Fashion Nova beats smaller rival as anti-competitive allegations emerge in fashion

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 among themselves to cease doing business with Honey Bum ”, thus creating a three-part“ star ”plot consisting of a dominant buyer, distributors competitors 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 demonstrate for substantiate its 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, in particular in connection with the Federal Trade directed by Lina Khan. Commission and in the European Union. Chanel is currently facing anti-competitive counterclaims filed against it under the Sherman and Donnelly Acts by The RealReal, which argued in response to legal action brought against it by Chanel that the French luxury goods brand has ” attempted, acquired and maintained a monopoly of power “in the” relevant markets “- namely, the markets for” premium handbags and good value handbags “- through an ongoing program aimed at” hindering the growth and development of innovative resale rivals like TRR that threaten Chanel’s dominance. ”

Chanel has since opposed such antitrust claims, saying that, among other things, the market share figures alleged by the TRR (which range from 30 to 50%) “are insufficient in law to establish a true monopolization claim.” , and even if they were, Chanel states that it is “totally implausible that [it] even has a 30 percent market 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.

Yet in a few affirmative defenses she has filed in response to the trademark infringement and dilution action filed against her two years ago by the owner of Dr. Martens AirWair, Shein says the shoe company is actively targeting Limiting “legitimate competition” for Dr. Martens has been given a boost by “claiming increasingly broad rights under his limited registrations and alleged common law rights.”

In particular, Zoetop argued in its October 2021 response that AirWair alleges a violation in cases where Zoetop failed to use all of the critical elements of [Dr. Martens’] relevant [boot design] trademark, as in cases where Zoetop brands have used “a non-yellow seam” – as opposed to the famous yellow seams of AirWair – or where Zoetop products have “a single color sole” where the rights of AirWair extend to the boots with two tone-on-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.

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

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