On Tuesday, a New York jury unanimously ruled in favour of Chanel in their lawsuit against the luxury second-hand reseller, What Goes Around Comes Around (WGACA).
Chanel's lawsuit was filed back in 2018, alleging trade mark infringement, unfair competition, false advertising and the sale of counterfeit products. In particular, Chanel argued that no other business is able to guarantee the authenticity of their products and presented evidence that 51 handbags sold by WGACA used voided serial numbers following a theft from Chanel's factory in 2012. Chanel also alleged that over 750 items sold by WGACA were props that were never intended or authorised to be sold.
Other issues included WGACA's use of discount code such as “COCO10” and their use of Coco Chanel quotes on their social media pages, which Chanel argued created a false perception among customers that there is an official affiliation between the companies. Chanel's legal team presented survey evidence of over 200 consumers and in particular focused on the fact that 23% of respondents thought that WGACA makes handbags, which is not the case and was used to support Chanel's argument that there would be customer confusion.
Ultimately, the jury agreed with Chanel on all counts (including that WGACA had sold counterfeit Chanel branded goods) and awarded $4million in statutory damages. Further damages are yet to be assessed and the Court will soon hear post-verdict motions.
A Chanel spokesperson said:
“Chanel welcomes the ruling, which demonstrates Chanel's unwavering commitment to protecting consumers and its brand against all false association, trademark infringement and counterfeiting, and false advertising. Such infringements hurt consumers and harm the Chanel good will and brand, because they are likely to confuse the public as to the nature of the Chanel-branded items they are purchasing.”
WGACA were disappointed with the verdict and a spokesperson said:
“WGACA has always had a rigorous authentication process and has never in the history of the company sold a non-genuine or counterfeit product. [Tuesday's] verdict was not about not selling a counterfeit, it was about WGACA selling items which were voided in Chanel's database. Without any access to this database the resale industry would not know the status of these serial numbers. We continue to stand by our 100% authenticity guarantee”
Perhaps more significantly than the verdict on WGACA's sale of counterfeit goods is Chanel's successful challenge to the business practices of luxury second hand resale businesses, namely their authenticity guarantees and advertising techniques. Chanel are also currently involved in a similar dispute against the luxury resale company The RealReal, again alleging infringement and the sale of counterfeit goods.
Following the WGACA 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 to avoid the risk of being held liable for trade mark infringement and false association.
Authentication processes have also come under fire, with one of the world's largest luxury fashion brands directly challenging the ability of second-hand resellers to guarantee the authenticity of their products. Ultimately, authentication by third parties always carries an element of risk through unintentional human error and if Chanel also wins its case against The RealReal on infringement and counterfeit grounds, will any resale company feel safe?