In the latest round of the long-running legal battle between Chanel and The RealReal, a New York federal court has handed the luxury giant a win, dismissing The RealReal’s antitrust and related counterclaims while leaving its unclean hands defense intact. The ruling, which permits The RealReal to seek leave to amend certain counterclaims while foreclosing others as time-barred, significantly narrows the case by eliminating the bulk of the reseller’s counterclaims and underscores the difficulty of recasting trademark and resale disputes as viable antitrust claims.
The decision does not disturb Chanel’s remaining claims, including trademark counterfeiting and infringement, false advertising, and New York common-law unfair competition, but it eliminates The RealReal (“TRR”)’s antitrust strategy at this stage of the case, as proceedings resume following a multi-year-long stay.
The Background in Brief: The dispute stems from the lawsuit that Chanel filed in 2018, accusing TRR of selling non-genuine Chanel products and misleading consumers about the nature and reliability of its authentication process. Among other things, Chanel alleges that TRR marketed certain goods as authentic despite allegedly lacking adequately qualified authentication personnel and failed to sufficiently disclose that Chanel is neither affiliated with TRR nor involved in its authentication process.
TRR has argued that Chanel engaged in “unlawful efforts to suppress competition” and “illegally excluded TRR,” including by interfering with advertising, entering into exclusive arrangements, and claiming that “only Chanel could authenticate Chanel handbags.” In claims of its own, TRR accused Chanel of violating federal and state antitrust laws, as well as related tort claims arising from Chanel’s alleged efforts to restrict competition in the secondary market.
A Statute of Limitations Problem
In his March 26 order, SDNY Judge Vernon S. Broderick disposed of TRR’s counterclaims on two key bases: most were time-barred and the remainder failed to state a claim upon which relief may be granted.
Taking on the issue of timing, the court stated that it is “undisputed” that antitrust and tortious interference claims respectively carry a four-year and three-year limitations period. TRR’s allegations stem from its inability to do business with Neiman Marcus, Saks, New York Magazine, The New York Times, and Vogue – circumstances that TRR attributes to Chanel’s alleged efforts to restrict competition – in “the fall of 2015” and “late 2015 or early 2016.” Because those events occurred “over five years before TRR filed its amended answer and counterclaims,” the court held that “[a]ny alleged violations … are barred.”
TRR’s attempt to salvage its claims via the continuing violation doctrine – which requires it to allege a new and independent act by Chanel that “inflict[s] new and accumulating injury” – failed. The court held that TRR’s claims that Chanel continued to represent that Chanel goods purchased from resellers were “likely to be fake” or that “only Chanel itself can know what is genuine Chanel” were insufficient to restart the limitations period, as they sought to “bootstrap” earlier, time-barred conduct.
Importantly, the court determined that allowing TRR to amend these time-barred claims would be “futile,” effectively foreclosing that portion of TRR’s antitrust theory.
The Court Rejects TRR’s “New Conduct” Theories
TRR pointed to more recent theories – namely, allegations involving Women’s Wear Daily and Farfetch – in an effort to bring its antitrust counterclaims within the limitations period, but again, the court held that these allegations fail to state a claim upon which relief may be granted …
> The Women’s Wear Daily allegations. TRR alleged it lost advertising opportunities after WWD declined to run its ads due to a conflict with one of its “huge partners,” which TRR contended was Chanel. The court maintained that TRR “does not offer any factual support” to suggest that an agreement was made between Chanel and WWD to block TRR’s ads, relying instead on “conclusory assertion[s].”
The court further held that TRR failed to allege antitrust injury, reiterating that the law protects “competition … not … competitors,” and that “injury experienced only by TRR” is insufficient without harm to the market as a whole. In short: TRR’s allegations failed not because of the type of harm it alleged (i.e., harm to itself as a competitor), but because it did not allege any broader harm to competition.
To the extent that TRR sought to recast these allegations as tortious interference with prospective business relations, the court rejected those claims, as well, finding that TRR did not allege conduct rising to a “wrongful purpose” or “a crime or an independent tort.”
> The Farfetch allegations. TRR’s claims regarding Chanel’s relationship with Farfetch fared no better. TRR alleged that Chanel made a “significant” investment in Farfetch and “tolerated” its resale of Chanel products while restricting other resellers like itself. The problem here, according to the court, was that TRR “does not provide any factual details” of actionable anticompetitive conduct by Chanel and failed to identify any recognized theory under the Sherman Act. As Judge Broderick put it, he could not “identify – and TRR does not supply – any cognizable legal claim” based on Farfetch’s conduct.
A Partial Win for TRR
Not a total win for Chanel, the court denied its motion to strike TRR’s unclean hands defense as untimely, emphasizing that Chanel had “ample notice” of TRR’s theory, including its claim that “Chanel has unclean hands by virtue of its anticompetitive schemes against the secondary market.” Despite that notice, Chanel waited nearly a year to move to strike.
On that basis, the court exercised its discretion to deny the motion, allowing TRR’s defense to remain in play.
THE BIGGER PICTURE: The decision underscores the high bar for recasting resale disputes as antitrust claims, with the court emphasizing that such claims must be timely, plausibly allege an agreement, and be tied to harm to competition – not just harm to an individual market participant. Still, TRR’s unclean hands defense keeps its broader allegations about Chanel’s conduct toward the secondary market in play as the case moves forward following the lifting of a stay and failed settlement efforts.
The case is Chanel, Inc., v. The RealReal, Inc., 1:18-cv-10626 (SDNY).
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