Big-name fashion entities garnered industry attention in the spring of 2020 when they announced a collaborative effort aimed at revamping the fashion industry by increasing “sustainability throughout the supply chain and sales calendar.” Proposals included adjusting the seasonal runway show and product delivery schedules in order “to encourage more full price sales” and fewer discounted wares in the wake of the COVID-19 pandemic. One effort on this front, called the Forum Letter, was signed by an international group of designers, executives, retailers, and other industry figures, including individuals from Chloé, Missoni Group, Mytheresa, Nordstrom, Selfridges, Carolina Herrera, PUIG, Proenza Schouler, and Tory Burch. A similar initiative, called Rewiring Fashion, was introduced shortly thereafter by industry outlet Business of Fashion. 

These environmental, social, and governance (“ESG”)-centric endeavors were met with industry enthusiasm, with the Forum Letter – and its call for industry occupants to revisit their pricing (or more specifically, their discounting) practices – being signed-off on by one-hundred-plus notable names. At the same time, at least one of these initiatives caught the eyes of market regulators.

This spring, it was reported that the European Commission had launched an anti-competition probe, which a specific focus on an alleged attempt by the sizable group of well-established fashion brands to fix prices. In a release announcing the probe in May, the Commission stated that it has “concerns that the companies concerned may have violated Article 101 of the Treaty on the Functioning of the European Union (‘TFEU‘) and Article 53 of the European Economic Area Agreement, which prohibit “illegal contacts and agreements, price fixing and market sharing.” (More about that here.) 

The Commission has not provided any additional information about the probe since then. However, “people at several of the companies, speaking on condition of anonymity because of the potential litigation, confirmed that they had been contacted” by the regulator, the New York Times reported early this month. 

What About the U.S.?

To date, it appears that publicly known probes into fashion/retail’s ESG-focused collaborative initiatives are limited to that of the European Commission, but that does not mean that lawmakers and regulators in the U.S. are not paying attention. “As companies’ ESG efforts have begun to have more market impact, and especially as firms collaborate to implement ESG principles, antitrust/competition authorities are asking whether ESG efforts could violate the antitrust laws,” Vinson & Elkins LLP’s Hill Wellford and Ryan Sun stated in a note

In November, five U.S. Senators – including the Ranking Members of the Senate Judiciary Committee (Charles Grassley) and of the Subcommittee on Competition Policy, Antitrust and Consumer Rights (Mike Lee) – announced that they had sent letters to 51 U.S. law firms detailing “the possible antitrust violations the firms’ clients may commit if they pursue [certain] ESG initiatives.” Among other things, the Senators pointed to recent comments from Federal Trade Commission (“FTC”) Commissioner Lina Khan, who stated that while the agency has seen firms trying to claim an ESG exemption from antitrust laws, no such exemption exists “for agreements relating to ESG.” 

As for how seemingly well-meaning efforts could potentially set companies up for antitrust actions, Cadwalader Wickersham & Taft LLP partner Joel Mitnick states that there are two relevant provisions of antitrust law: Sections 1 and 2 of the Sherman Act. The former prohibits “agreements that unreasonably restrain trade. Given that a Section 1 violation “requires an agreement among two or more actors, businesses that enter into collaboration agreements, even if under the banner of good faith ESG reform, run the risk of Section 1 scrutiny,” he says. 

Even if an ESG collaboration does not involve “an explicit agreement relating to price or output,” Thompson Hine’s Joshua Shapiro asserts that “a competitor collaboration could be deemed unlawful if it increases the ability or incentive of firms to raise prices or reduce output, quality, service, or innovation.” 

The New Reality for ESG Collabs

While industry efforts, such as fashion’s burgeoning ESG collaborations, do not necessarily violate antitrust laws, such activity should, nonetheless, “be carried out in conformity with antitrust risk mitigating safeguards, such as filtering the kinds of information that may be shared among competitors or relying on benchmarking protocols that conform to FTC and Department of Justice guidelines,” Mitnick asserts. In particular, parties to these collaborations should “avoid sharing competitively sensitive nonpublic information, including information on current or future pricing and marketing or sales plans.” 

And although competitor collaborations on ESG remain subject to the antitrust laws, “companies still have a number of ways to collaborate on ESG without raising significant antitrust risk,” according to Hogan Lovells’s Logan Breed and Ilana Kattan. For example (and subject to implementing sufficient safeguards), they claim that companies can collaborate on ESG by: (1) Entering into voluntary, non-binding codes of conduct on ESG; (2) Adopting ESG certification standards and awarding certifications or seals to companies that meet certain ESG requirements; or (3) Petitioning the government to adopt certain ESG standards (joint petitioning is immune from antitrust scrutiny under the Noerr-Pennington doctrine).

Ultimately, “whether or not meritorious,” Mitnick maintains that the “new reality is that legislators and antitrust enforcement agencies have begun to claim that anticompetitive harm can flow from ESG-focused industry collaborations,” thereby, putting brands on alert for current and future endeavors. 

A competition-centric squabble between rival jewelry-makers Cartier and Tiffany & Co. over the latter’s alleged attempt to secure secret information in order to boost its “high jewelry” division continues to play out before a New York state court. On the heels of Tiffany urging a New York State Supreme Court judge to toss out the trade secret misappropriation, unfair competition, and tortious interference claims that Cartier lodged against Tiffany in what the LVMH-owned brand calls a “doomed” attack, “calibrated for maximum publicity,” a Cartier-turned-Tiffany & Co. employee, who is also named as a defendant in the lawsuit, is pushing back, as well, arguing that Cartier has failed to adequately plead its case against him. 

In the motion to dismiss that he lodged on June 30, Jaron Green – who Cartier has accused of “misappropriat[ing] dozens of confidential Cartier documents immediately prior to resigning” from his role as Cartier’s Assistant Boutique Manager in Honolulu, Hawaii to take on a “more senior role” at Tiffany – argues that while Cartier attempts to assert claims against him for trade secret misappropriation, breach of contract, and breach of fiduciary duty, “each of those claims fails for at least one reason even under New York law.” 

At the heart of Green’s dismissal bid is his argument that Cartier fails to plead that the information at issue amounts to protectible trade secrets, that it took the necessary precautions to preserve the secrecy of any such information, and that Green illicitly accessed such information – the three necessary elements in a trade secret misappropriation claim. 

So, what does Cartier allege? The Richemont-owned jewelry co. claims that “in the days and weeks leading up to his resignation” from Cartier to join Tiffany, Green “secretly sent to his personal email account dozens of emails attaching documents containing confidential [Cartier] business strategies, pricing data, product details, client lists, development strategies, and talent development plans.” 

The primary problem, according to Green, is that in making its trade secret misappropriation claim, Cartier fails to allege that any of the information that he allegedly emailed to himself meets the “high threshold of competitive sensitivity” required by New York state law. “Courts in New York have excluded many categories of corporate information from the scope of trade secret protection,” he contends, “including sales data, customer lists, pricing information, market strategies, bids and proposals, and information concerning corporate structure and financial affairs.” Beyond that, information about “‘single or ephemeral events in the conduct of the business,’ such as general financial and operational data,” is also unprotectable.  

Against this background, Green argues that “at most,” Cartier asserts that some of the documents that he sent to himself contain “pricing that Cartier provides to specific clients.” But since pricing info has “generally been excluded from the ambit of trade secrets,” he states, and any info about current pricing that Cartier once offered to particular clients at a certain moment in time is “the paradigm of ‘ephemeral’ information,” and thus, also “does not constitute a trade secret.” In other words, this is “far from the sort of highly sensitive process information, in ‘continuous use,’ that qualifies as a trade secret in New York,” per Green. 

As for the other information that Green allegedly misappropriated, such as “market action plans,” “sales data,” “product deliverable data,” and “talent development strategies,” Green claims that his former employer fails to make anything but “vague allegation[s]” about how this constitutes “confidential sales information” subject to trade secret protection. 

Even if the info at issue did fall within the realm of trade secrets, Green insists that Cartier falls short of establishing the second essential element of a trade secret claim: that it has taken reasonable precautions to prevent disclosure of such information. “Cartier alleges scarcely any precautionary measures taken to protect the secrecy of the information at issue,” Green asserts, claiming that “the only security measure alleged in the complaint is the Form Agreement” that he signed, which “purport[s] to impose certain confidentiality and related obligations.” 

Setting aside “other issues with that document,” including an alleged lack of consideration, Green maintains that “a confidentiality agreement standing alone carries no weight if, as here, the documents at issue” – i.e., the one containing confidential info – “‘were readily available’ throughout the company.” As such, Green claims that Cartier did not “actually take robust steps to maintain [the] secrecy” of the information at play. 

Cartier similarly fails on the third trade secret misappropriation prong, making “no allegation that Green obtained the materials in question illicitly or in excess of his authority,” he argues. “These documents were widely available to Cartier sales employees; even the ‘pricing data’ of which Cartier attempts to make so much must, by definition, be widely available to its sales staff as it is the bread and butter of their day- to-day job activities.” Further, Cartier acknowledges, according to Green, that “sales associates are free to share similar pricing information with their third-party ‘clients,’ i.e., Cartier customers.” These allegations, “alone, defeat Cartier’s claim,” Green argues. 

Looking beyond the trade secret misappropriation charge, Green urges the court to toss out Cartier’s breach of contract claim on the basis that “the contract is unsupported by bilateral consideration” – i.e., Green says he “obtained no benefit (and Cartier sacrificed no rights) under [the] terms” of the Form Agreement, which included a confidentiality agreement – and because Cartier “fails to allege the essential element of damages.” Similarly, Green contends that Cartier’s claim for breach of fiduciary duty should be dismissed because it is “fatally duplicative of the contract claim and it fails for lack of damages.” 

The “persistence” of Cartier in asserting “groundless claims against Green in the face of the total absence of any potential for further relief illustrates the vindictive character of this litigation,” the defendant asserts, stating that, “fortunately, there is a clear solution: the claims asserted against Green in the complaint should be dismissed.” 

Cartier amended the complaint that it initially filed against Tiffany & Co. and former Cartier employees Megan Marino in February to include Green as a defendant, asserting in its first amended complaint on April 15 that in the wake of filing suit, it “discovered additional substantial evidence of trade secrets misappropriated from Cartier by a new Tiffany employee (Defendant Green).” 

While Cartier claims that it “sought assurances that Tiffany would take appropriate actions to, among other things, trace Tiffany’s receipt of those trade secrets and their dissemination within Tiffany,” Tiffany, instead, “aligned itself with Green, refusing to disclose the extent to which the information misappropriated by him has been disseminated within Tiffany and continuing to employ him without regard for his misconduct and flagrant breaches of his confidentiality agreement with Cartier (perhaps seeking to avoid a repeated unwelcome consequence of a terminated Tiffany employee cooperating with Cartier and providing sworn evidence of misconduct by Tiffany executives).” 

The case is Cartier v. Tiffany & Co., et al., 650925/2022 (N.Y. Sup.).