The resale of luxury goods is big business, estimated at around US$25-30 billion in 2020 and growing[1].

However, a recent New York lawsuit may put luxury resellers on thin ice.

In March 2018, the famous French luxury fashion house Chanel started legal proceedings against What Goes Around Comes Around (“WGACA”), a specialist second-hand luxury goods reseller, at the Southern District Court of New York, alleging it, inter alia, sold counterfeit Chanel goods and infringed Chanel’s trade marks[2].

After six years of litigation and a month-long trial, on 6 February 2024, the jury ruled unanimously for Chanel on all claims[3] and awarded it US$4 million in damages.

This victory may have a profound impact on how the entire luxury resale market operates.

Use of brands’ marks and images to promote the resale business

It’s important to note that, under trade mark laws, brand owners generally have no right to prevent third parties from (i) selling genuine second-hand goods or (ii) using the brand owner’s trade marks to promote the second-hand goods they sell.

This is because, under the doctrine of exhaustion, a trade mark owner’s rights in a product are spent (or “exhausted”) once the trade mark owner first puts a product on the market; the trade mark owner generally cannot rely on trade mark laws to stop any subsequent sale of the same product.

While some may see Chanel’s lawsuit as a cynical attempt to crack down on the resale market, the case does pose some significant challenges to all players in the resale industry.

Chanel’s Case

Whilst resellers are generally allowed in law to use a third party’s trade marks to denote the product they are reselling (for example, a reseller can, without LV’s permission, use the words “LV” or “Louis Vuitton” to describe a genuine second-handed LV bag), Chanel alleged WGACA’s use of Chanel’s marks exceeded what was necessary to identify the resale products.

Chanel claimed WGACA had:-

    • used photos featuring Chanel’s marks in emails to customers;
    • used the “#WGACACHANEL” hashtag in social media posts;
    • displayed on its website and advertisements the phrase “WGACA CHANEL- 100% Authenticity Guaranteed”;
    • used images and quotes from Coco Chanel, Chanel’s founder, in promotional materials;
    • held annual “Coco Chanel birthday sale” campaigns.
    • used images of Chanel’s products, including products that WGACA was not selling at that time.

Chanel claimed WGACA’s use was liable to “deceive consumers into falsely believing that WGACA has some kind of approval of or relationship or affiliation with Chanel or that Chanel has authenticated WGACA’s goods in order to trade off of Chanel’s brand and goodwill.”

By finding that WGACA’s use was infringing, it questions how and to what extent resellers can use brand owners’ marks in promotion.

    • Is the standard so strict that only identifiers that are absolutely necessary are permitted?
    • Can resellers carry out marketing campaigns with brand owners’ marks?
    • Would disclaimers (specific statements the resellers are not affiliated with the brand owners) help?

Sale of “Non-Genuine”/ “Counterfeit” Products

The main thrust of Chanel’s case is that WGACA had allegedly sold Chanel bags that were, according to Chanel’s own internal serial number system, “non-genuine” bags that Chanel did not authorize for sale.

This allegedly included:-

    • bags bearing serial numbers assigned to bags stolen from Chanel’s contracting factories and whose serial numbers were subsequently voided;
    • bags with characteristics not matching Chanel’s serial number system;
    • bags bearing serial numbers voided by Chanel during inventory audits at Chanel’s contracting factories;
    • Counter-support/ point-of-sale items are not authorized for sale.

Chanel claimed that whatever their source, these items were “non-genuine items” or “counterfeits” as Chanel had not authorized their sale, so the doctrine of exhaustion did not apply and, by implication, WGACA’s selling those bags was no different from selling counterfeits.

Again, the jury supported this claim unanimously.

Chanel also challenged WGACA’s claim it could verify if the products it was reselling were genuine or not, as only Chanel has access to its serial number system, so only Chanel could tell if it had authorized putting a product on the market.

Too Much Power to Brand Owners?

This ruling seems to put (at least in a US context) undue power in the hands of brand owners.

Defining genuine products solely with reference to the brand owner’s authorization for sale, in a sense, gives brand owners the sole authority to determine if a product is genuine or not, and even products produced in authorized facilities or placed within authorized sellers may not be considered “genuine”.

As WGACA commented in a post-verdict interview, without access to Chanel’s internal serial number database, it is difficult, if not impossible, for the resale industry to determine if a product has been authorized for sale or not[4].

There seems to be a not insubstantial risk that resellers could unknowingly sell unauthorized products, even where items appear to be legitimate.

The only way for resellers to verify “authenticity” would be to insist on seeing full “title documents” (e.g. receipts from authorized dealers or retailers) from sellers, which would increase costs for resellers and shrink the supply pool of second-hand products.

It may also be reasonable to ask if this ruling gives brand owners too much power to control distribution and resale channels, for example, by giving an undue advantage to resellers authorized or even operated by brand owners themselves[5], which would harm competition, and give rise to potential competition law/anti-trust law issues.

Whatever the case may be, the luxury resale market is likely to get a lot more interesting.

Author: Anthony



[2] Chanel Inc. v. WGACA LLC 18 Civ. 2253 (LLS)

[3] The jury sided with Chanel on all claims that the jury was asked to adjudicate on. Note that some of Chanel’s claims had been struck out in prior motions to dismiss.


[5] Luxury brands are starting to tap into the resale market themselves, see:  ;

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