Photo by What Goes Around Comes Around
A Vintage Dream or Trademark Nightmare
On March 14, 2018, Chanel filed a complaint against What Goes Around Comes Around (WGACA) alleging that the company was selling counterfeit Chanel products and implying a marketing association with Chanel. WGACA is one of many luxury resale platforms inspired by the younger generation’s commitment to sustainable shopping habits. Many luxury brands have recognized the rising popularity of resale platforms and have partnered with them as a way to adapt to this growing trend. However, some, like Chanel, have chosen to safeguard their brand identity and retain full control over their products. Known for its stringent control over marketing, production, and product management, Chanel’s approach has led to confrontation with companies like WGACA. WGACA offers an extensive selection of Chanel products, including rare vintage items, but it carries the critical responsibility of ensuring the authenticity of these items for its customers.
Chanel: Defending Luxury, One Lawsuit at a Time
Chanel’s initial complaint alleged trademark infringement, false association and endorsement, and false advertising. The claims centered on accusations that WGACA falsely implied an affiliation with Chanel, potentially misleading consumers. These allegations were further supported by evidence that some items WGACA marketed as authentic Chanel products were, in fact, counterfeit. WGACA defended its practices by citing the first sale doctrine, which permits the resale of genuine branded goods. Between the initial complaint in 2018 and the jury trial last year, the case saw a stream of filings, which prolonged the proceedings for years until the trial finally commenced on January 9, 2024.
Trademark Tensions: Protecting the Iconic Double-C
A trademark is a legal tool that protects brand identity. It covers distinctive signs, logos, and names that identify a company’s goods or services and distinguishes it from other competitors. Trademark infringement occurs when an authorized party uses a trademark in connection with goods or services in a manner likely to cause confusion, mistake, or deception among consumers. Trademark law allows Chanel to prevent unauthorized use of its trademarks that might mislead the public or harm its reputation. Trademarks play a vital role in the fashion industry by safeguarding brand identity and preventing counterfeit products. Trademarks, such as Chanel’s iconic “double Cs,” not only help consumers recognize the brand but also provide legal protection to ensure that what they are purchasing is genuine. Despite these protections, counterfeit products are becoming increasingly common, and some unknowingly find their way into resale markets, slipping through authentication processes and being resold as authentic goods. If counterfeit products continue to infiltrate resale markets, both resale stores and luxury brands risk losing consumer trust, damaging their reputations, and ultimately devaluing the exclusivity that defines high-end fashion.
Chanel alleged that WGACA infringed upon its “double C” logo, which is a key part of its trademark in its marketing and advertising practices for selling pre-owned Chanel items. For Chanel, the double C logo is not just a symbol. It is a global hallmark of luxury, exclusivity, and unparalleled craftsmanship. In a statement to Vogue Business, a Chanel spokesperson said, “Chanel is committed to protecting its brand and consumers against counterfeits of its intellectual property that are harmful to the brand.” Chanel maintains strict control over its intellectual property to protect its reputation and ensure that customers receive authentic, high-quality products. Therefore, counterfeit products and unauthorized uses of Chanel’s intellectual property pose a serious threat to its legacy and market position.
WGACA’s Defense: Fair Use
WGACA contends that it operates within the boundaries of fair use, a legal principle allowing the resale of branded goods as long as there is no misrepresentation of their origin. The doctrine supports secondary markets, allowing consumers to resell products without the original seller’s consent. However, fair use has limits. While the fair use doctrine allows the use of a trademark or brand name to describe another party’s product, this use must be limited to what is necessary to identify the product. Resellers cannot use a brand’s trademark in ways that suggest an official affiliation, endorsement, or sponsorship if no such relationship exists. Thus, a reseller may state that they are reselling a Chanel bag, provided the bag is a genuine, unaltered Chanel product. However, excessive use of trademarks or brand-related elements to promote a resale business exceeds legal boundaries, as it may lead consumers to mistakenly believe that the brand endorses the resale. Chanel argues that WGACA’s marketing misleads consumers with its prominent display of Chanel’s trademarks and styling in its stores and website to evoke Chanel’s aesthetic and imply that WGACA is authorized to use the trademark.
The court agreed with Chanel’s argument that WGACA’s actions gave the impression of an official partnership or endorsement by Chanel, even though no such relationship existed. Chanel successfully demonstrated that WGACA had infringed on its trademarks and engaged in unfair competition by using specific hashtags to promote its products on social media. WGACA made extensive and repeated use of Chanel’s trademark and other elements to market its resale business. This included using the hashtag “#WGACACHANEL,” mentioning the brand’s founder, incorporating images from Chanel’s advertising campaigns, and prominently showcasing and selling promotional items like notepads and tissue boxes. These products, originally distributed as gifts at Chanel fashion shows, were never authorized by the brand for resale. This was a clear violation of trademark laws, which protect brands from unauthorized use of their intellectual property that could mislead or deceive the public. For Chanel, this victory reinforced the importance of controlling its brand identity, particularly in the growing and unregulated resale market.
Authenticity at Stake: A Fine Line Between Truth and Deception
Chanel further alleges that WGACA markets itself as a seller of “authentic” Chanel goods but lacks the authorization to verify such claims. According to Chanel, this creates a risk of counterfeit items slipping through and tarnishing its brand reputation. Luxury brands like Chanel, invest heavily in cultivating an image of unparalleled craftsmanship and authenticity. This reputation is not only central to its identity but also integral to its high price tags associated with its products. Unauthorized claims of authenticity, particularly by third-party resellers, undermine this carefully curated image. If counterfeit items slip into the supply chain, the items could tarnish the brand’s reputation and erode consumer confidence. For Chanel, this attempt to protect its authentication processes goes beyond mere quality control. It is about safeguarding its legacy and the loyalty of its customers.
WGACA’s Defense: Independent Authentication
WGACA claims it has rigorous authentication processes, relying on its team of experts to ensure items are genuine. But in a market where fakes can pass as flawless dupes, even the most stringent measures may fall short. After a month-long trial, the jury rendered a unanimous verdict and found WGACA liable on all counts: trademark infringement, false association, unfair competition, and false advertising. Chanel successfully argued that WGACA did not adequately verify the authenticity of its resale items. The court determined some of the items sold by WGACA failed to meet Chanel’s stringent quality control standards, and others were revealed to be counterfeit. In March 2024, Chanel sought a permanent injunction and the disgorgement of WGACA’s profits. Chanel was awarded $4 million in statutory damages for WGACA’s “reckless disregard or willful blindness” when deciding to sell these counterfeit Chanel products on its website.
Chasing Exclusivity: The Growing Threat of Brand Dilution
Balancing resale and brand integrity is of dire importance as the fashion industry weighs heavily on maintaining the perceived quality and value of its brand. However, with so many resale companies, such as The RealReal, Depop, eBay, and Rebag, it slowly but surely leads to brand dilution. The core elements of a luxury item is its limited availability and its specifically curated customer base. When it becomes too accessible, it loses its appeal and impacts the brand’s image.
Nonetheless, there are benefits to resale companies. A well-managed resale strategy allows for a bigger market reach. It allows masses of consumers to access brands they could not normally afford, delivering real value to consumers with closets full of dormant fashion products. The sustainability aspect is a selling point for those who want to create less waste and helps to potentially navigate the overconsumption of fast fashion. It fosters a connection with customers who value sustainability and want the ability to resell their products.
Despite these benefits, many luxury brands are at risk in an increasingly saturated market. The impacts of brand dilution are significant as it affects various aspects of a brand’s overall image in terms of long-term growth and profitability. When a brand, such as Chanel, becomes diluted due to unlawful use from a reseller, its equity weakens. The line becomes blurred, and when a company is under fire for being linked to producing counterfeit products, the brand’s credibility will ultimately be undermined.
The court’s ruling in favor of Chanel is likely to impact second-hand retailers’ vetting and authentication procedures—increasing the operational costs and time to ensure products’ authenticity. Zach Briers, an intellectual property partner at Munger, Tolles, and Olson warns secondhand platforms to strengthen their authentication and verification processes and be more diligent in how they use third-party trademarks in their marketing and social media campaigns to prevent problems similar to WGACA. This case underscores the critical importance of protecting brand integrity, setting a powerful precedent for luxury brands to maintain control over their trademarks and safeguard their identity and market value in the evolving second-hand marketplace.
Image by Fashionista
*The views expressed in this article do not represent the views of Santa Clara University.