September 28, 2021

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Is Chanel really maintaining monopoly in high-end handbags

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This article is written by Shivani Garg, pursuing a Diploma in Intellectual Property, Media and Entertainment Laws from LawSikho.

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A person with vision is often destined to do great things in life, more or less leave a legacy behind. That is so true when it comes to Gabrielle Bonheur ‘Coco’ Chanel, a girl that not only created the life she wanted but also turned the life of every girl she ever crossed paths with. What’s more, she is a huge inspiration even today and surely, will own up to that even decades later. Out of all the style innovations from a designer who once famously said: “I don’t do fashion. I am fashion.’’, her concept of handbags brought. That holds true for most of the women of all the times. When Chanel handbags were launched it took over the market. But do they hold the same position in the market years later with such a huge amount? Well, to know the answer to this question one cannot miss the entire beginning of Chanel’s high-end handbags.

Let’s take a tour of the entire journey of Chanel high-end handbags and their existence. But before that let me tell you, things never stop on bringing the product out in the market and making it a huge deal, there are various things one has to keep in check while in the market. Well, laws are a major thing that governs the entire system even for the product as one just can’t go against that. Legal issues that revolve around products like handbags are laws governing monopolization, competition laws, antitrust laws, intellectual property and its registration issues. Now many of us hardly think about these areas, trust even I never thought about the same before buying anything except the authenticity related to the product which is to say original or not. So here we will come across a few of such things to give you a glimpse of how things work for producers out there who are bringing out something unique.

“In order to be irreplaceable, one must always be different.” – Coco Chanel

It’s just not any bag, it’s the 2.55 bag – one of the most iconic Chanel bags of all time. Wondering, what is so great about ‘THE 2.55’? For those who don’t know what great revolution Chanel’s 2.55 bag brought in fashion for women, you are certainly missing out on something especially if you are into fashion. The 2.55 sabotaged all the rules in the fashion industry when it launched in February 1955 (Yes, it gets its name from here!). It was the first luxury bag of its kind for women to come with a shoulder strap. Before this launch clutches, including those from Chanel, all needed to be carried by hand. Well, that’s always tiring. The innovative modification offered freedom to women, and thus transformed the way women’s bags were designed. The chain strap of the bag could double up and swing from one shoulder, an outside flap pocket was designed to store cash and the central pouch was perfectly shaped for lipstick.

The beauty and innovation brought monopoly to Chanel handbags in the market. It was one of its own kind with every minute detail thought thorough making it irresistible for any woman. And freedom, who would say no when it comes with their own terms? That was just the beginning for Chanel’s handbags. This is the point where things turn around for Chanel and the legal aspect was not considered at all. Back when handbags were launched, Chanel hardly took initiative for getting the products registered and worst was the entire sketches of handbags were made public without giving a single thought about copyright, patent or any intellectual property. As a result, there were many copies of Chanel handbags on every other street in the market. Too late to wipe out the entire copies. But here we are more concerned about what is the scenario years later and where our laws stand when it comes to saving the interests of producers or any brand. Without any doubt the handbags took over the market and even maintained it today. The question that left us hanging is how far they can manage it and is it even possible to monopolize the products in this era? Let’s see what laws have to say about it.

“In an acquisitive society, the drive for monopoly advantage is a very powerful pressure. Unchecked, it would no doubt…register the sun and the moon as exclusive trade-marks.’’ – Ralph S. Brown

France follows the European Union model and principles when it comes to competition and antitrust law regarding unfair competition, abuse of power, dominant companies and company mergers and acquisition. When it comes to competition, the Competition Authority in France is the one who is responsible for ensuring proper market competitiveness at the same time guaranteeing that the consumers can choose the best price. The Authority evaluates anti-competitive practices and can decide what sort of liability needs to be imposed. Recently, Chanel is already in news for violating both federal and state antitrust laws in furtherance of its alleged quest to achieve and maintain a monopoly for its pricey handbags. The case against Chanel was filed by The RealReal (TRR) in New York federal court on Nov. 14, 2018. There are claims against Chanel that it has been quietly carrying out an ‘aggressive campaign’ of ‘exclusionary and anticompetitive conduct’ aimed at “monopolizing the market”- and thus, the supply and price of its good, both new and pre-owned  – to the detriment of its competitors and consumers, alike. The case (Chanel, Inc., v. The RealReal, Inc.) is still pending in the court as counter claims are still being filed by both the parties.  The case shows how even Chanel is not above the law and definitely not the one calling shots for the rest of the market.

Yes, that’s the market position of Chanel. From the day it came into existence till date where the market is full of competitors in high-end handbags, Chanel is still able to hold its position tight. Well one might think the reason behind it is the quality, name and what it brings on the table that makes it unofficial on the market. But there is another inside story that has been highlighted by TRR. We all know there are always two sides of the coin. So what do the people in the situation have to say about Chanel and its market position? The fact that a rich supply of Chanel handbags was not usually available to consumers throughout is in everyone’s knowledge. But the very thing was changed by Chanel as claimed by TRR with the attempt to acquire and maintain monopoly power in the relevant market. It has been brought into light that Chanel is doing so by way of an ongoing scheme to ‘impair the growth and development of innovative resale rivals.  The companies have alleged that Chanel has actually ‘enhanced’ the monopoly power, in part, to its ‘anticompetitive intent of pushing out resellers of Chanel handbags and increasing its own market dominance.” You can say that higher you climb, more rivals and conspiracies stand against you in the market but the truth behind all this can only be revealed by time.

We know it takes a huge amount of time, energy and resources to bring a fresh new design to the market and if somebody takes advantage of all your sweat and blood, that just not hurt you deep inside but also the numbers of your business. Since the primary source of competitive advantage for all businesses, including those in the fashion industry is innovation and original creative expressions, it’s for the best to take advantage of the intellectual property system. Wondering, what is the benefit of this system? Well, registration of a design not only helps the owner to prevent all others from exploiting its new or original ornamental or aesthetic aspects, which may relate to a three-dimensional feature, such as the shape of a hat, or a two-dimensional feature, such as a textile print but also save all the business from any sort of losses. You will be surprised to know that some countries and regions, such as the United Kingdom and the European Union (EU) offer an unregistered form of protection for industrial designs for a relatively short period of time. Well, when it comes to CHANEL, it has actually managed to register many ip to secure its position which made it easy for the legal battles.

One of the notable registrations all around the world is that of its mark CHANEL on its handbags. The Logo of Chanel on its handbags is a registered trademark. Wondering what all things are registered by Chanel when it comes to ip and its handbags? Well, not just designs of these handbags are registered but also various things in the handbags are registered as well. The list contains: Ring under Class 11, various handbags under Class 03, various handbags that can also be worn as a belt under Class 03, a strap for handbag that can also be worn as a belt under Class 03, a strap for handbag under Class 03 and various patterns under Class 33.

Time and again there have been numerous cases filed by Chanel with the issue of domain name. Recently, Chanel has filed a lawsuit in the U.S. District Court in Las Vegas regarding the claims of trademark infringement by hundreds of websites selling counterfeit goods. Chanel is very committed when it comes to fighting against counterfeits and it dedicates considerable financial and human resources for this concern all over the world. The concrete terms and the course of action has been specifically laid down by Chanel on its official website. Nevertheless to say, Chanel defends its intellectual property rights such as copyright, trademarks and design rights including by taking legal action against counterfeiters, working with local authorities, and participating in information campaigns to ensure that consumers understand the risks they run in purchasing counterfeit articles

“In order to be irreplaceable one must be different.”- Coco Chanel

There is no doubt that Chanel handbags owns the monopoly in the market to such an extent that irrespective of conditions like COVID-19 it managed to spike its prices by 21%. But do you know things in the UK are quite different as they practice antitrust laws and anti-competitive behavior. Further, courts have defined monopoly power as “the power to control prices or exclude competition. Monopolization of any product is described by 2 factors:

  1. Relevant Product Market: Customer factors and Manufacturing factors;
  2. Evidentiary Considerations: Visual techniques, Written techniques and Oral techniques.

The UK prohibits agreements or practices that restrict free trading and competition between business entities, bans abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Irrespective of such laws, in 2018, counter claims have been filed against Chanel for anti-trust and monopolization in ongoing trademark case by The RealReal (TRR) in New York federal court in which TRR claims that Chanel has engaged in violations of Section 1 and 2 of the Sherman Act, anticompetitive arrangement in violation of the Donnelly Act, tortious interference with contract, and tortious interference with prospective business relations. The claims regarding Chanel being ‘a monopolist’ were also filed in the same case. Although Chanel filed a motion for the counter claims to be dismissed but following were dismissed in 2021.  

Some people are born from ashes. Stands true for Gabrielle! There is no doubt about the quality of the Chanel products but if it comes at the price of some ulterior motives to throw other companies out of their business then even Chanel is not spared to face the law. The claims have been filed against the Chanel as it has “attempted, acquired, and maintained monopoly power” in the “relevant market” by way of an ongoing scheme to “impair the growth and development of innovative resale rivals like TRR who threaten Chanel’s dominance” by “creating a robust resale market where none previously existed,” and thereby, giving consumers increased access to “a rich supply of Chanel handbags that would not otherwise be available to [them].” Further, the remarks to those claim are not surprising as Chanel states, “even if the alleged statements did fall within the scope of the Sherman Act, there is a presumption that disparaging a competitor, or otherwise engaging in ‘misleading advertising and publicity’ has a ‘de minimis’ effect on competition, and therefore, is not a violation of antitrust laws.” Which is to say, Chanel is still standing strong irrespective of the claims and counterclaims being filed.

  1. https://edition.cnn.com/style/article/coco-chanel-fashion-50-years/index.html
  2. https://www.lawyersfrance.eu
  3. Article: Chanel is maintaining monopoly with the help of big-name retailers, publishers, the RealReal claims in new filing, www.thefashionlaw.com
  4. Article: The RealReal files anti-competition counterclaims against Chanel in ongoing legal battle, www.thefashionlaw.com
  5. https://www.styledomination.com/fashion/anatomy-chanel-bag/
  6. https://www.chanel.com/sg/anti-counterfeits/
  7. https://www.wipo.int/wipo_magazine/en/2005/03/article_0009.html
  8. Find a registered design – GOV.UK (registered-design.service.gov.uk)
  9. https://www.thefashionlaw.com/chanel-wants-the-realreals-antitrust-monopolization-counterclaims-dismissed-from-trademark-case/
  10. https://www.thefashionlaw.com/with-court-approval-the-realreal-files-anti-competition-counterclaims-against-chanel-in-ongoing-legal-battle/
  11. https://via.library.depaul.edu/cgi/viewcontent.cgi?article=2595&context=law-review

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