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February 2, 2024
Chanel, the renowned French luxury brand, has historically exercised immense control over the distribution of its products, which has led to its concerns about The RealReal advertising itself as a secondhand retailer of authentic Chanel merchandise.1 Chanel sells luxury fashion and cosmetic products worldwide through its own retail stores, as well as high-end specialty stores such as Saks Fifth Avenue and Nordstrom. The RealReal is a California-based luxury consignment retailer that takes items it receives from potential sellers and conducts an internal inspection and authentication process prior to selling the merchandise. Chanel does not authorize, sell to, or authenticate sales of its products through The RealReal.2
In November of 2018, Chanel filed a suit against The RealReal in the Southern District of New York alleging trademark infringement, counterfeiting, false endorsement, false advertising, and unfair competition under the Lanham Act. The New York-based luxury fashion company also brought several related claims under New York state common and statutory law.3 In the filing, Chanel alleged that The RealReal sold at least seven counterfeit Chanel bags on its website, challenging The RealReal’s claim that its in-house luxury experts authenticated each item as genuine Chanel products. The New York based luxury fashion company also asserted that The RealReal does not have the necessary qualifications to authenticate Chanel products because only Chanel has the ability to do so. Moreover, Chanel claimed that The RealReal’s advertising and marketing practices attempted to deceive consumers into falsely believing that The RealReal obtained approval or was affiliated with Chanel.4 The RealReal asserted that this lawsuit is an attempt by Chanel to crush possible competition in the luxury market and interfere with the economy. The luxury consignment retailer claimed that Chanel is trying to use this suit to bar consumers from reselling their authentic goods and to prevent customers from buying those goods at discounted prices. The RealReal also defended its authenticity guarantee as being a valid verification process.5
With the recent proliferation of secondhand online marketplaces, luxury brands, like Chanel, face the daunting challenge of confronting new threats to their well-recognized and protected trademarks, while simultaneously pursuing the opportunities those markets offer for themselves.6 The secondhand fashion industry is exponentially growing with $44 billion in sales for 2023 and an estimated $70 billion in sales by 2027.7 With Gucci and Ralph Lauren consistently trending on Poshmark, and Chanel being one of the most-searched brands on Depop, Chanel is not the first brand that has pursued litigation against an online marketplace.8
In 2018, Chanel filed a lawsuit against What Goes Around Comes Around (“WGACA”), alleging that WGACA was selling non-genuine Chanel products as being “authentic items”. In that case, Chanel alleged that WGACAA sold counterfeit goods and implied an affiliation with Chanel through its advertising and marketing materials. WGACA denied both accusations and the case is till ongoing.9
In Tiffany v. eBay, Tiffany claimed that eBay should be held liable for infringement because it had knowledge or had reason to know that sellers on eBay were selling counterfeit Tiffany merchandise. The Second Circuit rejected Tiffany’s argument and found that eBay itself did not sell counterfeit Tiffany goods because the vendors are the ones actually selling the infringing merchandise.10 Although both eBay and The Real provide online marketplaces for secondhand merchandise to be sold, unlike eBay, The RealReal possesses approval power over merchandise being sold, maintains the inventory, and bears the risk of loss for its products. The Southern District of New York decided that since The RealReal itself controls a secondhand market for trademarked luxury goods, The RealReal is subject to the burden of potential liability for “sell[ing], offering for sale, distributing, and advertising goods in the market it created”11. If the RealReal is found to have been selling counterfeit products, the court will most likely impose a heavy penalty onto The RealReal; however, Chanel’s attempt to stop The RealReal from selling Chanel products is highly likely to be barred because of the First Sale Doctrine, which is meant to allow for a resale market and fair competition.12
Despite Chanel’s history of taking issue with online reseller marketplaces, new documents revealed that Chanel was a previous investor in Farfetch, another secondhand online luxury consignment retailer, which prompted The RealReal to bring antitrust claims against Chanel in February of 2021.13
The RealReal argued that Chanel tried to monopolize the secondhand market through strategic investments and litigation, as well as to use its highly regarded reputation to pressure popular stores such as Saks Fifth Avenue to not advertise nor have a retail relationship with the secondhand luxury retailer. The RealReal noted that Chanel has not pursued litigation against Farfetch for the same business activities Chanel claims is unlawful for The RealReal.14 This case is still ongoing.15
It is worth noting that multiple luxury brands have instead decided to partner with secondhand marketplaces. Stella McCartney, Burberry, and Gucci have all collaborated with The RealReal. For example, in 2020, Gucci began releasing specially curated pieces on The RealReal in order to incentivize Gucci shoppers to use The RealReal. Gucci then planted a tree for every Gucci item purchased on The RealReal.16
The outcome in Chanel’s case against The RealReal could potentially provide clarification as to how much control luxury brands have over protecting their brands against secondhand retailers that have in-house authentication teams and how luxury consignment businesses should advertise themselves. As of January 2024, Chanel’s trial against WGACA could also provide precedent for how much responsibility secondhand retailers have for counterfeit items being sold on their websites and in how they advertise the brands they sell. Therefore, what happens next in The RealReal case could be potentially impacted by the decision in Chanel v. WGACA.17