I am a California attorney with antitrust experience. As you suggested, the threshold substantive legal question is proof of the anticompetitive use of market power in the tying product. This analysis requires that the relevant market be defined and that the anti-competitive effect be demonstrated. This is easy to allege and hard to prove. As Abbott and Wright observe in Hylton, Keith N. Antitrust Law and Economics. Elgar, 2010: “bundling would not constitute unlawful tying if the purchaser simply desires to purchase less than the entire bundle of products offered for package sale at a reduced price. Rather, to prevail on an unlawful tying claim, the plaintiff would have to show an exclusionary effect on other sellers as a result of plaintiff’s thwarted desire to purchase substitutes for one or more items in the bundle from other sources that harms competition in the market for the tied product.”
This means that the plaintiff needs to prove that sellers of the tied products (the stuff you don’t want so that you can get the stuff you do want) are harmed. The legal standard is not “I can’t buy what I want at MSRP.” It is also worth noting that class action suits are not easy. The class must be certified. The defendant will fight the certification of the class. If the class is certified, it will then move to the settlement phase. At this point the defendant will use the class to get rid of all the similarly situated plaintiffs by agreeing to the largest class possible and then proposing a settlement which includes minor changes to business practices, a lot of money for the plaintiff’s attorneys, a spiff for the representative plaintiff and useless coupons for class members. We all ignore these class action settlement post-cards in the mail because claiming the coupon is too much trouble and opting out, thereby preserving your rights, is merely an opportunity to hire an attorney. The recent settlement of the real estate brokerage industry is the rare exception where an anti-trust class action suit changes an industry and gets meaningful damages for the class. As a matter of economics, the core issue is that there are only two ways to allocate products -- by price or by by quantity. Looking at watches, Rolex could decide to let retailers sell Submariners at the market clearing price, which is what the goods trade for in the secondary market. This would eliminate the perceived shortage of Submariners. It would also eliminate flipping. You see this with car manufacturers that let dealers set their own retail prices - the dealer adds the "Additional Dealer Mark-Up" to the hot cars, thereby selling new cars at the market clearing price. And everyone complains that the dealer is gouging them, when, in fact, the dealer is merely allocating by price instead of favoritism. Instead of allowing "Additional Dealer Mark-Up", Rolex is enforcing MSRP under the Colgate Doctrine. Rolex has decided to set the MSRP below the market clearing price, thereby creating a shortage (at MSRP demand > supply). This shortage means that the retailer must allocate the products by some system other than price. And what do retailers do? They use a system of favoritism in which they reward what they perceive to be good customers. In essence, the hot watches become a rewards program for good customers. And the fact of the matter is that if what you really want is a Submariner, you are dollars ahead buying a Submariner for a premium in the secondary market instead of losing money on watches you don't want in order to get the one watch you want at MSPR. It is also worth noting that for luxury goods makers, some customers are worth more than money -- they are advertising assets. Allocating a scarce item to a famous person to display in public is better for the brand image than selling it to me at any price.
Thank you for your informed reply. My personal opinion is that the plaintiffs will have success in defining the market. The fact that Birkin bags are priced so far above retail tells me that other options are not considered adequate substitute goods. And the same goes for Rolex. The market data says even Tudor is not considered a true substitute. However, I agree on your points about the road blocks that Hermes can throw along the way.
Regarding my "good customer" observation about watch allocations. I have never bought a Rolex from my AD. I have bought Panerais, Omegas, JLCs and Chopards. When the titanium YachtMaster was announced, I asked about getting one. They made this big promise, "We will see what we can do." Today I got the call. Why? 1. I have demonstrated that I am not a watch flipper with my purchase history - watch flippers are bad for AD's. 2. They want me to buy my next Omega, Panerai etc from them, not the AD at the next mall over or at the brand's boutique - and this Rolex buys them customer loyalty. They have to sell the watch to somebody at MSRP and they picked what, to them, is a good customer.
I am not a lawyer, but Rolex and its AD’s walk up to the line of illegality without crossing it. The reps are trained to never say buy this and we guarantee you a Rolex of your choice. I had the owner of an AD tell me because of Rolex supply & demand, it comes down to your purchase history with a specific AD to determine if you get the privilege to buy the Rolex you want. I wanted to buy a GMT and after a 30 minute conversation with the sales rep, I was offered a white gold Pepsi at $40,000+. I respectively walked out. It is cheaper to buy the Rolex you want on the grey market. As far as suing Rolex for illegal sales tactics, Rolex will show it can’t control its agents/AD’s sales practices. The prosecution would be more successful suing individual AD’s and trying to discover why they force a customer to buy stuff we don’t want. In the end, I no longer go into my local AD’s to avoid playing the Pandemic Games. One day the pendulum will favor the side of collectors who want to buy a Rolex. Until then the AD’s can sell Rolex anyway they want and get away with it!
The purchase history would be a red flag, practically a smoking gun. That by definition is 'tying products'. On one visit, I saw an AD looking over her screen. I think she was checking my purchase history. And prob making notes. Nope, don't give him anything! I got an email from another AD basically admitting that they only sold to 'established clients'!!
Thanks for sharing your insights. My take is that unlike Hermes, Rolex mainly does not sell watches directly to consumers but through the AD network, except for Bucherer. To make real disruption to their Modus operandi, other avenues needs to be explored.
I was never pressured to buy something else. But things got a little easier when I did buy lesser brands at one AD. But when I went to another AD, they got me a Sub with only one purchase history. But that place was also involved in a retail lawsuit similar to this situation. Interesting indeed
I see these lawsuits going nowhere. The problem is there is no victim that any law agency will care about. I cannot walk into the Ferrari dealer and buy an SF90. Boohoo for me that I cannot go buy a $1mm car or $500k purse? Waste of time for any law agency to help billionaires get a purse. The scarcity of Rolex products is, sadly, why we want them. They are not the best watch for the price, but the scarcity is a big part of the allure. If we can all just walk in and buy any Rolex we want, the brand cache will fall dramatically and so will our desire for them. It's a circular reference.
Well, the using is the practice of 'tying products'. But agreed that there are complex factors at play here, especially regarding the marketing of luxury. When does exclusivity become illegal? Fun times ahead!
I think the backlash is already there. People are now tired of these tactics. Especially with the new trend of moving away from ostentatious luxury. It's getting old. I still haven't gotten my Sub yet!
To be completely honest, I feel like Tudor kinda protects Rolex. To a degree, with Tudor there is no real need for one to buy a Rolex, because functionality and finishing on Tudor models is already terrific. I kinda feel like Rolex have always been aware of this and have Tudor as a result. It could trickle down all the way to why Tudor commissioned Kenissi. I have a Black Bay 58 Navy. Is it as well built as a 124060? No. Does it have a ceramic bezel? No. Does it look as attractive as the 124060 (subjective)? Probably not. Does it have a 70h power reserve? Yes. Does it have a free-sprung balance and an anti-magnetic hairspring? Yes. Is it regulated better than COSC? Yes. The 124060 is a better watch and I’m not going to lie and say that I wouldn’t take one over my Black Bay. However, rationally, the Black Bay 58 is no worse of a watch than the 124060. Rolex models just have that cherry on top.
I love Tudor watches. But my own analysis shows (My Tudor video) shows that the market does not consider them substitute goods for Rolex. I think that would be easy to prove with market sales analysis.
Unlike Hermes, the vast majority of Rolex AD’s aren’t owned by the brand. It is the individual AD’s that are doing the tying, not the brand itself. Rolex may provide high level allocation directives to AD’s (“sell more to young buyers” etc), but it literally has no control over how individual watches are allocated to consumers so I’m not sure how applicable the Hermes suit is to Rolex. But Rolex owns Bucherer, and they may be doing the anti-competitive tying. Well, Bucherer is in the retail business so there are plenty of other consumer choices to shop at other AD’s. I’m no fan of Rolex; I wish they get sued to the ground. But this anti-trust suit is not it. I think the French government’s ruling against the brand has more potential to alter the watch market than this anti-trust suit filed by entitled California handbag shoppers.
Yes, the sales structure of ADs does protect Rolex to some extent. But if there is proof that Rolex gave any direction for arbitrary allocation of watches, they might be in trouble. And agreed that Bucherer also presents a problem for them.
I think the only way this type of lawsuit can proceed to win is to prove that the brand name is intentionally withholding stocks to create a false sense of scarcity.
Why do you think it's failed. I'm hopeful that something will come of this; at least let us have transparent wait lists. You get a ticket and wait in line.
@@mywatchjourney6579 Litigants are always surprised at the scope of pretrial discovery. If the waitlists and associated communications are relevant to the litigation, they will be turned over. The parties to the litigation are subject to the party discovery rules and everybody else who has relevant information is subject to subpoenas.
I am a California attorney with antitrust experience. As you suggested, the threshold substantive legal question is proof of the anticompetitive use of market power in the tying product. This analysis requires that the relevant market be defined and that the anti-competitive effect be demonstrated. This is easy to allege and hard to prove. As Abbott and Wright observe in Hylton, Keith N. Antitrust Law and Economics. Elgar, 2010:
“bundling would not constitute unlawful tying if the purchaser simply desires to purchase less than the entire bundle of products offered for package sale at a reduced price. Rather, to prevail on an unlawful tying claim, the plaintiff would have to show an exclusionary effect on other sellers as a result of plaintiff’s thwarted desire to purchase substitutes for one or more items in the bundle from other sources that harms competition in the market for the tied product.”
This means that the plaintiff needs to prove that sellers of the tied products (the stuff you don’t want so that you can get the stuff you do want) are harmed. The legal standard is not “I can’t buy what I want at MSRP.”
It is also worth noting that class action suits are not easy. The class must be certified. The defendant will fight the certification of the class. If the class is certified, it will then move to the settlement phase. At this point the defendant will use the class to get rid of all the similarly situated plaintiffs by agreeing to the largest class possible and then proposing a settlement which includes minor changes to business practices, a lot of money for the plaintiff’s attorneys, a spiff for the representative plaintiff and useless coupons for class members. We all ignore these class action settlement post-cards in the mail because claiming the coupon is too much trouble and opting out, thereby preserving your rights, is merely an opportunity to hire an attorney. The recent settlement of the real estate brokerage industry is the rare exception where an anti-trust class action suit changes an industry and gets meaningful damages for the class.
As a matter of economics, the core issue is that there are only two ways to allocate products -- by price or by by quantity. Looking at watches, Rolex could decide to let retailers sell Submariners at the market clearing price, which is what the goods trade for in the secondary market. This would eliminate the perceived shortage of Submariners. It would also eliminate flipping. You see this with car manufacturers that let dealers set their own retail prices - the dealer adds the "Additional Dealer Mark-Up" to the hot cars, thereby selling new cars at the market clearing price. And everyone complains that the dealer is gouging them, when, in fact, the dealer is merely allocating by price instead of favoritism. Instead of allowing "Additional Dealer Mark-Up", Rolex is enforcing MSRP under the Colgate Doctrine. Rolex has decided to set the MSRP below the market clearing price, thereby creating a shortage (at MSRP demand > supply). This shortage means that the retailer must allocate the products by some system other than price. And what do retailers do? They use a system of favoritism in which they reward what they perceive to be good customers. In essence, the hot watches become a rewards program for good customers. And the fact of the matter is that if what you really want is a Submariner, you are dollars ahead buying a Submariner for a premium in the secondary market instead of losing money on watches you don't want in order to get the one watch you want at MSPR.
It is also worth noting that for luxury goods makers, some customers are worth more than money -- they are advertising assets. Allocating a scarce item to a famous person to display in public is better for the brand image than selling it to me at any price.
Thank you for your informed reply. My personal opinion is that the plaintiffs will have success in defining the market. The fact that Birkin bags are priced so far above retail tells me that other options are not considered adequate substitute goods. And the same goes for Rolex. The market data says even Tudor is not considered a true substitute. However, I agree on your points about the road blocks that Hermes can throw along the way.
Wow! That was an awesome explanation! Thank you!!
Regarding my "good customer" observation about watch allocations. I have never bought a Rolex from my AD. I have bought Panerais, Omegas, JLCs and Chopards. When the titanium YachtMaster was announced, I asked about getting one. They made this big promise, "We will see what we can do." Today I got the call. Why? 1. I have demonstrated that I am not a watch flipper with my purchase history - watch flippers are bad for AD's. 2. They want me to buy my next Omega, Panerai etc from them, not the AD at the next mall over or at the brand's boutique - and this Rolex buys them customer loyalty. They have to sell the watch to somebody at MSRP and they picked what, to them, is a good customer.
I am not a lawyer, but Rolex and its AD’s walk up to the line of illegality without crossing it. The reps are trained to never say buy this and we guarantee you a Rolex of your choice. I had the owner of an AD tell me because of Rolex supply & demand, it comes down to your purchase history with a specific AD to determine if you get the privilege to buy the Rolex you want. I wanted to buy a GMT and after a 30 minute conversation with the sales rep, I was offered a white gold Pepsi at $40,000+. I respectively walked out. It is cheaper to buy the Rolex you want on the grey market.
As far as suing Rolex for illegal sales tactics, Rolex will show it can’t control its agents/AD’s sales practices. The prosecution would be more successful suing individual AD’s and trying to discover why they force a customer to buy stuff we don’t want. In the end, I no longer go into my local AD’s to avoid playing the Pandemic Games. One day the pendulum will favor the side of collectors who want to buy a Rolex. Until then the AD’s can sell Rolex anyway they want and get away with it!
The purchase history would be a red flag, practically a smoking gun. That by definition is 'tying products'. On one visit, I saw an AD looking over her screen. I think she was checking my purchase history. And prob making notes. Nope, don't give him anything! I got an email from another AD basically admitting that they only sold to 'established clients'!!
Thanks for sharing your insights. My take is that unlike Hermes, Rolex mainly does not sell watches directly to consumers but through the AD network, except for Bucherer. To make real disruption to their Modus operandi, other avenues needs to be explored.
I imagine that a class action lawsuit will cause disruption, no matter what.
Consumer protection used to be a thing. Now politicians are not concerned about the consumer, just “campaign contributions”.
I was never pressured to buy something else. But things got a little easier when I did buy lesser brands at one AD. But when I went to another AD, they got me a Sub with only one purchase history. But that place was also involved in a retail lawsuit similar to this situation. Interesting indeed
I'm waiting on my Sub. I'm tempted to ask for that AD's location haha.
“Forced” to buy an unnecessary luxury good? LMFAO
Absolutely, I don't see myself with a Birkin bag any time soon lol. But still, you can't tie product purchases that damage sellers and consumers.
I see these lawsuits going nowhere. The problem is there is no victim that any law agency will care about. I cannot walk into the Ferrari dealer and buy an SF90. Boohoo for me that I cannot go buy a $1mm car or $500k purse? Waste of time for any law agency to help billionaires get a purse. The scarcity of Rolex products is, sadly, why we want them. They are not the best watch for the price, but the scarcity is a big part of the allure. If we can all just walk in and buy any Rolex we want, the brand cache will fall dramatically and so will our desire for them. It's a circular reference.
Well, the using is the practice of 'tying products'. But agreed that there are complex factors at play here, especially regarding the marketing of luxury. When does exclusivity become illegal? Fun times ahead!
Typically, any sales practice that is bad for the consumer will eventually be stopped.
I think the backlash is already there. People are now tired of these tactics. Especially with the new trend of moving away from ostentatious luxury. It's getting old. I still haven't gotten my Sub yet!
To be completely honest, I feel like Tudor kinda protects Rolex. To a degree, with Tudor there is no real need for one to buy a Rolex, because functionality and finishing on Tudor models is already terrific. I kinda feel like Rolex have always been aware of this and have Tudor as a result. It could trickle down all the way to why Tudor commissioned Kenissi.
I have a Black Bay 58 Navy. Is it as well built as a 124060? No. Does it have a ceramic bezel? No. Does it look as attractive as the 124060 (subjective)? Probably not. Does it have a 70h power reserve? Yes. Does it have a free-sprung balance and an anti-magnetic hairspring? Yes. Is it regulated better than COSC? Yes.
The 124060 is a better watch and I’m not going to lie and say that I wouldn’t take one over my Black Bay. However, rationally, the Black Bay 58 is no worse of a watch than the 124060. Rolex models just have that cherry on top.
I love Tudor watches. But my own analysis shows (My Tudor video) shows that the market does not consider them substitute goods for Rolex. I think that would be easy to prove with market sales analysis.
@@mywatchjourney6579 Rolex would probably find a way to make it convincing though. Kinda just feels like there’s no way they made this mistake.
@@dainluke Yes, it will be a war of expert testimony. And a steel cage match between economists lmao
It’s about time that these selling practices came under legal action . i am surprised that it took this long .
My self, too. The tying, whether can be proved in court or not, is definitely illegal.
Unlike Hermes, the vast majority of Rolex AD’s aren’t owned by the brand. It is the individual AD’s that are doing the tying, not the brand itself. Rolex may provide high level allocation directives to AD’s (“sell more to young buyers” etc), but it literally has no control over how individual watches are allocated to consumers so I’m not sure how applicable the Hermes suit is to Rolex.
But Rolex owns Bucherer, and they may be doing the anti-competitive tying. Well, Bucherer is in the retail business so there are plenty of other consumer choices to shop at other AD’s.
I’m no fan of Rolex; I wish they get sued to the ground. But this anti-trust suit is not it. I think the French government’s ruling against the brand has more potential to alter the watch market than this anti-trust suit filed by entitled California handbag shoppers.
Yes, the sales structure of ADs does protect Rolex to some extent. But if there is proof that Rolex gave any direction for arbitrary allocation of watches, they might be in trouble. And agreed that Bucherer also presents a problem for them.
This has nothing to do with Rolex S.A. It’s all about the authorised dealer.
Also keep in mind that they now own Bucherer.
Wouldn’t the “gray market” be considered an option in the Rolex scenario?
The plaintiffs are saying no, because the same grey market exists for Birkin bags. And here also, the secondary prices are above retail. Sad.
I think the only way this type of lawsuit can proceed to win is to prove that the brand name is intentionally withholding stocks to create a false sense of scarcity.
That would require some type of sting operation
This is a failed lawsuit, it’s annoying but it’s not wrong what they’re doing.
Why do you think it's failed. I'm hopeful that something will come of this; at least let us have transparent wait lists. You get a ticket and wait in line.
Nothing will happen, ADs are not legally obligated to release their waitlist. And Hermes owns their stores, Rolex do not own the ADs.
They do now. Rolex bought Bucherer a few months ago…
That's what I'm thinking too. And then there is the CPO program. Fun times ahead for Rolex.
If there is a lawsuit (only a matter of time, I think), then the discovery process might force them to reveal internal communications.
@@mywatchjourney6579 I hope Rolex gets sued, this lawsuit is a long time coming. And I love my Rolex watches.
@@mywatchjourney6579 Litigants are always surprised at the scope of pretrial discovery. If the waitlists and associated communications are relevant to the litigation, they will be turned over. The parties to the litigation are subject to the party discovery rules and everybody else who has relevant information is subject to subpoenas.
Wow ok, CBS News has now done a report on this: ruclips.net/video/4_tam43HZUY/видео.html