Carolina Herrera
Over the last several years, the second-hand luxury retail market has experienced dramatic growth, captivating fashion enthusiasts and investors. This surge has been propelled by consumers seeking to find affordable pieces and special vintage finds, coupled with an overall industry-wide shift towards sustainability, garnering the attention of the luxury brands themselves and prompting collaborations between luxury brands and notable resale companies such as Poshmark, TheRealReal, Vestiaire Collective, What Goes Around Comes Around, and Rebag.[1]
Partnerships between primary and secondary luxury markets are one of the two ways brands have approached the resale market, and while some companies such as Gucci, Rolex, and Burberry have embraced this avenue, other brands have taken a more protective and litigious approach.[2] Chanel falls into the latter category. Chanel prides itself on the luxury and quality of their products, and the potential misuse of the famous, interlocking “CC” monogram has always raised serious concerns for the company.[3] Chanel has historically exercised an extreme amount of control over the creation, marketing, and distribution of its products.[4] It has always been wary of consignment stores and platforms like The RealReal and What Goes Around Comes Around, especially surrounding the issues of authenticity, false advertising, and trademark counterfeiting and infringement.[5]
In 2018, Chanel sued What Goes Around Comes Around (“WGACA”), a luxury reseller, which operates stores in Manhattan, Los Angeles, Miami, and the Hamptons, along with an e-commerce site.[6] WGACA prides itself on having “the world’s largest collection of vintage Chanel.”[7] The luxury reseller does not have a formal relationship or affiliation with Chanel, and Chanel has stated that it has refused past partnership requests from WGACA.[8] In the complaint, Chanel alleged counterfeiting and trademark infringement, false advertising, unfair competition and false endorsement.[9] Chanel also claimed that WGACA’s advertising and promotion of its Chanel products is misleading its customers into believing it has an official partnership with Chanel.[10] At the time of the complaint, Chanel asserted that WGACA stated on its website that any piece purchased was “guaranteed authentic.” However, this authenticity is not confirmed by Chanel; it is confirmed by WGACA. In the court documents, attorneys for Chanel claim that WGACA has previously sold counterfeit Chanel items.
Chanel alleged false endorsement and advertising claims, arguing that WGACA has “willfully trad[ed] on [its] well known trademarks, including using Chanel’s trademarks, quotes, and images of [its] founder Coco Chanel, hashtags with [its] trademarks, #WGACACCHANEL, pictures of Chanel runway shows and prior Chanel advertisements to draw a false association with Chanel, as well as WGACA falsely guaranteeing that every Chanel item it sells is authentic.”[11] This lead to the likelihood of confusion, and Chanel claimed that not only did “multiple consumers call or email Chanel’s customer services hotline demonstrating confusion as to the association between Chanel and WGACA,” but a survey conducted by Chanel’s legal team, along with David Franklyn, the director of the McCarthy Institute for IP and Technology Law (and an expert witness for Chanel), underscored that genuine confusion among consumers did exist.[12] According to the survey, a majority of survey participants believed that “(1) Chanel approved the sale of WGACA’s Chanel-branded goods (61 percent); (2) Chanel sponsored WGACA’s sale of Chanel-branded goods (47 percent); (3) Chanel is associated with WGACA (47 percent); and (4) WGACA was either an affiliate, partner, collaborator, or authorized reseller of Chanel (73 percent).”[13]
Almost six years since the complaint was filed, on February 6, 2024, a unanimous jury ruled in favor of Chanel on all four counts and awarded $4 million in statutory damages with further damages yet to be assessed.[14] The Court will soon hear post-verdict motions. These types of cases often hinge on whether a reasonable customer will genuinely be confused about the relationship between the two brands. Although boutiques and resale stores have a legal right to sell pre-owned goods without the permission of the original manufacture, pursuant to the first-sale doctrine, Chanel’s victory represents a successful challenge to the business practices of the luxury resale business—specifically their authenticity guarantees and advertising techniques.[15] Following this decision, resellers will need to be much more careful when referring to third-party luxury brands in their social media campaigns and general advertising materials. It is unclear whether the following disclaimer was visible on WGACA’s prior to this lawsuit or has been implemented as a result of litigation, but there is now a statement on the website that says “WHAT GOES AROUND COMES AROUND LLC, IS NOT AN AUTHORIZED RESELLER NOR AFFILIATED WITH ANY OF THE BRANDS WE SELL.”[16] In a statement following the verdict, Seth Weisser, WGACA’s CEO and co-founder, said that they will continue to stand by their 100% authenticity guarantee.[17] With the growing secondary market and the development of more robust advertising strategies through social media, it will be interesting to see how these cases will evolve in the future.
[1] Nicolette Shamsian, Luxury Fashion Resale: Legal Considerations and Challenges, Above the Law (May 9, 2023, 11:18 AM), https://abovethelaw.com/2023/05/luxury-fashion-resale-legal-considerations-and-challenges/ [https://perma.cc/FVU5-ML6A] [https://web.archive.org/web/20240213022206/https://abovethelaw.com/2023/05/luxury-fashion-resale-legal-considerations-and-challenges/].
[2] Id.
[3] See Chanel, Inc. v. What Comes Around Goes Around, LLC, 2018 U.S. Dist. LEXIS 158077, at *8 (S.D.N.Y. Sept. 14, 2018).
[4] Wang Zihan, Analysis on the Marketing Strategy of Chanel, 543 Advances Soc. Sci., Educ., Humans. Rsch. 855, 856 (2021).
[5] Shamsaian, supra note 1.
[6] Complaint at 2, Chanel Inc. v. What Comes Around Goes Around, LLC, (S.D.N.Y. 2020) (No. 18 Civ. 02253).
[7] Dhani Mau, Chanel Is Suing What Goes Around Comes Around, Fashionista (Mar. 15, 2018), https://fashionista.com/2018/03/chanel-what-goes-around-comes-around-lawsuit-counterfeit-goods [https://web.archive.org/web/20240213025159/https://fashionista.com/2018/03/chanel-what-goes-around-comes-around-lawsuit-counterfeit-goods].
[8] Chanel, What Goes Around Comes Around File Rival Motions in Ongoing Fight Over Reseller’s Offering of Chanel Goods, Fashion L. (Jul. 31, 2021), https://www-thefashionlaw-com.prx.law.columbia.edu/chanel-what-goes-around-comes-around-file-rival-motions-in-ongoing-fight-over-resellers-offering-of-chanel-goods/ [https://perma.cc/LRE7-XA75] [https://web.archive.org/web/20240213025645/https://www.thefashionlaw.com/chanel-what-goes-around-comes-around-file-rival-motions-in-ongoing-fight-over-resellers-offering-of-chanel-goods/].
[9] Id.
[10] Id.
[11] Id.
[12] Danny Parisi, Chanel Wins Lawsuit Against What Goes Around Comes Around over Trademark Infringement, Glossy (Feb. 4, 2024), https://www.glossy.co/fashion/chanel-wins-lawsuit-against-what-goes-around-comes-around-over-trademark-infringement/ [https://perma.cc/VXX6-2F6N] [https://web.archive.org/web/20240213030711/https://www.glossy.co/fashion/chanel-wins-lawsuit-against-what-goes-around-comes-around-over-trademark-infringement/].
[13] Chanel, What Goes Around Comes Around File Rival Motions in Ongoing Fight Over Reseller’s Offering of Chanel Goods, Fashion L. (Jul. 31, 2021), https://www-thefashionlaw-com.prx.law.columbia.edu/chanel-what-goes-around-comes-around-file-rival-motions-in-ongoing-fight-over-resellers-offering-of-chanel-goods/ [https://perma.cc/LRE7-XA75] [https://web.archive.org/web/20240213025645/https://www.thefashionlaw.com/chanel-what-goes-around-comes-around-file-rival-motions-in-ongoing-fight-over-resellers-offering-of-chanel-goods/]; Parisi, supra note 12.
[14] Megan Rannard, Chanel Unanimously Wins Infringement and Counterfeit Lawsuit Against Luxury Reseller, What Goes Around Comes Around, Lexology (Feb. 8, 2024), https://www.lexology.com/library/detail.aspx?g=a22db135-43c3-46dc-b201-9a671f622860#:~:text=On%20Tuesday%2C%20a%20New%20York,the%20sale%20of%20counterfeit%20products [https://perma.cc/NGD2-JUTE] [https://web.archive.org/web/20240213031106/https://www.lexology.com/library/detail.aspx?g=a22db135-43c3-46dc-b201-9a671f622860].
[15] Id.
[16] Chanel, What Goes Around Comes Around, https://www.whatgoesaroundnyc.com/en-us/chanel [https://perma.cc/SY7L-HWD] [https://web.archive.org/web/20240213031307/https://www.whatgoesaroundnyc.com/en-us/chanel] (last visited Feb. 18, 2024).
[17] Laurel Deppen, Chanel Wins Legal Dispute Against What Goes Around Comes Around, Fashion Dive (Feb 7, 20240, https://www.fashiondive.com/news/chanel-wins-wgaca-lawsuit/706860/ [https://perma.cc/56TG-V7XK] [https://web.archive.org/web/20240213031802/https://www.fashiondive.com/news/chanel-wins-wgaca-lawsuit/706860/].