Fashion Nova defeated an antitrust and monopolization lawsuit filed against it by a smaller rival, which accused the fast fashion retailer of engaging in a conspiracy to stifle the growth of its competitors. This is what aspiring online retailer Honey Bum claimed in its lawsuit against Fashion Nova in California federal court in December 2020, claiming the company had organized a group boycott with more than ‘a dozen suppliers she shares with Honey Bum for “unexpectedly” canceling and / or refusing to fulfill existing Honey Bum purchase orders and rejecting new orders on the grounds that they constitute “a threat to them. Fashion Nova profit margins ”.

After asking the court to dismiss Honey Bum’s section 2 monopolization claim of the Sherman Act in March 2021 in light of Honey Bum’s failure to establish that Fashion Nova maintains “market power over a “relevant market” “, which is a necessary element in a monopolization claim, the court allowed Fashion Nova’s summary judgment motion on January 6 and dismissed the remainder of the case.

In what constitutes the gist of his order, Judge Gary Klausner of the U.S. District Court for the Central District of California dismissed Honey Bum’s antitrust complaint under Section 1 of the Sherman Act, which prohibits contracting and / or “trade hindering” conspiracies. “To make his claim, Judge Klausner ruled that Honey Bum had to demonstrate the existence of an agreement which constitutes an” unreasonable restriction on trade “, but did not do so sufficiently.

In her summary judgment motion she filed last year, Honey Bum alleged that Fashion Nova broke the law by “pressuring[ing] various sellers to refuse to sell to Honey Bum “, prompting the sellers to then” come to an agreement with each other to stop doing business with Honey Bum “, creating a three-part” star “plot consisting of a dominant buyer , in competition with distributors and a horizontal agreement between these competing distributors. Honey Bum argued this arrangement was unreasonable in itself, thus avoiding having to establish an anti-competitive effect.

Unfortunately for Honey Bum, as Justice Klausner noted, the Supreme Court ruled that the group boycotts are nothing but unreasonable. in itself when it comes to horizontal agreements between direct competitors, which is not what happened here. According to Judge Klausner, Honey Bum’s evidence of these so-called horizontal deals – namely emails showing that between August 2017 and May 2019 some sellers told Fashion Nova that they would no longer do business with Honey Bum, guarantees that ‘they would have respected – does not “create a real dispute that the sellers have reached a horizontal agreement.”

Further, the court concluded that a reasonable jury could not infer that there was an agreement between the individual sellers to boycott Honey Bum, and that Honey Bum had not ruled out the possibility that the sellers acted independently. . In fact, Judge Klausner said the evidence “actually supports the opposite conclusion – that each vendor independently accepted the threats Fashion Nova inflicted on them individually.”

Although the court acknowledged that Fashion Nova “created the parallel conduct of the sellers to boycott Honey Bum by forcing them into vertical deals with [it]”and that” such conduct may be anti-competitive – and possibly even violate antitrust laws “, this” does not suggest that the sellers have illegally agreed to restrict competition, “which Honey Bum had to show to support his antitrust claim on a in itself based.

The court also sided with Fashion Nova on Honey Bum’s tort allegations and thus allowed Fashion Nova’s summary judgment motion in its entirety.

In her complaint last year, Honey Bum argued that due to the critical nature of maintaining a local supply chain in order to “quickly produce clothing to meet a retailer’s specific needs” in As part of the fast-fashion (sometimes “matter of a few days”) retail model of retailing, it has been damaged, potentially to the tune of millions of dollars, by Fashion Nova’s allegedly “monopolistic and anti-competitive” tactics. More than that, Honey Bum – who argued that her entry into the fast online fashion market would have “helped diversify customers, increase outlets and reduce reliance on Fashion Nova.” – claimed that Fashion Nova “was plotting and / or contracting to impose restrictions on trade” through deals with various vendors “harmed the fast-paced Los Angeles fashion market more generally”.

Other anti-competition claims

Recent allegations of competition in the retail industry are not limited to Fashion Nova… or Amazon, the latter having been (and continues to face) antitrust investigations, including states. -United, notably from the Federal Trade Commission headed by Lina Khan, and in the European Union.

Chanel, for example, is currently facing anti-competitive counterclaims filed against it under the Sherman and Donnelly Acts by The RealReal (“TRR”), which argued in response to the lawsuit that Chanel has brought against it. that the French luxury goods brand has “attempted, acquired and maintained monopoly power” in the “relevant markets” – namely, the markets for “premium handbags and valuable handbags” – in through an ongoing program to “hinder the growth and development of innovative resale rivals like TRR that threaten Chanel’s dominance.”

Chanel has since argued that the market share figures alleged by TRR (which range from 30-50%) “are insufficient in law to establish a true monopolization claim,” and even if they were, Chanel says. that it is “entirely improbable that [it] even owns a 30 percent share in a market that includes not only all relevant handbag vendors – such as Gucci, Prada, Hermes, Louis Vuitton, Givenchy, Ferragamo, Balenciaga, Céline, Burberry, Christian Dior, Saint Laurent , Valentino, Fendi, Versace and Coach, to name a few, but also all resellers of such handbags nationwide. In a motion to dismiss still pending, Chanel seeks to have TRR’s competition-based counterclaims dismissed.

Beyond that, in a few affirmative defenses she filed in response to trademark infringement and the dilution lawsuit filed against her two years ago by AirWair, Shein claims the owner of Dr. Martens is actively targeting to limit “legitimate competition” for Dr. Martens. ‘famous boots by “asserting ever-expanding rights in accordance with its limited registrations and alleged common law rights”. In particular, Zoetop argued in its October 2021 response that AirWair is alleging infringement in cases where Zoetop has not used all of the critical elements of Dr Martens’ boot design mark, such as cases where Zoetop brands have used “a non – yellow stitching” – as opposed to AirWair’s famous yellow stitching – or where Zoetop products have “a one-color sole” when AirWair’s rights extend to boots to two-tone soles.

At the same time, Zoetop claims that AirWair “attempted to use its alleged brands and trade dress too broadly for anti-competitive purposes to drive competitors out of the market.” This case is still pending in federal court in California.

Epic Games and an open door?

Existence and a relatively swift resolution of – the Fashion Nova case, and the competitive claims made in response to the lawsuits brought by Chanel and AirWair are noteworthy if for no reason other than these kinds of issues are not filed with too much frequency, especially in the fashion space (compared to say… tech).

This is likely due to the fact that these cases are often difficult – and prohibitively expensive – to win, prompting brands that may be tempted to take such actions to weigh their chances of success against the resources required to try. . Among other things, antitrust claims routinely include “sprawling, expensive, and extremely time-consuming businesses” in terms of discovery (and defense). And as Chanel asserted in a recent case regarding TRR’s counterclaims, such cases require the party alleging anti-competition to adhere to certain strict rules, such as proof of monopoly power, of behavior. Illegal “anti-competitive” or “exclusion”, “the existence of a well-defined relevant product market and a well-defined relevant geographic market”, as well as the actual harm and damage resulting from allegedly anticompetitive acts.

As Epic Games learned when it filed an antitrust complaint against Apple in 2020 after Apple removed its Fortnite game from the App Store, successfully defining the relevant market, on its own, is a difficult feat. The court rejected Epic’s claim that the market at issue in the case was isolated from the iOS App Store, where Apple has a 100% monopoly. In its defense, Apple argued that the market was much larger and consisted of all digital video games.

In a September 2021 ruling, Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California disagreed with the two parties’ market proposals and found that the appropriate market was in fact all of them. mobile digital game transactions. In doing so, she determined that Apple had market power and that its “app distribution restrictions have some anti-competitive effects. However, given the court’s chosen market definition, it rejected Epic’s arguments that Apple maintains an illegal monopoly under both California Cartwright Law and Federal Sherman Law.

Reporting on the outcome of the case at the time, Fenwick & West attorneys Steve Albertson, Thomas Ensign and Mark Ostrau said that despite the loss of Epic, “the district court left the door open for future plaintiffs to file similar claims, suggesting that different evidence could lead to a different outcome on the same issues.

This could prove to be significant for fashion brands looking to control their bigger competitors, but there is a good chance that such cases will remain relatively rare.

The case is Honey Bum, LLC v Fashion Nova, Inc., 2: 20-cv-11233 (CDCal.)