. The plaintiffs also challenge the court’s dismissal of the Section 2 monopoly claim, asserting that the “Elitist Luxury Handbag” market is a recognized economic reality, evidenced by the secondary market premiums where Birkins trade at 200-300% of retail value—a phenomenon not seen with “substitutable” luxury bags.

The 3% Commission Differential: A Structural Incentive for Coercion

The central economic engine of the alleged tying arrangement, and a focal point of the Ninth Circuit appeal, is the clear in sales associate compensation. Verified payroll data and internal policy documents in the appellant’s brief reveal a compensation structure designed to penalize the sale of the primary product while aggressively rewarding the sale of tied products.

According to the evidentiary record, Hermès sales associates receive a 3. 0% commission on “ancillary products,” a category explicitly defined to include shoes, scarves, belts, jewelry, and home goods. In contrast, the commission rate for “quota bags”, specifically the Birkin and Kelly handbags, is set at 0%. Non-quota handbags (such as the Herbag or Picotin) attract a 1. 5% commission.

During the February 12 oral arguments, plaintiffs’ counsel argued that this “inverted incentive” creates a widespread mandate for coercion. By stripping the flagship product of any financial reward for the associate, Hermès deputizes its staff to enforce a pay-to-play barrier. The “metric” for a sales associate’s financial survival is not the sale of the luxury bag itself, the accumulation of ancillary spend attached to the customer’s profile before the bag is even unlocked.

The “Purchase Profile” Thresholds

While Hermès has publicly denied the existence of a fixed “spend ratio,” the class certification filings present statistical analysis of customer purchase histories from 2020 to 2024 suggesting a de facto requirement. The “Ancillary Product Metric” refers to the ratio of spend on non-leather goods required to trigger a “quota bag” offer.

Data presented in the appellate briefs indicates that successful Birkin buyers maintain a 1: 1 to 2: 1 spend ratio, meaning for every dollar the bag costs (e. g., $12, 000), the customer has previously spent between $12, 000 and $24, 000 on ancillary items.

Defining the “Tied” Market

A serious friction point in the appeal is the definition of the “ancillary” market. The district court previously dismissed the complaint in part because the “tied products” were too diverse, a “kaleidoscope” of items ranging from $500 silk scarves to $50, 000 furniture. Judge Donato’s September 2025 dismissal order noted that plaintiffs failed to show how Hermès’ practices harmed competition in the market for scarves specifically, or furniture specifically.

In the Ninth Circuit appeal, the plaintiffs pivoted to define the tied market not by product type, by the “purchase profile utility.” They that for a Birkin-seeking customer, a Hermès ashtray is not purchased for its utility as an ashtray, for its utility as a “credit” toward the quota bag. This functional redefinition attempts to unify the “kaleidoscope” of goods into a single metric: qualifying spend.

“The consumer is not buying a scarf; they are buying ‘points’ in a hidden loyalty game where the rules are never published the entry fee is strictly enforced by the commission structure.”
, Excerpt from Appellants’ Opening Brief, Docket 25-16012, filed Feb 17, 2026.

Evidence of Coercion vs. Loyalty

Hermès defends the practice as “relationship-based retailing,” a standard luxury strategy to reward brand loyalty. yet, the “Ancillary Product Metric” undermines this defense by showing that the “relationship” is purely transactional and mathematically enforced.

The appeal record includes declarations from plaintiffs Tina Cavalleri and Mark Glinoga. Cavalleri alleges she spent “tens of thousands of dollars” on ancillary products, yet when she inquired about a Birkin in September 2022, she was told she had not been “consistent in supporting our business”, a euphemism, plaintiffs, for falling the required spend threshold. Glinoga’s experience in 2023 mirrors this; even with multiple attempts to buy a Birkin, he was explicitly counseled to purchase “other items and accessories”.

The 0% commission on Birkins is the smoking gun. If the goal were simply to sell luxury goods, a sales associate would be indifferent between selling a $12, 000 Birkin and $12, 000 worth of scarves. The fact that the former yields $0 commission and the latter yields $360 creates a, company-mandated economic force that overrides consumer choice. The associate cannot afford to sell a Birkin to a “low-profile” customer, as it consumes inventory without generating income.

The “Kaleidoscope” Defense

Hermès’ legal team that because the “ancillary” products are so varied, they cannot constitute a single “tied” market under Sherman Act precedent. They contend that a customer forced to buy a belt is not the same as one forced to buy a watch, and thus there is no coherent monopoly leveraging.

The Ninth Circuit panel scrutinized this during the February 12 hearing. One judge questioned whether the “interchangeability” of the ancillary goods, in the context of qualifying for a Birkin, makes them a single market of “qualifying spend.” If a $5, 000 watch and five $1, 000 scarves both serve the exact same function of “unlocking” the Birkin, they are fungible currency in the Hermès ecosystem, regardless of their physical differences.

This “currency” theory relies heavily on the commission data. By paying a flat 3% across all ancillary categories, Hermès itself treats these diverse products as equivalent units of “support” for the business, distinct from the non-commissioned quota bags.

Market Definition Dispute: Single-Brand Markets vs. High-End Interchangeability

The central legal fissure in Cavalleri et al. v. Hermès International, and the primary focus of the Ninth Circuit’s February 12, 2026, inquiry, lies in the definition of the relevant product market. For the plaintiffs to prevail on a Sherman Act Section 2 claim, they must prove Hermès possesses monopoly power. This requirement forces a binary confrontation: if the market is defined broadly as “luxury handbags,” Hermès is one competitor among giants like Chanel, Louis Vuitton, and Gucci, possessing no monopoly power. If, yet, the market is defined narrowly as “elitist luxury handbags” or restricted to the Birkin and Kelly lines themselves, Hermès holds a dominant, if not absolute, market share.

The “Elitist Luxury” Submarket Theory

In their Second Amended Complaint (SAC), dismissed by District Judge James Donato in September 2025, the plaintiffs attempted to gerrymander a market definition that excluded nearly all chance substitutes. They proposed a relevant market of “elitist luxury handbags,” a tier distinct from “accessible” or “aspirational” luxury. Under this definition, the plaintiffs alleged that Hermès controls between 60% and 75% of the market, a figure sufficient to establish monopoly power.

The plaintiffs’ argument relies on the economic concept of “singularity.” They contend that the Birkin bag exhibits zero cross-elasticity of demand with other high-end handbags. In economic terms, a price increase (or in this case, a coercive tie-in requirement) for a Birkin does not drive consumers to purchase a Chanel Classic Flap or a Dior Lady bag instead. The “investment grade” nature of the Birkin, which frequently trades on the secondary market at premiums exceeding 100% of retail value, renders it functionally unique. Plaintiffs argued that for the specific class of consumers targeted by Hermès, no other product serves as a viable substitute.

The Kodak Exception and Single-Brand Markets

To support this narrow definition, the appellants leaned heavily on the Supreme Court’s 1992 ruling in Eastman Kodak Co. v. Image Technical Services. In Kodak, the Court recognized that a single brand’s parts and services could constitute a separate market if consumers were “locked in” to the ecosystem after purchasing the primary equipment. The plaintiffs attempted to map this “lock-in” theory onto the Birkin purchasing process.

The argument posits that the “ancillary products” (scarves, jewelry, homeware) function as the “entry fee” to the Hermès ecosystem. Once a consumer has sunk tens of thousands of dollars into their “purchase profile,” they are locked in; switching to a competitor like Chanel would mean abandoning the “equity” built with their Hermès sales associate. During the February 2026 oral arguments, plaintiffs’ counsel argued that this sunk-cost creates a derivative aftermarket where Hermès wields absolute power, mirroring the Kodak framework.

Hermès’ Defense: Interchangeability and Queen City Pizza

Hermès’ defense, upheld by the District Court and reiterated before the Ninth Circuit, rests on the standard of “interchangeability” established in Queen City Pizza, Inc. v. Domino’s Pizza, Inc.. The defense that a product’s distinctiveness or high price does not exempt it from the broader market of functional substitutes. A Birkin bag, fundamentally, is a container for carrying personal items, interchangeable with thousands of other luxury handbags.

Hermès’ legal team emphasized that “market power” in antitrust law is the ability to raise prices without losing customers to competitors. They argued that if Hermès were to double the price of a Birkin, consumers would inevitably shift to other status symbols. The fact that Hermès chooses to restrict supply to maintain cachet is a business strategy, not an antitrust violation. They characterized the “elitist” market definition as a “litigation construct” designed solely to manufacture a monopoly where none exists.

“Plaintiffs offer a kaleidoscope of products, scarves, furniture, jewelry, and attempt to bundle them into a single ‘tied’ market. This ignores the commercial reality that Hermès faces fierce competition in every single one of those categories. A consumer denied a Birkin can walk across the street to Cartier for jewelry or Loro Piana for knitwear.”

The District Court’s “Soundbites” Dismissal

Judge Donato’s September 2025 dismissal was particularly harsh regarding the plaintiffs’ market evidence. He noted that the “elitist luxury” definition was supported not by rigorous econometric analysis, by “random soundbites” from fashion blogs and decade-old academic articles. The court found that the plaintiffs failed to plead facts showing that a Birkin bag is distinct enough from a Chanel bag to warrant its own market. The dismissal order stated that “exclusivity alone does not confer antitrust market power,” rejecting the notion that a brand’s successful marketing of scarcity creates a legal monopoly.

Ninth Circuit Scrutiny: The Cross-Elasticity Question

During the appeal hearing, the Ninth Circuit panel probed the limits of the single-brand theory. One judge questioned whether accepting the plaintiffs’ definition would open the floodgates for antitrust suits against any manufacturer of a “cult” product, from limited-edition sneakers to specific models of Ferrari. The core judicial skepticism revolved around whether the “lock-in” alleged by plaintiffs was structural (like the proprietary parts in Kodak) or psychological and social.

The panel also scrutinized the “tied market” definition. The plaintiffs alleged that the tied products were “ancillary goods” generally. yet, the court noted the difficulty in defining a coherent market for “ancillary goods” that includes items as as $800 sandals and $50, 000 sofas. Without a clear market for the tied products, the claim that Hermès is “foreclosing competition” becomes difficult to sustain. If a customer buys an Hermès blanket to qualify for a Birkin, which specific competitor is harmed? The furniture store down the street? The luxury bedding market? The ambiguity of the “tied market” remains a significant hurdle for the appellants.

The “Unwritten” Contract: Decoding the Purchase History method

The core of the appellants’ argument before the Ninth Circuit rests on a single, contested premise: that Hermès’ “purchase history” requirement is not a benign loyalty program, a calculated, unclear barrier to entry that functions as a de facto tying arrangement. In their opening brief filed in late 2025, plaintiffs Tina Cavalleri and Mark Glinoga challenged the District Court’s dismissal by arguing that the absence of an explicit written contract does not absolve Hermès of antitrust liability. The “purchase history” profile, they contend, operates as a rigid gatekeeping method where the price of admission to the primary market (Birkin bags) is a substantial, non-refundable toll paid in the secondary market (ancillary products).

Unlike traditional loyalty programs where points are accrued transparently and redeemed for rewards, the Hermès system is alleged to be deliberately nebulous. The plaintiffs’ filings detail a system where consumers are never told how much they must spend to “qualify,” only that they have not yet spent enough. This ambiguity, the appellants, creates a “coercive feedback loop.” Consumers, desperate to unlock access to the tying product, continue to purchase tied products (scarves, shoes, home goods) they do not want, frequently accumulating thousands of dollars in “sunk costs” without ever receiving the offer of a bag.

The 3% Commission Differential: The Enforcement Engine

A serious component of the plaintiffs’ coercion argument is the financial incentive structure for Sales Associates (SAs), which they allege turns employees into enforcers of the illegal tie. According to the amended complaint filed in October 2024, the commission structure is explicitly designed to punish the sale of the tying product while rewarding the sale of the tied products.

The appellants that by paying zero commission on the Birkin bag, Hermès deputizes its sales force to withhold the product until a sufficient volume of commission-generating ancillary goods has been moved. This structure creates a scenario where an SA has a direct financial disincentive to sell a Birkin to a customer who has not yet “paid their dues” in 3% commission items. The brief cites instances where Plaintiff Glinoga was explicitly told to “purchase other items and accessories” to become eligible, a directive that aligns perfectly with the SA’s compensation incentives.

Coercion Without Contract: The ” ” Tie

The legal battleground at the Ninth Circuit centers on whether this arrangement meets the Sherman Act’s standard for coercion. The District Court, in its September 2025 dismissal, characterized the practice as “curation” and “prioritizing top-spending customers,” noting that no consumer is forced to buy a scarf at gunpoint. The appellants reject this framing as archaic. They that under modern antitrust standards, coercion exists whenever a seller’s market power in one product is used to restrict consumer choice in another.

“The absence of a written ‘tie’ is not evidence of compliance; it is evidence of sophistication. By enforcing the tie through commission structures and ‘profile’ reviews rather than contract clauses, Hermès achieves the same anticompetitive result, foreclosure of the tied market, while evading scrutiny.”
, Excerpt from Plaintiffs’ Opening Brief, Docket No. 25-16012 (Dec. 2025)

The plaintiffs point to the “futility” of the consumer’s position. Because Birkin bags are never displayed, never sold online, and never available for walk-in purchase, the “purchase history” is the only channel of access. This monopoly on the distribution channel transforms the “option” to buy ancillary goods into a requirement. The brief highlights that Plaintiff Cavalleri spent tens of thousands of dollars on ancillary products, yet was told in September 2022 that bags were reserved for clients who had been “consistent in supporting our business”, a euphemism, the appeal, for “spending more on high-margin tied products.”

Market and the “Unwanted” Product

The final pillar of the coercion argument addresses the economic harm to the “tied” market. The appellants contend that the “purchase history” requirement artificially demand for Hermès’ ancillary goods, distorting competition with rival luxury brands. Consumers are not buying Hermès home goods or shoes because they prefer them over competitors like Chanel or Louis Vuitton; they are buying them to pay the “toll” for the Birkin.

Data in the 2024 amended complaint suggests that of Hermès’ ancillary sales are driven by this coercive method rather than genuine consumer demand. The plaintiffs that this constitutes a “not insubstantial” amount of commerce foreclosed to competitors, satisfying the quantitative requirement of a per se tying violation. By forcing consumers to spend $10, 000+ on “profile-building” items, Hermès extracts a premium that serves no pro-competitive purpose, simply transfers wealth from the consumer to the monopolist while harming rivals in the ancillary market who cannot use a “super-product” like the Birkin.

The “Disciplined Scarcity” Defense: Allocation as Business Strategy

In the Ninth Circuit proceedings on February 12, 2026, Hermès International presented a defense that fundamentally reframed the “purchase history” requirement. Rather than a coercive tying arrangement, the defense characterized the protocol as a “scarcity allocation method” designed to filter demand for a product where global desire supply by a factor of ten. Counsel for Hermès argued that the Sherman Act does not criminalize the management of exclusivity, nor does it mandate that a luxury house must democratize access to its most prized assets.

The defense rested on the economic principle that the Birkin’s value is derived largely from its inaccessibility. By requiring a demonstrated history of brand loyalty, Hermès contends it is not “forcing” the purchase of ancillary goods, rather selecting clients who exhibit a genuine appreciation for the brand’s craftsmanship across categories. This distinction is legally significant: under the Colgate doctrine, a manufacturer generally retains the right to choose its trading partners and refuse to deal with anyone, provided the decision is unilateral and not part of a monopolistic scheme to restrain trade.

“The antitrust laws are not designed to police the frustration of wealthy consumers who cannot immediately acquire a status symbol. Hermès allocates its scarcest products to those who have demonstrated a commitment to the maison, a practice that protects our brand equity from the volatility of the resale market.”

Screening for Arbitrage: The Reseller Prevention Protocol

A central pillar of the defense rebuttal focused on the “grey market” of luxury resale. Hermès presented data indicating that without the purchase history filter, the Birkin market would be overrun by professional resellers seeking to flip bags for a 100% to 200% markup on platforms like Privé Porter or The RealReal. The defense argued that the “profile” requirement serves a pro-competitive purpose by ensuring that bags end up in the hands of end-users rather than arbitrageurs.

This “quality control” defense posits that the ancillary purchases, scarves, homeware, and jewelry, act as a costly signal of a customer’s intent to keep the product. A reseller looking for a quick profit is less likely to invest heavily in non-transferable “relationship” goods. Therefore, the spending requirement is not a tie, a screening device. The Ninth Circuit panel questioned whether this screening method was the least restrictive means available, yet the defense maintained that alternative methods, such as strict limits on purchase quantities, had already proven insufficient against sophisticated resale syndicates.

Market Definition and the “Single-Brand” Fallacy

Hermès also attacked the plaintiffs’ definition of the relevant market. The defense reiterated that a single brand’s product, no matter how iconic, rarely constitutes a market unto itself. They the interchangeability of high-end goods, noting that a consumer denied a Birkin can purchase a Chanel Classic Flap, a Delvaux Brillant, or a Dior Lady Bag. The defense argued that the “Elitist Luxury Handbag” market proposed by the plaintiffs was an artificial construct designed to manufacture a monopoly where none exists.

The “Goodwill” Exception and Brand Integrity

The defense also invoked the “goodwill” exception frequently recognized in tying cases. This legal theory suggests that a company may insist on certain conditions if they are necessary to maintain the quality and reputation of the tying product. Hermès argued that the “Birkin experience” is diluted if the bag becomes a mere commodity traded by speculators. The “journey” of building a profile, they asserted, is intrinsic to the luxury experience they sell.

By framing the purchase history as a method of brand management, Hermès attempted to shift the court’s focus from the effect on the consumer’s wallet to the intent of the manufacturer. The defense the September 2025 dismissal by District Judge James Donato, who noted that “consumer disappointment does not equal antitrust injury.” They urged the Ninth Circuit to uphold this standard, warning that ruling against Hermès would set a precedent allowing courts to micromanage the inventory policies of every exclusive retailer in the United States.

The defense concluded by emphasizing that no consumer is entitled to a Birkin. The bag is a reward for loyalty, not a right. This “unilateral refusal to deal” argument aims to sever the link between the two products, portraying the ancillary purchases as voluntary acts of brand engagement rather than contractual obligations.

Judicial Inquiry: Panel Questions on Consumer Choice and Market Power

The oral arguments on February 12, 2026, shifted rapidly from procedural technicalities to the economic core of the Sherman Act. The Ninth Circuit panel directed its most probing interrogatories toward the definition of market power and the reality of consumer coercion. The judges appeared skeptical of the “single-brand market” theory proposed by the appellants. Their line of questioning the friction between luxury exclusivity and antitrust liability.

The Interchangeability Test

The panel pressed the plaintiffs on the concept of cross-elasticity of demand. One judge explicitly asked whether a price increase in Birkin bags would drive consumers to purchase Chanel or Delvaux handbags instead. This question strikes at the heart of the *Eastman Kodak* precedent regarding single-brand markets. The plaintiffs argued that the Birkin possesses “singularity” in the marketplace. They claimed that for the specific subset of ultra-wealthy consumers, no substitute exists. The court seemed unconvinced by the anecdotal evidence of “desire” versus the economic evidence of “need.” The defense seized on this skepticism. They noted that Hermès holds a relatively small share of the global leather goods market compared to conglomerates like LVMH. The judges requested clarification on why “high demand” equates to “monopoly power” in a legal sense. They distinguished between a brand’s popularity and its ability to exclude competition.

Scrutinizing the “Coercion” method

of the inquiry focused on the mechanics of the alleged tie. The panel examined whether the “purchase history” requirement functions as an explicit contract or a vague expectation. The judges asked if any written policy mandates the purchase of ancillary goods. The plaintiffs conceded that no written contract exists pointed to the “3% commission differential” as structural proof.

The panel questioned whether this commission structure proves coercion of the *consumer* or incentivizes the *employee*. One judge remarked that sales incentives are common across retail sectors. The plaintiffs countered that the combination of zero commission on the primary product and high commission on the tied products creates a “de facto” requirement. They argued that sales associates act as gatekeepers who enforce the tie to secure their own wages.

Market Power and the “Locked-In” Consumer

The judicial inquiry also explored the “lock-in” theory. The plaintiffs posited that consumers who have already spent thousands on ancillary products are “locked in” to the Hermès ecosystem. They argued that switching costs are prohibitively high because leaving the brand means forfeiting the “investment” made toward a Birkin quota. The panel challenged this characterization. They asked if the “investment” was a sunk cost or a voluntary purchase of luxury goods that the consumer retains. The defense argued that consumers are free to walk away at any time. They stated that the purchase of a silk scarf or ceramic plate yields a tangible product. The judges asked the defense if the “scarcity” was artificial. The defense maintained that craftsmanship limits supply. The panel appeared to weigh whether “disciplined scarcity” is a valid business strategy or a method to manipulate market power.

“It may be that Hermès reserves the Birkin bag for its highest-paying customers. that in itself is not an antitrust violation.”
, Judge James Donato, Order Dismissing Second Amended Complaint, September 17, 2025.

The panel frequently referenced Judge Donato’s September 2025 dismissal order. They asked the plaintiffs to differentiate their current arguments from the ones already rejected by the lower court. The plaintiffs emphasized that the “futility” of the purchase history requirement was not fully appreciated in the district court’s analysis. They claimed that consumers continue to spend without a guarantee of a bag. The judges questioned if this constitutes “fraud” rather than “antitrust” injury.

The Definition of the “Tied” Market

The final phase of the inquiry addressed the “tied” market of ancillary products. The judges asked if Hermès actually dominates the market for silk scarves or luxury shoes. The data shows that Hermès faces strong competition in these sectors. The panel questioned how a tie could harm competition if consumers can easily buy scarves from Gucci or shoes from Christian Louboutin. The plaintiffs argued that the *Hermès* consumer is foreclosed from the *Hermès* ancillary market specifically. The judges expressed doubt that a single brand’s internal allocation rules could constitute a market-wide antitrust injury.

Data Sources

Case Filings: Cavalleri et al. v. Hermès International et al., Case No. 3: 24-cv-01707 (N. D. Cal.), filed March 19, 2024; Dismissal Order filed September 17, 2025.

Court Records: Ninth Circuit Court of Appeals, Docket No. 25-16012, Oral Arguments Record, February 12, 2026.

Legal Analysis: “Hermès Wins Dismissal of Tying Claims,” Zelle LLP Antitrust Report, January 29, 2026; “Judicial Inquiry into Luxury Scarcity,” The Fashion Law, February 19, 2026.

Financial Data: Hermès International Annual Reports (2023-2024); “Luxury Retail Commission Structures,” Global Legal Post, September 30, 2025.

The Zero-Commission Paradox: Structural Coercion on the Sales Floor

The economic engine driving the alleged tying arrangement in *Cavalleri et al. v. Hermès International* is not a corporate directive found in a handbook, a compensation structure that fundamentally alters the behavior of the sales force. At the heart of the Ninth Circuit appeal arguments presented in February 2026 lies a specific, uncontested set of financial incentives: the commission between “Quota Bags” and “ancillary products.” Plaintiffs that Hermès has weaponized the paychecks of its sales associates (SAs) to enforce an unwritten tying policy. By removing all financial reward for selling the brand’s most expensive and desired items, the company deputizes its floor staff to demand the purchase of less coveted goods. The sales associate, acting as the gatekeeper, has no economic motivation to sell a Birkin or Kelly bag in isolation. Their livelihood depends entirely on the “tied” products, scarves, shoes, jewelry, and homeware, creating a scenario where the “tying” is not just encouraged, financially mandatory for the employee.

The Commission Tier System

The compensation data presented in the *Cavalleri* complaint, and heavily scrutinized during the appellate proceedings, reveals a three-tier commission structure. This system creates a clear inverse relationship between consumer demand and employee compensation.

This table illustrates the “Zero-Commission Paradox.” A sales associate who the sale of a $12, 000 Birkin 30 receives $0 in commission. The transaction, while generating significant revenue for Hermès International, represents a “dead” interval for the employee’s variable earnings. Conversely, selling $12, 000 worth of silk scarves and fashion jewelry yields a $360 commission.

The “Loss Leader” of Human Capital

During the February 12, 2026, oral arguments, counsel for the appellants characterized this structure as a “labor-side loss leader.” In traditional retail economics, a loss leader is a product sold at a loss to attract customers. Here, the plaintiffs that the Birkin bag serves as a loss leader for the *sales associate*. The time and administrative effort required to process the sale of a Quota Bag, verifying the client’s profile, managing the inventory release, conducting the private room ceremony, is uncompensated labor unless it is paired with commission-bearing ancillary sales. This creates a conflict of interest that aligns the sales associate with the alleged corporate conspiracy. If an SA releases a Birkin to a customer who has not purchased ancillary items, that SA has wasted a high-value asset that could have been used to use hundreds of dollars in personal income. The “purchase history” requirement, therefore, is not a method of vetting brand loyalty, as the defense claims; it is the method by which the sales associate ensures they are paid for their labor.

Deputizing the Sales Force

The Ninth Circuit panel examined whether this compensation scheme constitutes “coercion” under the Sherman Act. The defense maintains that the 0% commission rate is a governance tool designed to prevent favoritism and the “scalping” of bags by staff to friends or high-tippers. By removing the financial incentive to sell the bag, Hermès it ensures that bags are allocated based on “genuine relationship” and “brand appreciation” rather than the salesperson’s immediate financial gain. yet, the plaintiffs’ brief counters that this “governance” tool is actually a “coercion” tool. By starving the sales associates of commission on the primary product, Hermès forces them to become aggressive pushers of the secondary products. The “relationship” described by the defense is quantified strictly by the sale of the 3% commission items.

“The sales associate is not a neutral arbiter of brand equity. They are a rational economic actor. If they sell a Birkin naked, they starve. If they withhold the Birkin until the client buys a diamond bracelet, they eat. This is not brand management; this is a bounty system.”
, Excerpt from Plaintiffs’ Opening Brief, Ninth Circuit Appeal, Feb 2026

The “Shadow Quota” and Employee Metrics

Beyond the direct commission percentages, the appellate record highlights the role of internal employee performance metrics. While Hermès does not publish these internal, the *Cavalleri* filing alleges that SAs are evaluated based on their “cross-selling” ratios. A sales associate who moves a high volume of leather goods low volumes of Ready-to-Wear (RTW) or Metiers d’Art (jewelry/watches) risks a negative performance review. This “shadow quota” reinforces the commission structure. The Birkin bag becomes the use tool for the SA to meet their own category. When a customer requests a Birkin, the SA is presented with a binary choice: 1. Grant the request immediately: The SA earns $0 commission, improves the leather category metric (which is likely already saturated), and loses the use to improve their RTW/Jewelry metrics. 2. Condition the request: The SA suggests that the bag is “not yet available” offers to show the client new shoes or watches. If the client spends $5, 000 on these items, the SA earns $150 and hits their category. The bag is then “found” in the back. The plaintiffs that this behavioral loop is the definition of a tying arrangement enforced by economic need. The “tie” is not written in a contract; it is written in the pay stub.

Legal of the 3% Differential

The specific figure of 3% for ancillary goods versus 0% for Quota Bags is central to the antitrust claim. In *Eastman Kodak Co. v. Image Technical Services, Inc.*, the Supreme Court recognized that market power can be inferred from the ability to force a purchaser to do something that they would not do in a competitive market. The plaintiffs that the commission structure proves Hermès *knows* consumers would not buy the ancillary products at the current volume or price point without the coercion. If the ancillary products were desirable enough to stand on their own, Hermès would not need to incentivize staff so heavily to push them, nor would they need to penalize the sale of the bags. The 3% premium on ancillary goods acts as a “bounty” for enforcing the tie. During the appeal hearing, the judges questioned whether this internal compensation structure could be legally attributed to the corporation as an antitrust violation. The defense argued that an employee’s rogue pressure on a client does not equal corporate policy. yet, the plaintiffs successfully pointed out that the *structure* itself, the 0% vs. 3% split, is corporate policy. The corporation designed the maze; the sales associates are simply running it.

The “Unwritten Contract” of Employment

The 2024 dismissal by the District Court relied partly on the idea that the “purchase history” requirement was too vague to constitute a contractual tie. The appeal attempts to concretize this by focusing on the employment contract of the sales associates. The argument posits that while the contract with the *consumer* is unwritten, the contract with the *employee* is explicit. * Fact: SAs are paid 3% on ancillary items. * Fact: SAs are paid 0% on Birkins. * Inference: The corporation explicitly values the sale of a scarf infinitely more than the sale of a Birkin *in isolation*. * Conclusion: The “tying” is the only way for the employee to align their behavior with the corporation’s valuation. This structural analysis moves the case away from “he said, she said” accounts of specific store interactions and into the of widespread corporate design. The “Ancillary Push” is not a result of overzealous staff; it is the mathematical inevitability of the compensation grid.

The Role of “Variable Income” in Luxury Retail

To understand the coercive power of this structure, one must examine the reliance of luxury retail workers on variable income. Base salaries in the luxury sector, while higher than general retail, are frequently supplemented by commissions that can make up 30-50% of total take-home pay. By designating the most high-velocity product (the Birkin) as a non-commission item, Hermès removes the “easy money” from the table. In other luxury houses, high-ticket items like exotic skin handbags frequently carry significant commissions, aligning the sales effort with the product’s price. Hermès’ deviation from this norm—paying zero on the highest ticket item—is a unique anomaly that the plaintiffs serves only one purpose: to force the “bundling” of less liquid inventory. The SA cannot afford to be a “bag seller”; they must be a “lifestyle seller” to survive. This economic reality for the workforce directly into the “prespend” requirement for the consumer.

The ‘Birkin Premium’: Secondary Market Valuation as Antitrust Evidence

The economic heart of the appellants’ argument before the Ninth Circuit lies not in the boutiques of Madison Avenue or Rue du Faubourg Saint-Honoré, in the unregulated, high-velocity secondary market. During the February 2026 oral arguments, counsel for Cavalleri et al. presented the “Birkin Premium”, the consistent, massive between the manufacturer’s suggested retail price (MSRP) and the open market value, as the smoking gun of market power. The logic is brutal in its simplicity: if a rational actor can purchase an asset for $12, 000 and immediately liquidate it for $30, 000, the seller possesses the use to demand an “entrance fee” equal to that surplus.

The Valuation Gap: Quantifying the use

The plaintiffs’ brief relies heavily on data aggregators like Rebag, Sotheby’s, and Privé Porter to establish that the “nominal” price of a Birkin is a fiction. According to the 2025 Clair Report by Rebag, Hermès handbags retained an average of 138% of their retail value on the secondary market, a figure that dwarfs the retention rates of competitors like Chanel or Louis Vuitton. For specific “quota bags,” the spread is even more aggressive.

Data submitted into evidence tracks the pricing disparities for the most coveted models between 2020 and 2025. The following table illustrates the “coercion margin”, the financial gap that plaintiffs allege Hermès exploits to force ancillary purchases.

In the Ninth Circuit proceedings, plaintiffs argued that this surplus, ranging from $13, 700 to over $150, 000, is not a reflection of popularity, a quantified measure of the “tying power.” The argument posits that Hermès captures this surplus not by raising the sticker price of the bag, by forcing the consumer to dissipate the difference on scarves, homeware, and jewelry. The “true price” of a Birkin 25, under this theory, is not $11, 400; it is $11, 400 plus $17, 000 in required ancillary spending, bringing the total outlay to the market-clearing price of roughly $28, 500.

Investment-Grade Asset Class: The S&P 500 Comparison

To substantiate the claim that the Birkin functions as a financial asset rather than a consumer good, so changing the antitrust analysis, the plaintiffs pointed to long-term performance metrics. A landmark 2016 study by Baghunter, updated with 2020-2025 data, demonstrated that the Birkin bag has historically outperformed both the S&P 500 and gold. While the S&P 500 returned a nominal average of roughly 10-11% annually over the relevant period, specific Hermès assets appreciated at rates exceeding 14% annually, with zero volatility to the downside.

“We are not talking about a handbag. We are talking about a bearer asset with higher liquidity and lower volatility than most equities. The defendant controls the allocation of this asset and uses that control to distort competition in the market for silk and ceramics.”
, Excerpt from Plaintiffs’ Opening Brief, Ninth Circuit Appeal, Feb 17, 2026.

This “investment” classification is serious to the tying claim. If the product were a fashion item, consumers might switch to a substitute (e. g., a Chanel Flap Bag) when faced with coercive terms. yet, because the secondary market valuation makes the Birkin a store of value, there are no economic substitutes. A Chanel bag, which Rebag notes frequently retains less than 90% of its value immediately post-purchase (prior to 2023 price hikes), does not offer the same financial utility. This absence of interchangeability strengthens the allegation of monopoly power within the defined “elitist luxury handbag” market.

The ‘Shadow Price’ Theory

The appellate panel focused intently on the concept of the “Shadow Price.” Judge Bea, one of the panelists, questioned whether the secondary market premium was created by Hermès or by third-party speculators. The plaintiffs’ rebuttal utilized the 2025 Sotheby’s auction data to show that Hermès actively manages this spread. By refusing to increase primary production to meet demand, producing only an estimated 12, 000 to 15, 000 Birkins annually even with demand for 10 times that volume, Hermès maintains the valuation gap that makes the tying arrangement possible.

If Hermès were to raise the retail price of a Birkin 25 to $28, 000, the secondary market premium would, and with it, the use to force ancillary purchases. By keeping the MSRP artificially low ($11, 400), Hermès creates a “lottery” where the “winning ticket” (the right to buy) is purchased through loyalty spend. The secondary market data serves as the auditor of this scheme, revealing the exact monetary value of the coercion applied to each customer.

Defense Counter-Narrative: The ‘Gray Market’

Hermès’ defense team attempted to dismiss the secondary market data as “speculative noise” driven by unauthorized resellers. They argued that the “Birkin Premium” reflects the risks and of the gray market, authentication costs, storage, and immediate availability premiums, rather than an inherent undervaluation at the retail level. They the 2024 luxury market correction, where prices for lower-tier luxury goods softened, yet admitted under questioning that Birkin and Kelly prices remained “statistically impervious” to the downturn.

The defense also argued that they cannot be held liable for prices set on platforms like The RealReal or Vestiaire shared. yet, the plaintiffs introduced internal documents suggesting that sales associates are trained to subtly reference the “investment value” of the bags when encouraging clients to add jewelry or furniture to their tickets, weaponizing the secondary market valuation at the point of sale.

Inventory Opacity: The “Back Room” Reality

The central grievance of the Cavalleri appeal rests on a specific, logistical allegation that the Ninth Circuit panel scrutinized with particular intensity during the February 12 proceedings: the physical location of the inventory. While Hermès maintains a public posture of “scarcity” and “waiting lists,” the plaintiffs that the absence is an administrative fiction. The complaint alleges that Birkin and Kelly bags are not absent from the store, are rather stockpiled in “back rooms,” visible only to sales associates who release them based on a calculated algorithm of ancillary spending.

This “Phantom Inventory” theory is supported by financial metrics that contradict the narrative of a production bottleneck. Between 2020 and 2024, Hermès aggressively expanded its manufacturing footprint, yet the consumer experience of “zero availability” remained unchanged. The plaintiffs contend that this disconnect is not a supply chain failure, a method of coercion. By keeping inventory levels unclear, Hermès creates an informational asymmetry where the consumer cannot verify if a bag exists, forcing them to over-consume ancillary products to “unlock” a purchase opportunity.

Production Capacity vs. Consumer Access (2015, 2025)

Data submitted into the record highlights a between Hermès’ manufacturing output and the retail availability of its “quota bags.” While the company publicly cites artisanal constraints, its annual reports show a double-digit expansion in leather goods capacity.

The “Inventory Turnover” metric is particularly damning to the scarcity defense. In 2024, Hermès held inventory for an average of 211 days. For a company that claims its flagship product sells the instant it hits the shelf, a seven-month holding period suggests a significant volume of stock is sitting idle. The plaintiffs argued before the Ninth Circuit that this “dwell time” represents the period during which the bags are held hostage in the back room, waiting for a customer to reach the required “purchase profile” threshold.

The “Profile” as a Digital Gatekeeper

The opacity is not physical; it is digital. The appeal record details the use of a point-of-sale system that acts as a gatekeeper for inventory release. When a customer requests a Birkin, the Sales Associate (SA) does not check the stockroom; they check the “profile.”

“The inventory is not allocated to the store; it is allocated to the customer’s net worth as defined by their purchase history. The bag exists in the system, it is invisible to the consumer until the algorithm, or the manager interpreting it, decides it is visible. This is not a queue; it is a paywall.”
, Argument Summary, Plaintiff’s Opening Brief, Ninth Circuit Appeal (Feb 2026)

This system creates a “Schrödinger’s Bag” scenario. The bag is both in stock and out of stock simultaneously, depending entirely on the customer’s prior spending on ties, scarves, and home goods. The plaintiffs allege that SAs are instructed to state “we have no deliveries today” to low-spend clients, while simultaneously ushering high-spend clients to private viewing rooms to purchase from that same delivery. This selective visibility is the lever of the alleged tying arrangement: without the uncertainty created by opacity, the coercion to buy ancillary goods would collapse.

Incentive Structures and the “No Commission” Rule

The opacity is further enforced by the compensation structure for Sales Associates. As noted in the complaint and discussed during the appeal, SAs receive no commission on the sale of a Birkin bag (a “quota” item) earn varying commissions ( 1. 5% to 3%) on ancillary products like furniture, jewelry, and ready-to-wear. This structure turns the Birkin into a loss leader for the employee’s personal income.

Consequently, the SA has a direct financial disincentive to sell a Birkin to a “walk-in” customer. The bag is valuable to the associate only as a carrot to induce the sale of commission-generating items. If the inventory were transparent, if a customer could see three Birkins on the shelf, the SA would lose the use required to extract the ancillary purchases. Thus, the “back room” is not just a storage space; it is a strategic tool to maintain the use necessary for the tying arrangement to function.

SECTION 11 of 22: Quantifying the Barrier: The 1: 1 Spend Threshold for Quota Bags

The economic core of the appellants’ case, as detailed during the February 12 proceedings, rests not on the mere existence of a waiting list, on the quantification of a “pay-to-play” surcharge that doubles, triples, or quadruples the list price of a Birkin or Kelly handbag. While Hermès International has long maintained that its allocation relies on “brand loyalty” and “client relationships,” the plaintiffs presented data suggesting these terms are euphemisms for a rigid, albeit unwritten, financial algorithm. This algorithm, known colloquially among consumers as the “pre-spend” ratio, allegedly functions as a de facto cover charge, creating a barrier to entry that is mathematically calculable and, according to the plaintiffs, legally coercive.

The “1: 1” Baseline and the Commission Enforcer

At the heart of the “tying” allegation is the “1: 1 ratio”, a metric widely in consumer forums and introduced into the appellate record as evidence of the widespread nature of the coercion. The ratio dictates that a customer must spend an amount on “ancillary products” (the tied goods) equivalent to the retail price of the desired “quota bag” (the tying product) before they are even considered for an offer. For a standard Birkin 30 in Togo leather, retailing at approximately $12, 500 in 2025, the consumer is required to spend an additional $12, 500 on items such as silk scarves, fashion jewelry, or homeware.

The plaintiffs argued that this ratio is not accidental is structurally enforced through the commission revealed in discovery. The compensation model creates a direct financial imperative for Sales Associates (SAs) to enforce the spend threshold:

This 0% commission on the most coveted items is the “smoking gun” of the tying arrangement, according to the plaintiffs’ counsel. It ensures that an SA has no economic reason to sell a Birkin bag in isolation. The bag becomes valuable to the employee only as a tool to extract the 3% commission on the $10, 000 to $50, 000 worth of furniture or jewelry sold beforehand. This monetizes the “tying” product by shifting the profit center entirely to the “tied” products.

Escalating Ratios: The “Moving Goalpost” Strategy

During the appeal, the plaintiffs emphasized that the “1: 1” ratio is a baseline, with the actual barrier frequently rising significantly higher in competitive markets or for specific bag configurations. Evidence presented from consumer affidavits and “Hermès game” tracking forums indicates that the ratio has drifted upward from 2020 to 2025, frequently reaching 2: 1 or 3: 1 for “Holy Grail” items like a Birkin 25 in neutral colors (Black, Gold, Craie) or exotic skins.

“The barrier is not static; it is and unclear. A consumer who spends $10, 000 expecting an offer is frequently told they are ‘close’ or need to show ‘more consistency,’ pushing the spend to $20, 000 or $30, 000. This moving goalpost prevents the consumer from shopping elsewhere, trapping them in a pattern of sunk costs.”
, Excerpt from Plaintiffs’ Appellate Brief, Docket 25-16012

This opacity serves a dual purpose: it protects Hermès from explicit contractual liability while maximizing the extraction of consumer surplus. If the rule were a published “Buy $10, 000 of furniture, get a Birkin,” it would be a clear-cut tying arrangement. By keeping the threshold vague (“consistent support”), Hermès induces over-spending, as customers attempt to “outbid” invisible competitors for the SA’s favor.

Plaintiff Data: The “Tens of Thousands” Reality

The specific financial injury to the named plaintiffs, Tina Cavalleri and Mark Glinoga, was revisited to ground these abstract ratios in hard numbers. The appellate record highlights that Cavalleri had spent “tens of thousands of dollars” on ancillary products, purchases she explicitly stated she would not have made for the prospect of the bag. In September 2022, even with this significant outlay, she was informed that specialty bags were reserved for clients who had been “consistent in supporting our business,” a phrase the plaintiffs decode as a demand for further spending.

Mark Glinoga’s experience in 2023 reinforced this pattern. After multiple attempts to purchase a Birkin, he was repeatedly counseled to purchase “other items and accessories”. The barrier here is not inventory unavailability, Hermès admits the bags exist in the back room, a financial gatekeeping method that requires the consumer to pay a premium on unwanted goods to access the desired good.

The “Real Price” of a Birkin

To quantify the consumer harm, the plaintiffs introduced an economic model calculating the ” Price” of a Birkin bag when the tying arrangement is factored in. This model assumes that the “tied” products (ancillary goods) have a lower utility to the consumer than their market price, representing a “tax” or surcharge.

This data illustrates that the “barrier to entry” is not the $12, 500 sticker price, the $37, 500 liquidity requirement. For the Ninth Circuit panel, the serious question was whether this $25, 000 in ancillary spending is a voluntary expression of brand love or a coerced purchase mandated by market power. The plaintiffs that no rational consumer would purchase $25, 000 of unwanted porcelain unless it was the only route to the handbag, fitting the classic definition of a tying arrangement under the Sherman Act.

Market Comparisons and “Profile” Building

The defense countered that “profile building” is standard across the luxury sector, citing competitors like Ferrari or Rolex. yet, the plaintiffs distinguished the Hermès model by pointing to the breadth of the tied market. While Ferrari might prioritize customers who race (a related activity), Hermès allegedly requires handbag customers to become furniture or jewelry customers, markets with no functional connection to the handbag. The “1: 1” ratio forces a handbag consumer to enter the home goods market, distorting competition in that separate sector by artificially inflating Hermès’ share of wallet for items like ashtrays and blankets.

By February 2026, the “1: 1” threshold had become the shorthand for the plaintiffs’ entire theory of harm: a quantifiable, enforced, and escalating tax that transforms a retail transaction into a high- auction, where the currency is not just money, compliance with an unwritten menu of ancillary purchases.

Economic Expert Testimony: Measuring Cross-Elasticity of Demand

The Ninth Circuit’s review of Cavalleri et al. v. Hermès International on February 12, 2026, hinged on a single, decisive economic metric: the cross-elasticity of demand. While the legal teams debated the definition of coercion, the economic experts focused on whether the Birkin bag constitutes a distinct “elitist luxury” market or a high-priced tier within the broader handbag sector. The testimony and filed briefs presented a collision between classical antitrust modeling and the unique economics of Veblen goods.

The SSNIP Test Application

Central to the economic debate was the application of the “Small Significant Non-transitory Increase in Price” (SSNIP) test. Standard antitrust practice asks whether a hypothetical monopolist could profitably raise prices by 5% without driving consumers to substitute products. Plaintiff experts argued that Hermès has applied a “de facto SSNIP” far exceeding 5% through its ancillary purchase requirements.

According to the appellant’s economic analysis, the “purchase history” requirement compels consumers to spend ratios of 1: 1 or higher on non-Birkin goods, doubling the acquisition cost of the handbag. The refusal of these consumers to switch to substitute brands (such as Chanel or Delvaux) even with this massive price increase was presented as definitive proof of zero cross-elasticity.

“When a consumer accepts a 100% price markup in the form of required ancillary purchases rather than switching to a competitor, the cross-elasticity of demand is not just low; it is non-existent. The Birkin does not compete with other bags; it competes with other asset classes.”

Quantitative Evidence: The “Birkin Premium”

The economic testimony relied heavily on verified market data from 2015 to 2025 to substantiate the claim of a distinct market. Data submitted to the court, corroborated by luxury resale indices, highlighted a between Hermès products and the broader luxury market.

A 2025 report by Rebag, in the appellate briefs, indicated that Hermès handbags retained an average of 138% of their retail value on the secondary market. In contrast, the broader luxury handbag category averaged between 60% and 90% retention. This “Birkin Premium” creates an economic moat where the product functions as an investment vehicle rather than a consumable good, altering standard demand curves.

The data further revealed that while Hermès retail prices for the Birkin 30 rose approximately 43% between 2015 and 2025, resale values surged by 92% over the same period. Plaintiff economists argued this decoupling of retail price from market value proves that Hermès possesses the power to exclude competition, as no other manufacturer can discipline Hermès’ pricing through competitive pressure.

Defense Rebuttal: The “Cluster Market” Theory

Hermès’ defense team countered with an economic model based on “cluster markets” and high-end interchangeability. Their experts argued that the relevant market is not “Birkin bags” “ultra-luxury status symbols,” a category that includes high jewelry, watches, and handbags from rival houses like Chanel and Dior.

The defense presented cross-shopping data suggesting that Hermès clients frequently purchase from competitors. They argued that the “waitlist” method is not evidence of monopoly power of “brand management” common in the luxury sector. Their key economic contention was that if Hermès were to cease production, consumers would not hoard cash would transfer expenditure to other high-status goods, indicating high cross-elasticity at the macro level.

yet, the appellate panel scrutinized this claim against the “switching cost” data. Judge Nguyen specifically questioned the defense on the “lock-in” effect, noting that a consumer who has invested $20, 000 in a “purchase history” profile faces a catastrophic loss of sunk costs if they switch to a competitor, a that artificially suppresses cross-elasticity.

The Veblen Good Anomaly

of the expert testimony addressed the “Veblen Good” anomaly, where demand increases as price rises. Plaintiff experts argued that standard antitrust tools fail to capture the coercive power of Hermès because the high price (and the high barrier to entry) is the product’s primary utility. The “tying” of ancillary products, therefore, is not just a revenue generator a method to maintain the artificial scarcity that defines the market.

By the close of the session, the economic consensus presented to the Ninth Circuit was clear on the data divided on the legal implication: Hermès has successfully insulated the Birkin from standard market forces. The question remaining for the court is whether this insulation is the result of superior product acumen or an illegal restraint of trade under the Sherman Act.

Precedent Analysis: The Kodak and Microsoft Antitrust Parallels

The Ninth Circuit’s review of *Cavalleri et al. v. Hermès International* rests on a collision between two distinct eras of antitrust jurisprudence. Plaintiffs the “purchase history” requirement mirrors the coercive “lock-in” method condemned in *Eastman Kodak Co. v. Image Technical Services* (1992) and *United States v. Microsoft Corp.* (2001). Conversely, Hermès and the lower court rely on the strict market definitions established in the recent *Epic Games v. Apple* (2023) ruling to frame the Birkin bag as a mere luxury preference rather than a monopolized need.

The Kodak “Lock-In” Theory

The appellants’ primary legal gamble involves repurposing the *Kodak* doctrine for the fashion sector. In *Kodak*, the Supreme Court held that a company could violate antitrust laws by controlling the aftermarket for parts and service of its own equipment, even if it did not have a monopoly in the primary equipment market. The Court reasoned that customers were “locked in” to Kodak copiers and could be exploited in the derivative parts market. In the February 2026 oral arguments, plaintiff counsel attempted to map this “lock-in” onto the Hermès customer journey. The argument posits that once a consumer commits to the Hermès ecosystem, spending thousands on “ancillary products” to build a profile, they are locked in. The “sunk costs” of previous purchases function like the hardware investment in *Kodak*. Walking away means forfeiting the accumulated “credit” toward a Birkin offer. Judge James Donato, in his September 2025 dismissal, rejected this comparison. He ruled that the “lock-in” in *Kodak* was technical and functional: a Kodak copier *required* Kodak parts to operate. A consumer desiring a Birkin bag faces no functional barrier to switching to a Chanel or Delvaux handbag; the barrier is purely psychological and preference-based. The Ninth Circuit panel must decide if “consumer desire” can legally substitute for “technical need” in defining a captive market.

The Microsoft Tying Standard

The *Microsoft* precedent serves as the structural template for the plaintiffs’ tying claim. In *United States v. Microsoft*, the tech giant was found liable for conditioning the availability of its dominant operating system (Windows) on the acceptance of its web browser (Internet Explorer). The court found this “technological tying” stifled competition in the browser market. Plaintiffs allege Hermès operates a similar “contractual tying” scheme. The “tying product” is the Birkin bag (or the *opportunity* to buy one), and the “tied products” are the scarves, jewelry, and homeware consumers must purchase. The complaint cites specific ratios, frequently 1: 1 or higher, where customers must spend an equivalent amount on ancillary goods to “unlock” the primary product. The defense counters that *Microsoft* involved a true monopoly in PC operating systems, where consumers had no viable alternatives. Hermès it holds no such dominance in the broader “luxury handbag” market. In their brief, Hermès attorneys noted that while Microsoft could force a browser onto 95% of PC users, Hermès cannot force a consumer to buy a silk scarf if they can simply buy a scarf from Gucci or Louis Vuitton. The coercion, they, is an illusion created by the consumer’s own brand loyalty.

The Epic Games Barrier

The most formidable obstacle for the plaintiffs is the Ninth Circuit’s own 2023 ruling in *Epic Games v. Apple*. In that case, the court rejected the argument that Apple’s iOS App Store constituted a single-brand market. The court affirmed that a company’s own internal ecosystem does not become a relevant antitrust market simply because it is popular or closed off. Judge Donato’s September 2025 dismissal leaned heavily on *Epic*. He noted that defining a market as “Hermès Birkin bags” is functionally identical to Epic defining a market as “iOS app distribution.” Both are single-brand definitions that ignore the existence of inter-brand competition. Unless plaintiffs can prove that a Birkin bag has *no* economic substitute, a difficult task in a market flooded with high-end leather goods, the *Epic* precedent suggests the claim must fail.

Comparative Legal Standards

The following table contrasts the legal standards applied in these precedents with the facts alleged in *Cavalleri*:

The “Coercion” vs. “Choice” Fissure

The Ninth Circuit’s inquiry on February 12 focused on the definition of coercion. In *Microsoft*, coercion was widespread and unavoidable for OEMs. In *Cavalleri*, the coercion is conditional on the consumer’s specific desire for a status symbol. Plaintiffs that for the ultra-wealthy demographic, the Birkin is a “Veblen good” with no substitutes, making the coercion real in economic terms. If a consumer wants the signal of a Birkin, they *must* pay the toll. Hermès maintains that antitrust laws protect competition, not the ability of consumers to buy specific luxury items on their own terms. They assert that the “purchase history” is a valid inventory allocation method, not an antitrust violation. The appellate panel’s decision likely turn on whether they view the “purchase history” as a loyalty program (legal) or a barrier to entry that distorts the market for ancillary goods (illegal under *Kodak*). If the court accepts the *Epic Games* standard as controlling, the “single-brand market” theory collapses. If they distinguish *Epic* by focusing on the unique “sunk cost” nature of the purchase history, the *Kodak* parallel may yet revive the class action.

The “Coerced” Purchaser: Defining the Injured Class

The oral arguments heard by the Ninth Circuit on February 12, 2026, exposed a fundamental fracture in the Cavalleri et al. v. Hermès International litigation: the precise definition of the “injured consumer.” While the Sherman Act prohibits tying arrangements that restrain trade, the appellate panel focused heavily on the practical difficulty of distinguishing between a “loyal client” and a “coerced victim.” The plaintiffs, Tina Cavalleri, Mark Glinoga, and Mengyao Yang, seek to represent a nationwide class of consumers who purchased “ancillary products”, scarves, shoes, jewelry, and home goods, solely to establish the “purchase history” required to buy a Birkin or Kelly handbag. The defense maintains that this definition is fatally overbroad, encompassing thousands of customers who genuinely desired the ancillary goods.

The scope of this class is not a procedural detail; it determines the chance damages model. If the class includes every customer who bought a scarf and a Birkin, the damages could reach hundreds of millions of dollars. If restricted only to those who can prove they unwillingly bought the scarf, the class may be impossible to certify due to the predominance of individual inquiries. Judge James Donato’s September 2025 dismissal of the Second Amended Complaint this “kaleidoscope” of products and motivations as a primary reason for rejection, a ruling the plaintiffs ask the Ninth Circuit to reverse.

The “Subjective Intent” Hurdle

A central point of contention during the appeal was the ” -for” causation requirement. The plaintiffs that the Hermès “purchase history” policy creates a structural presumption of coercion. They contend that any consumer who purchased ancillary products and subsequently requested a Birkin (or was denied one) falls within the injured group. The logic posits that the purchase history requirement acts as an artificial price inflation, an “entrance fee” to the primary market.

Hermès’ legal team countered that this theory ignores consumer autonomy. They argued that a customer might buy a $800 pair of Oran sandals because they like the sandals, regardless of their desire for a handbag. To include such a consumer in the class would grant them a windfall for a voluntary purchase. The Ninth Circuit panel pressed the plaintiffs’ counsel on how a court could objectively separate these two groups without conducting thousands of individual depositions.

“The proposed class definition asks the court to read the mind of every Hermès customer in the United States. It presumes that no one buys a silk scarf for its own sake if they also want a handbag. This ignores the reality of the luxury market where brand affinity drives cross-category purchasing.”
, Excerpt from Defense Brief, Ninth Circuit Appeal, Docket 25-16012.

The “Ancillary” Aggregation Problem

The definition of the “tied product” remains the most technically aspect of the class certification effort. In typical tying cases, the tied product is specific (e. g., a printer and its ink cartridges). Here, the tied product is a vast category described in the complaint as “ancillary products,” ranging from $500 jewelry to $10, 000 furniture. The District Court previously ruled this aggregation created a “kaleidoscope” market that antitrust definition.

During the February 2026 hearing, the plaintiffs argued that the specific identity of the tied product matters less than the fact of the expenditure. They introduced the concept of “qualifying spend”, a monetary threshold rather than a product-specific requirement. Under this theory, the injury is the financial outlay required to unlock the Birkin, regardless of whether that money was spent on porcelain or pret-a-porter.

Commission Structures as Class Evidence

To support the existence of a injured group, the plaintiffs point to the Hermès commission structure as proof of a widespread design to injure consumers. Verified court filings indicate that sales associates earn:

• 3. 0% Commission: Ancillary products (Shoes, Jewelry, Home Goods, Scarves).
• 1. 5% Commission: Non-Birkin/Kelly Handbags.
• 0. 0% Commission: Birkin and Kelly Handbags.

The plaintiffs this compensation model proves that the “injured group” is not random targeted. Sales associates are financially incentivized to withhold the 0% commission product (Birkin) until the customer extracts sufficient value from the 3% commission products (Ancillary). This structural, they, creates a common method of injury that applies to all class members, overriding the “subjective intent” defense.

Geographic Subclasses: The Cartwright Act Distinction

The appeal also addresses the distinction between the nationwide class under the Sherman Act and the California subclass under the Cartwright Act. The Cartwright Act is generally broader in its definition of “coercion” and “unfair competition.” The plaintiffs that even if the nationwide class fails the strict market definition standards of the Sherman Act, the California subclass, comprising residents like Cavalleri and Glinoga, should survive due to the state’s more consumer-protective statutes regarding “secret” prerequisites for purchase.

The Exclusion of the “Priced Out”

A serious limitation of the proposed class is the exclusion of consumers who refused to play the game. Under antitrust standing rules, a plaintiff must purchase the tied product to claim damages. Therefore, consumers who walked into a Hermès boutique, asked for a Birkin, were told to “build a profile,” and walked out without buying anything are likely excluded from the monetary damages class. yet, this group remains relevant for the injunctive relief sought, specifically, a court order forcing Hermès to decouple the products. The Ninth Circuit panel questioned whether the class representatives, who did spend money, can adequately represent the interests of those who were simply shut out of the market entirely.

Hermès Revenue Segmentation: Dependence on Silk and Home Categories

The financial architecture of Hermès International is not a ledger of luxury sales; it is the forensic map of the alleged antitrust violation. While the Birkin and Kelly bags, categorized under “Leather Goods and Saddlery”, serve as the gravitational center of the brand, the Ninth Circuit appeal in Cavalleri et al. v. Hermès International scrutinizes the economic orbit of the company’s “ancillary” categories. Plaintiffs that the revenue streams from Silk, Home Goods, and Ready-to-Wear are not driven solely by organic consumer demand, are artificially inflated by a coercive “purchase history” requirement that functions as a tollbooth for handbag access.

The “Tied” Revenue: 2025 Financial Performance

On February 12, 2026, Hermès released its full-year 2025 financial results, reporting a consolidated revenue of €16 billion. The segmentation of this revenue is serious to the antitrust claim. The “Leather Goods and Saddlery” division remains the dominant engine, accounting for approximately 44% of total sales. Yet, the majority of the company’s revenue, 56%, is derived from sectors that plaintiffs allege are the “tied” products in the arrangement.

The 2025 performance data reveals a clear between the “admission ticket” categories and those less central to the alleged purchase history algorithm. While Leather Goods grew by 13%, the “Other Hermès” sector, comprising Jewelry and Home Goods, surged by 11%, crossing the €2 billion threshold for the time. Conversely, categories like Perfume & Beauty and Watches, which have lower price points and are arguably less for building the requisite “spend profile” quickly, saw declines.

The “Ancillary” Dependency

The core of the plaintiffs’ argument before the Ninth Circuit is that Hermès has immunized its non-leather divisions from market competition. By conditioning access to a Birkin on the accumulation of “purchase history,” the company allegedly forces consumers to divert capital into the Silk and Home divisions. The 2025 data supports the theory of a subsidized ecosystem: the “Other Hermès” division’s double-digit growth outpaced the broader luxury market, which faced significant headwinds in 2025.

Legal counsel for the plaintiffs emphasized that the €1 billion generated by the Silk and Textiles division is not purely a reflection of consumer preference for scarves. Instead, they posit that a significant percentage of this revenue represents “coerced consumption”, purchases made solely to satisfy the unwritten algorithm of the sales associate. If the “tying” method were removed, plaintiffs, the demand for $800 beach towels and $5, 000 porcelain sets would face a market correction, exposing the true, lower organic demand for these items.

The “Kaleidoscope” Defense and Market Reality

Hermès’ defense, upheld by the lower court under appellate review, characterizes these revenue streams as independent successes driven by “craftsmanship and heritage.” In the February 2026 hearings, defense attorneys pointed to the “kaleidoscope” of products in the alleged tied market, ranging from ashtrays to baby shoes, as evidence that no coherent “tied market” exists. They argued that a consumer buying a watch is not the same as one buying a blanket, and thus, the antitrust claim fails to define a specific monopoly.

“The notion that our clients purchase a $60, 000 jewelry set as a ‘ticket’ for a handbag insults the intelligence of the consumer and the quality of the artisan’s work. These divisions stand on their own financial merits.”
, Defense Statement, Ninth Circuit Oral Arguments, Feb 12, 2026

Yet, the financial segmentation tells a more complex story. The “Other Hermès” sector, which includes the high-ticket Home and Jewelry items, has become the second-fastest-growing category after Leather. This correlation aligns with the “spend ratio” theory: as the price of Birkins rises, the requisite “pre-spend” must also rise, pushing consumers toward more expensive categories like furniture and fine jewelry to hit their. A client seeking a quota bag cannot rely on $85 lipsticks; they must move into the high-margin “Other” category to qualify.

Strategic of the “Other” Category

The 11% growth in the “Other” category is strategically important for Hermès. With Leather production constrained by capacity limits, workshops in Loupes and Charleville-Mézières are not scheduled to come online until 2026 and 2027, the company cannot simply print more bags to drive revenue. Growth must come from the non-constrained categories. The “tying” allegation suggests that Hermès solves its inventory constraint problem by leveraging the scarcity of leather to force volume in non-scarce categories.

If the Ninth Circuit revives the class action, the discovery phase could force Hermès to reveal the internal metrics of these divisions. Specifically, the court may seek data on the “sell-through” rates of Home and Silk products to clients who never receive a quota bag versus those who do. A high correlation between heavy Home Goods spending and subsequent Birkin allocations would provide the smoking gun for the revenue dependence theory.

The Architecture of Implicit Coercion

The most legally ambitious argument presented during the February 12, 2026, Ninth Circuit appeal centers on what antitrust scholars are calling the “Soft Tie” theory. Unlike traditional tying arrangements, where a seller explicitly contractually conditions the sale of Product A on the purchase of Product B, the Hermès arrangement operates in a gray zone of “understood” rules. Plaintiffs argued that the absence of a written contract does not absolve the defendant of liability under the Sherman Act when the condition of sale is undeniable.

Lead counsel for the appellants, citing the “market realities” standard established in Eastman Kodak Co. v. Image Technical Services, Inc., contended that a tie need not be explicit to be coercive. The “Soft Tie” theory posits that Hermès has constructed a retail environment where the “purchase history” requirement functions as a de facto contract. Consumers understand, through sales associate signaling and market reputation, that the purchase of ancillary goods (scarves, shoes, homeware) is the only pathway to the tying product (the Birkin).

The “Futility of Purchase” Doctrine

A serious component of the “Soft Tie” argument is the concept of “futility.” During the hearing, plaintiffs’ counsel emphasized that no rational consumer attempts to purchase a Birkin bag without a “profile” because the market knowledge of the requirement is absolute. This creates a “psychological contract” where the coercion occurs before the consumer even enters the private viewing room.

“The coercion here is not in the refusal of the bag, in the years of required spending that precede the mere possibility of an offer. The consumer is tied to the ancillary market not by a signature, by the certainty of rejection without it.”

This argument seeks to expand the definition of “forcing” under Jefferson Parish Hospital District No. 2 v. Hyde. While Jefferson Parish focused on the seller’s use of market power to “force” the buyer to do something they would not otherwise do, the “Soft Tie” theory that the structural forcing of a “loyalty” system is economically identical to a contractual tie.

The “Wink and Nod” method

The enforcement of this implicit tie relies heavily on the behavior of sales associates, a the plaintiffs labeled the “Wink and Nod” method. The appeal record highlights that sales associates are not passive actors financially motivated enforcers of the tie.

Plaintiffs argued that this commission structure deputizes sales associates to enforce an antitrust violation. By paying zero commission on the tying product (the Birkin), Hermès ensures that associates have no incentive to sell the bag to a “walk-in” customer, regardless of availability. The only way for an associate to monetize the high demand for the Birkin is to use it as use to sell commission-bearing ancillary goods.

Legal Precedents and the “Coercion” Threshold

The defense, represented by veteran antitrust litigators, countered that “relationship retail” is a standard luxury practice, not a Sherman Act violation. They relied on United States v. Grinnell Corp. to that maintaining a high-quality brand image through selective distribution is a legitimate business justification.

yet, the Ninth Circuit panel appeared interested in the distinction between “vetting” and “tying.” One judge questioned whether the “purchase history” was truly a vetting method for brand affinity, or simply a “toll booth” for the Birkin. The “Soft Tie” theory suggests that if the “vetting” is purely financial, i. e., anyone who spends $10, 000 on shoes is “vetted”, then it is not a subjective selection process an objective price schedule that includes unwanted products.

The plaintiffs drew parallels to the Microsoft antitrust cases, arguing that “technological tying” (integrating a browser into an OS) is analogous to “relationship tying.” In both cases, the dominant firm uses its power in one market (OS/Birkin) to foreclose competition in another (Browsers/Shoes) by making it practically impossible for the consumer to choose the competitor’s product without losing access to the dominant product.

Market Realities vs. Formalism

The success of the “Soft Tie” theory rests on the court’s willingness to look past the absence of a written agreement. Historically, courts have been hesitant to infer tying arrangements from “course of conduct” evidence alone. yet, the plaintiffs presented data suggesting that the correlation between “ancillary spend” and “Birkin allocation” is so strong that it defies any explanation other than a widespread requirement.

If the Ninth Circuit accepts the “Soft Tie” theory, it could redefine the legal boundaries of loyalty programs. A ruling in favor of the plaintiffs would suggest that any loyalty program requiring purchase in Market A to access Market B could be scrutinized as a tie, provided the seller has sufficient market power in Market B. This would strip the “luxury defense”, the idea that high-end retail plays by different rules, of its legal immunity.

The “Soft Tie” argument asks the court to modernize the Sherman Act for an era where coercion is algorithmic and psychological rather than contractual. As the judges deliberate, the question remains: is the “Hermès Game” a valid vetting process, or is it a sophisticated, unwritten contract that violates the fundamental principles of free competition?

Damages Modeling: Calculating the Overcharge on Unwanted Goods

The economic architecture of the plaintiffs’ appeal rests on a single, quantifiable premise: the “sticker price” of a Birkin bag is a fiction. In the arguments presented to the Ninth Circuit, the class representatives introduced a damages model that redefines the cost of a Hermès handbag not as the $10, 000 to $30, 000 charged at the register, as a composite sum including the “coerced” purchase of ancillary goods. This ” Price Theory” posits that the purchase history requirement functions as a hidden surcharge, mathematically equivalent to a tie-in sale where the tied product, scarves, jewelry, or home goods, has a utility value of near zero to the consumer. The plaintiffs contend that the damages are not the lost opportunity to buy a bag, the hard currency extracted for unwanted items, a sum that forensic accountants estimate ranges from 1. 5 to 3 times the value of the handbag itself.

The “Shadow Price” Methodology

To calculate the specific overcharge, the plaintiffs’ experts proposed a ” -For” market simulation. In a competitive market absent the alleged tying arrangement, a consumer would purchase a Birkin for its nominal price ($12, 000) and zero ancillary products. Under the current regime, the same consumer spends $12, 000 on the bag plus $20, 000 on “qualifying” merchandise. The damages model isolates this $20, 000 as the “tying overcharge.” This calculation challenges the district court’s dismissal, which characterized the ancillary purchases as independent consumer choices. The appeal record highlights internal Hermès data showing a correlation coefficient of nearly 0. 9 between high-value ancillary spending and Birkin allocation offers, a statistical link that plaintiffs proves the “purchase history” is a rigid pricing algorithm rather than a vague loyalty metric.

The defense counters that this model ignores the intrinsic value of the ancillary goods. A silk scarf or a gold bracelet, Hermès, retains market value and utility; therefore, the “damage” cannot be the full purchase price. yet, the plaintiffs’ rebuttal employs the “Forced Purchase” doctrine. They that if a consumer has no desire for a $500 ashtray buys it solely to unlock a handbag, the economic loss is the full $500, regardless of the item’s theoretical resale value. The brief cites the 3% commission structure, where associates earn on ancillary goods zero on Birkins, as the method that enforces this zero-utility spend. The sales associate, incentivized to maximize the “tax,” directs the consumer to the highest-margin, lowest-velocity inventory, dumping dead stock on Birkin aspirants.

“The consumer’s wallet is not a repository for the defendant’s inventory management problems. When a buyer is compelled to purchase a $3, 000 saddle they do not own a horse for, the value of that saddle to the buyer is not $3, 000. It is the price of admission, a toll fee masquerading as a luxury good.”
, Excerpt from Plaintiffs’ Opening Brief, Ninth Circuit Appeal, Feb 2026.

Aggregating the Class Harm

Scaling this model to the class level reveals the magnitude of the alleged antitrust injury. With Hermès reporting 2024 revenues of €15. 2 billion, and the “Other Hermès Sectors” (Jewelry and Home) growing by 17%, the plaintiffs attribute of this growth to coerced tying. The damages expert report suggests that between 2020 and 2024, U. S. consumers spent approximately $450 million on ancillary products solely to satisfy the unwritten purchase history requirement. The appeal that this sum represents a wealth transfer from consumers to the corporation, enabled by monopoly power in the “elitist luxury handbag” market. If the Ninth Circuit accepts this damages theory, the liability for Hermès could exceed $1 billion when trebled under the Sherman Act, fundamentally altering the risk profile of “scarcity marketing” strategies across the luxury sector.

Operational Mechanics: How Client Profiles Track Cumulative Spend

The operational heart of the allegations in Cavalleri et al. v. Hermès International lies not in the Birkin bag itself, in the digital architecture used to allocate it. Court filings and appellate arguments from February 2026 reveal that the “Client Profile” is far more than a customer relationship management (CRM) tool; plaintiffs allege it functions as a ledger of eligibility, tracking a specific metric known as “cumulative spend” to gatekeep access to the brand’s “quota bags.”

The “Zero-Commission” Incentive Structure

The engine driving the alleged tying arrangement is a compensation that turns Sales Associates (SAs) into enforcers of the spend requirement. According to the class action complaint filed in the Northern District of California, Hermès use a split-commission structure designed to disincentivize the standalone sale of its primary assets.

This 0% commission on the most coveted items creates a structural conflict of interest. An SA has no financial motivation to sell a Birkin bag for its own sake. Instead, the bag serves as a tool to maximize the 3% commission on “ancillary products.” Plaintiffs this deputizes the sales force to enforce a “pay-to-play” system without written corporate policy, as the SA’s income is directly tied to the client’s accumulation of non-bag merchandise.

The Managerial “Back Room” Approval Process

Testimony and filings indicate that an SA cannot unilaterally sell a Birkin bag, even if one is physically present in the stockroom. The transaction requires a specific approval workflow that hinges on the Client Profile. When a client requests a Birkin, the SA does not check inventory; they check the profile.

“The manager looks at your total spend history, determines the amount spent on leather goods versus other items… and the frequency of your visits. If you have not visited the store or made any purchases in over 6 months, it is possible that a quota bag not be offered.”
, Industry analysis in Plaintiff exhibits regarding allocation.

This “back room” review acts as the enforcement checkpoint. The Store Manager reviews the digital ledger to assess “category diversity”, a metric that penalizes clients who only buy leather goods. To be “deemed worthy,” a profile must show consistent spending across high-margin categories like furniture, fine jewelry, and ready-to-wear clothing. The system allegedly flags “leather-only” buyers as low-value, regardless of their total expenditure, blocking them from the allocation queue.

The “Spend-Ratio” and Reset Mechanics

While Hermès does not publish official prices for eligibility, the legal discovery process has illuminated the concept of the “prespend ratio.” Market data and plaintiff allegations suggest an implicit ratio frequently exceeding 1: 1, meaning a customer must spend at least the equivalent of the bag’s value (approx. $10, 000 to $30, 000) on ancillary goods before being considered.

Crucially, the tracking method is. Obtaining a quota bag frequently “resets” the use of the client’s profile. To qualify for a second bag, the client must demonstrate new loyalty through fresh spending. This prevents a single large purchase from granting permanent access, forcing a continuous pattern of consumption. The “purchase history” is thus not a record of past gratitude, a live meter of current utility to the brand’s bottom line.

Digital Integration and Global Vetting

By 2025, the centralization of Hermès’ inventory systems allowed for tighter control over this data. The “quota” system, strictly limited to two bags per year, is enforced globally through this digital profile. Attempts by consumers to circumvent the system by shopping at different boutiques are frequently thwarted by the networked nature of the client ID, which displays the “quota status” and “spend profile” to any manager worldwide. This ensures that the “tying” arrangement is not limited to a single rogue store is an operational reality across the network.

The “Kaleidoscope” Market: Judge Donato’s Dismissal Order

The legal pathway to the Ninth Circuit was paved by a decisive ruling on September 17, 2025, when U. S. District Judge James Donato dismissed the plaintiffs’ Second Amended Complaint (SAC) with prejudice. In his order, Judge Donato dismantled the core economic theory of Cavalleri v. Hermès International, characterizing the alleged “tied” market not as a coherent economic sector, as a “kaleidoscope of products” ranging from scarves and shoes to furniture and home goods. The dismissal did not hinge on whether Hermès utilized a “purchase history” requirement, a fact the court accepted as plausible for pleading purposes, on the failure to define a market in which that requirement could be deemed anticompetitive under the Sherman Act.

Judge Donato’s rationale focused on the “Elitist Luxury Handbag” market definition proposed by the plaintiffs. The court found this definition “fatally vague” and unsupported by rigorous economic data. By attempting to segregate the Birkin and Kelly bags into a market entirely separate from other luxury handbags (such as those by Chanel or Louis Vuitton) based solely on “exclusivity” and “price,” the plaintiffs created a circular argument: the product was a market unto itself because it was expensive and hard to get. Donato ruled that “scarcity is not market power,” and that a brand’s ability to command high prices or enforce waiting lists is a function of brand equity, not an antitrust violation.

The “Coercion” vs. “Choice” Distinction

A serious component of the dismissal was the court’s interpretation of “coercion” under Sherman Act Section 1. Judge Donato distinguished between “consumer disappointment” and “antitrust injury.” The court noted that while consumers might feel pressured to buy ancillary products to “unlock” a Birkin, this pressure did not amount to the type of coercion the Sherman Act prohibits unless it forecloses competition in the tied market. Because the plaintiffs failed to show that Hermès’ requirement prevented them from buying scarves or shoes from other retailers, or that it significantly harmed rivals in the luxury accessory market, the court viewed the “purchase history” protocol as a valid inventory allocation strategy rather than an illegal tie.

Assignment of Error 1: The “Pleading Barrier”

In the appellate arguments presented in February 2026, the plaintiffs identified the District Court’s treatment of market definition as the primary reversible error. The appeal brief that Judge Donato applied a “summary judgment standard” to a motion to dismiss, requiring economic proof of cross-elasticity of demand that is reserved for the discovery phase. The plaintiffs contend that the “Elitist Luxury Handbag” market is a recognized economic reality, distinct from the “aspirational” luxury market, and that the Birkin’s absence of substitutes, evidenced by its appreciation in value on the secondary market, sufficiently pleads a distinct market.

“The District Court erred by demanding mathematical precision in market definition before discovery. The distinct price point, exclusivity, and resale behavior of the Birkin bag segregate it from the broader handbag market as a matter of economic fact, not just consumer perception.”
, Excerpt from Appellants’ Opening Brief, Docket 25-16012

Assignment of Error 2: The “De Facto” Contract

The second major error assigned on appeal attacks the District Court’s formalism regarding the “purchase history” requirement. While Judge Donato ruled that no explicit contract existed forcing consumers to buy ancillary goods, the appellants this ignores the “functional reality” of the transaction. The appeal posits that Hermès has created a “de facto” tying arrangement where the condition is understood by all parties, even if unwritten. By dismissing this as mere “customer prioritization,” the plaintiffs the District Court legalized a loophole where dominant firms can enforce tying arrangements through “loyalty” programs that are, in practice, mandatory toll booths.

Foreclosure of the Ancillary Market

, the appeal challenges the finding of “no antitrust injury.” The plaintiffs that the District Court failed to recognize the in the tied market (ancillary products). By forcing consumers to spend thousands of dollars on Hermès scarves, jewelry, and home goods they do not want, Hermès artificially its market share in these sectors and forecloses consumer capital that would otherwise flow to competitors. The error assigned is that the District Court focused too narrowly on whether rivals were completely shut out, rather than whether the competitive process was corrupted by the tying arrangement.

The “Scarcity Defense” vs. Cross-Market Coercion

The February 2026 oral arguments before the Ninth Circuit in Cavalleri et al. v. Hermès International hinged on a serious economic distinction: the difference between “brand loyalty” and “coercive tying.” Hermès’ defense team repeatedly invoked the broader luxury sector, suggesting that their allocation of Birkin bags is no different from the exclusivity practices of other high-net-worth heritage brands. yet, a forensic examination of the allocation models used by Ferrari N. V. and Rolex S. A. reveals fundamental structural differences that weaken Hermès’ attempt to normalize its “ancillary product” requirements.

While all three entities use scarcity to drive demand, the method of “qualification” differs legally and economically. The Hermès model, as alleged in the Second Amended Complaint, relies on cross-market tying, conditioning the sale of a dominant product (handbag) on the purchase of unrelated goods (shoes, homeware). In contrast, the Ferrari and Rolex models largely operate within single-market progression or are shielded by independent retailer autonomy, creating antitrust defenses that are unavailable to Hermès.

Ferrari: The “Ladder of Ownership” (Same-Market Tying)

Ferrari’s allocation strategy for its “Icona” series and limited-run V12 models (e. g., the Daytona SP3 or 812 Competizione) is arguably the most in the luxury world. Yet, it has largely evaded the specific antitrust liability facing Hermès. The distinction lies in the nature of the “tie.” To qualify for a limited-edition Ferrari, a client must demonstrate a history of purchasing other Ferraris.

This “Car-to-Car” qualification creates a vertical ladder within a single product market. In antitrust terms, requiring a customer to buy a Ferrari Roma to access a Ferrari Pista is viewed as building brand loyalty within the automotive sector. It does not use market power in sports cars to monopolize a separate market, such as apparel or furniture. The Cavalleri plaintiffs that Hermès, conversely, use power in the “elite handbag” market to distort competition in the “luxury footwear” or “home goods” markets, sectors where Hermès faces strong competition from brands like Christian Louboutin or Restoration Hardware.

also, Ferrari’s restrictions are frequently framed as anti-speculation measures. The “Right of Refusal” (ROFR) clauses in Ferrari purchase agreements, which prevent owners from flipping cars for profit within the year, were upheld in various dealer disputes not as antitrust violations, as valid contract terms to preserve brand integrity. The Hermès “profile” requirement, which absence a written contract or clear ROFR, functions less as a protective measure and more as an unclear revenue extraction method.

Rolex: The “Authorized Dealer” Shield

Rolex S. A. presents a different legal obstacle for plaintiffs attempting to draw parallels. Unlike Hermès, which owns and operates its U. S. boutiques directly (vertical integration), Rolex largely relies on a network of independent Authorized Dealers (ADs). While consumers frequently complain of being forced to buy “relationship builders”, frequently undesirable jewelry or Tudor watches, to access a Rolex Submariner or Daytona, this conduct is executed by third-party retailers, not the manufacturer itself.

This distinction provides Rolex S. A. with plausible deniability regarding Sherman Act Section 1 claims, which require a “conspiracy” or agreement. Rolex corporate can (and does) claim that tying practices violate their dealer guidelines, shifting liability to individual jewelry stores. Hermès, by contrast, cannot claim its sales associates are rogue third parties; they are direct employees executing corporate policy.

The legal for Rolex may shift following its 2023 acquisition of Bucherer, a major retailer. This move, approved by EU regulators in late 2024 and finalized in 2025, gives Rolex direct control over a significant retail footprint. yet, during the relevant class period for Cavalleri (2019, 2025), the vast majority of Rolex transactions occurred through independent ADs, insulating the parent company from the direct “coercion” claims leveled at Hermès.

Comparative Analysis: The Coercion Matrix

The following table contrasts the allocation method of the three luxury giants, highlighting why the Hermès model is uniquely to the “tying” allegations under the Sherman Act.

The “Single Brand Market” Doctrine

A pivotal element of the Ninth Circuit appeal is the application of the Eastman Kodak Co. v. Image Technical Services (1992) precedent, which established that a single brand can constitute a relevant antitrust market if consumers are “locked in” and information is unclear. Plaintiffs that Hermès has created a “lock-in” effect where the Birkin is not just a handbag, a unique currency that cannot be substituted by a Chanel or Delvaux bag.

Ferrari and Rolex successfully against this designation by pointing to high interchangeability. A wealthy car enthusiast denied a Ferrari allocation can purchase a McLaren or Lamborghini. A watch collector can pivot to Patek Philippe or Audemars Piguet. Hermès, yet, has cultivated a market perception, supported by resale data showing Birkins trading at 200% to 300% of retail, that the Birkin has no economic substitute. This absence of interchangeability, combined with the requirement to purchase unrelated ancillary goods, creates the specific “tying” architecture that the Ninth Circuit panel scrutinized in the February 12 hearing.

The defense’s attempt to conflate Hermès’ practices with Ferrari’s “disciplined scarcity” fails to account for the ancillary spend ratio. Ferrari does not require a client to purchase $50, 000 worth of branded luggage or apparel to qualify for a car; the spend is directed toward the core engineering product. By decoupling the “qualifying spend” from the primary market (leather goods), Hermès exposes itself to claims that it is unlawfully extending its monopoly power from the “super-luxury handbag” market into the competitive “luxury accessories” market, a classic Sherman Act violation that neither Ferrari nor Rolex replicates.

chance Remedies: Injunctive Relief regarding Sales Practices

The Ninth Circuit’s February 2026 review of Cavalleri et al. v. Hermès International has moved beyond the theoretical boundaries of market definition to the practical mechanics of enforcement. Should the appellate court reverse Judge James Donato’s September 17, 2025 dismissal and remand the case for trial, the plaintiffs’ demand for injunctive relief would become the central battleground. Unlike monetary damages, which look backward, the injunctive remedies sought in the Second Amended Complaint (SAC) aim to fundamentally restructure Hermès’ retail operations in the United States. The plaintiffs are not asking for compensation; they are seeking a judicial order to the “purchase history” algorithm that allegedly functions as an illicit tying method.

The “Decoupling” Mandate

The primary injunctive relief requested is a permanent prohibition on conditioning the sale of “quota bags” (Birkin and Kelly) on the purchase of ancillary products. Legal analysts suggest that if the plaintiffs prevail under the Sherman Act or California’s Cartwright Act, the court would likely problem a “decoupling order.” This directive would explicitly forbid sales associates from considering a customer’s spending on shoes, scarves, or homeware when allocating high-demand handbags.

Such an order would require Hermès to sever the internal data link between a client’s “profile” (containing ancillary purchase history) and the inventory availability of Birkin bags. In practice, this could force the luxury house to adopt a ” -come, -served” model or a verified lottery system for its most coveted items, a radical departure from the curated exclusivity that defines the brand. During the appeal, legal counsel for the plaintiffs argued that without this structural separation, any monetary penalty would be treated as a “cost of doing business” while the exclusionary conduct continued.

Restructuring the Commission Incentives

A more granular, yet equally disruptive, chance remedy the compensation structure of Hermès sales associates. The complaint details a commission that allegedly fuels the coercive behavior:

The plaintiffs contend that this 0% vs. 3% differential creates a “bounty system” where the Birkin is weaponized to extract maximum value from the ancillary categories. An injunctive remedy could mandate the equalization of commission rates across all product lines or prohibit the use of differential commissions for “tied” and “tying” products. By neutralizing the financial incentive for sales associates to withhold bags, the court could theoretically eliminate the coercion at the point of sale without needing to micromanage daily inventory allocation.

Transparency and the “Wishlist” System

The third pillar of chance relief involves the “wishlist” or “profile” system. Currently, the criteria for being “offered” a Birkin are unclear, with the SAC alleging that “purchase history” is the sole determinant. Injunctive relief under California’s Unfair Competition Law (UCL) could force Hermès to publish objective criteria for bag allocation. Precedents in consumer protection law suggest that if a scarcity model is used, the rules of engagement must be non-deceptive.

“The opacity is the method of the fraud. A remedy that does not force the criteria into the light is no remedy at all.”
, Argument from Plaintiff’s Appellate Brief, referring to the ‘Unwritten Contract’ theory.

If granted, this transparency mandate would require Hermès to disclose exactly what “purchase history” is required to qualify for a bag, turning the “unwritten rule” into a public contract. While Hermès this would destroy the brand’s “mystery” and “allure,” antitrust courts have historically prioritized market fairness over brand mystique when exclusionary conduct is proven.

Enforcement Challenges and Monitoring

The Ninth Circuit panel’s questioning in February 2026 hinted at the difficulty of enforcing such behavioral injunctions. If a court orders Hermès to stop “tying,” how does it police the subjective decisions of sales associates who claim a bag is simply “out of stock”?

To address this, the plaintiffs have suggested the appointment of an external monitor or the implementation of an auditable inventory log. This would mirror remedies seen in other high-profile antitrust cases, such as United States v. Microsoft or the consent decrees in the music industry, where defendants must submit to periodic compliance reviews. For Hermès, this would mean every Birkin sale could chance be audited to ensure it was not preceded by a suspicious spike in ancillary spending, a level of regulatory intrusion that the brand’s defense team has characterized as “unconstitutional overreach” into private business strategy.

Procedural Timeline: Anticipated Ruling Date and Supreme Court Prospects

The conclusion of oral arguments on February 12, 2026, initiates a period of judicial deliberation that historically spans several months. While the Ninth Circuit Court of Appeals operates without a statutory deadline for issuing opinions, statistical metrics from the Administrative Office of the U. S. Courts and circuit-specific data provide a reliable framework for forecasting the ruling’s arrival. For Hermès International and the class representatives, the timeline shifts from active litigation to a waiting game defined by median disposition times and the strategic calculus of chance Supreme Court intervention.

Ninth Circuit Disposition Metrics

The Ninth Circuit is frequently as one of the slower federal appellate courts due to its sheer caseload volume, yet recent efficiency measures have compressed the window between argument and opinion. Data from the 2024 and 2025 judicial terms indicates that for civil appeals, the median interval from oral argument to final disposition hovers between 3. 5 and 5 months. This places the probable release window for the Cavalleri decision between late May and early August 2026.

Complex antitrust cases, particularly those involving applications of the Sherman Act to luxury markets, frequently drift toward the longer end of this spectrum. If the three-judge panel remains divided, a possibility suggested by the vigorous questioning regarding “market definition” and “coercion”, the drafting of a dissent extend the timeline. A unanimous memorandum disposition, which would likely affirm Judge James Donato’s September 2025 dismissal, could emerge as early as April 2026. yet, given the high profile of the “tying” allegations and the involvement of sophisticated counsel, a full published opinion is the standard expectation.

Procedural Anchor: The clock began ticking on February 12, 2026. Based on a 178-day average for complex civil merits opinions (2024-2025 data), the statistical target date for a ruling is August 9, 2026.

The En Banc Variable

A ruling by the three-judge panel does not automatically finalize the appellate process. The losing party retains the right to petition for a rehearing en banc, a request for a review by a larger panel of 11 judges. While the Ninth Circuit grants these petitions in less than 0. 5% of cases, the Cavalleri case presents the type of “circuit split” chance that attracts en banc interest. Specifically, if the panel’s ruling contradicts the Second Circuit’s standards on luxury market definitions or diverges from the “coercion” precedents set in Epic Games v. Apple, the court may vote to rehear the case to secure uniformity.

Filing a petition for rehearing suspends the issuance of the mandate, freezing the case status. If granted, the en banc process adds an additional 9 to 12 months to the litigation, pushing a final circuit decision well into 2027. If denied, the mandate problem seven days later, clearing the route for a Supreme Court petition.

Supreme Court Certiorari Prospects

The destination for Cavalleri et al. v. Hermès International may lie at the United States Supreme Court. yet, the statistical probability of the Court granting a writ of certiorari is microscopic. In the 2024 term, the Court granted review in approximately 1. 8% of paid petitions. For antitrust cases, the bar is even higher, requiring a clear conflict between Circuit Courts of Appeal or a departure from established precedents like Ohio v. American Express.

The plaintiffs’ best argument for certiorari rests on the “Market Definition” dispute. If the Ninth Circuit affirms the dismissal by ruling that a single brand (Hermès) cannot constitute a relevant market, the plaintiffs could this conflicts with the Supreme Court’s ruling in Eastman Kodak Co. v. Image Technical Services, which held that a single brand can be a market in aftermarket scenarios. Hermès, conversely, would rely on the Amex precedent, arguing that the luxury handbag market is two-sided and strong competitive.

Settlement Pressure and Discovery Risks

The procedural timeline exerts asymmetric pressure on the litigants. For Hermès, a remand to the District Court represents a significant strategic failure. It would reopen the doors to discovery, exposing the company’s internal “purchase history” algorithms, client allocation lists, and sales associate commission structures to public scrutiny. The “disciplined scarcity” defense relies on opacity; litigation demands transparency.

Consequently, if the Ninth Circuit reverses Judge Donato’s dismissal, the likelihood of a settlement increases exponentially. Hermès may prefer to pay a substantial financial sum to the class rather than allow a jury to examine the mechanics of how it allocates Birkin bags. Conversely, if the Ninth Circuit affirms the dismissal, the plaintiffs’ use evaporates, leaving them with a costly and low-probability appeal to the Supreme Court.

Final Outlook

As of March 8, 2026, the case sits in the quiet center of the appellate storm. The Ninth Circuit’s decision likely hinge on a technical dispositive question: Did the plaintiffs plausibly allege that the “ancillary products” (scarves, jewelry, home goods) are distinct from the “Birkin” market, or are they part of a unified “luxury experience”? The answer define the boundaries of antitrust liability for the entire luxury sector for the decade.