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New York Judge Greenlights The RealReal’s Antitrust Counterclaims in High-Stakes Lawsuit by Chanel

In a win for Paul, Weiss client The RealReal, a federal magistrate judge in Manhattan allowed the luxury consignment company to file antitrust counterclaims in an amended answer to a high-stakes lawsuit in which French fashion house Chanel is taking aim at The RealReal’s luxury resale business. In its counterclaims, based on recent internal Chanel documents that came to light, The RealReal alleges that Chanel has engaged in an anticompetitive scheme to eliminate threats to its business model by secondary resellers like The RealReal.

Chanel sued The RealReal in U.S. District Court for the Southern District of New York in November 2018 for, among other things, trademark infringement and false advertising over The RealReal’s sale of allegedly counterfeit Chanel handbags. In March 2020, Paul, Weiss and co-counsel won the partial dismissal of Chanel’s lawsuit, trimming the trademark infringement, unfair competition and two state law claims, significantly limiting Chanel’s lawsuit. The RealReal answered Chanel’s complaint in May 2020, but in February 2021, based on newly revealed internal Chanel documents and following Paul, Weiss litigation partner Karen Dunn's oral arguments on the motion to amend, U.S. Magistrate Judge Gabriel Gorenstein gave The RealReal permission to amend its answer.

In its counterclaims, The RealReal claims that Chanel, faced with a new threat to the core of its business model, which is premised on a limited supply and few access points for consumers, has waged an aggressive campaign of exclusionary and anticompetitive conduct—including repeated interference with The RealReal’s business relationships—in an effort to monopolize the market. The RealReal alleges that Chanel has engaged in a variety of anticompetitive actions in violation of state and federal antitrust laws—including that Chanel used its dominance to deny The RealReal advertising and retail relationships including with Neiman Marcus and Saks, denigrate secondary resellers as “likely fake,” and misrepresent that only Chanel can authenticate Chanel products. The RealReal also alleges that Chanel reacts to new market entrants by employing underhanded, anticompetitive schemes and tactics; that it acts contrary not only to its public branding but also to the interests of consumers of Chanel's own products; and that it was bringing claims to remedy and stop Chanel’s breaches of the antitrust laws.

In a hearing on the motion in January, The RealReal argued that amendment was warranted based in part on newly revealed internal Chanel documents, which showed that Chanel viewed the secondary market as a threat, and strategized to eliminate that threat by investing and partnering with certain resellers and initiating litigation against others. The RealReal also discovered that Chanel had declined to file suit against Farfetch, a luxury reseller in which Chanel holds a significant investment and has a business relationship, for conduct Chanel claims is illegal when others engage in it.

The Paul, Weiss team includes litigations partners Karen Dunn and William Isaacson.

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