Korea puts brakes on Chanel, Hermes, Nike resale bans

The Korea Fair Trade Commission (KFTC) has put the brakes on what it calls unfair business practices whereby Chanel, Hermes and Nike ban customers from reselling their products on the secondhand market.

The commission said on Wednesday it has amended relevant provisions to put an end to such activities by the three foreign brands, whose goods sometimes sell for a premium on resale platforms due to their limited supply.

According to the antitrust body, Chanel, Hermes and Nike have placed resale prohibition clauses in their terms and conditions for customers that involve contract cancellation and membership ineligibility if they buy their product for the purpose of resale.

Such clauses were introduced alongside the growth of resale platforms in Korea, the world’s seventh-largest luxury goods market by sales, where the reselling craze between 2020 and 2022 has driven the prices of secondhand foreign designer-brand goods above their original price tags.

Chanel, Hermes and Nike all argued that considering the property value of luxury goods, the act of grabbing a product ahead of other customers and reselling it at a higher price can harm other consumers and must be blocked.

They worry that the rise in peer-to-peer transactions on resale platforms could reduce their products' scarcity value and weaken their control over prices.

The KFTC concluded, however, that there was no objective standard to determine whether a product was purchased for resale purposes, and the owner should be able to freely decide how to dispose of it.

For now, the KFTC’s move against the resale ban is unlikely to lead to a resale boom for luxury products, due to a drop in their resale prices, said industry officials.

The Chanel Classic Medium Flap Bag sells for 12 million won ($9,300) in the domestic secondhand market, less than its original sticker price of 14.5 million won.

Hermes, known as the luxury of luxuries, maintained 20% sales growth in Korea in the first half of this year, while Chanel’s sales growth slowed to the 6% range over a similar period.

USE OF PRODUCT REVIEWS

Meanwhile, the commission corrected provisions that had allowed business owners to use content written by consumers, such as product reviews posted on the companies' platforms, without permission. It labeled such business practices as unfair.

Even if they are allowed to use such content, their use must be limited to the minimum extent, the KFTC said.

Write to Sul-Gi Lee and Ji-Yoon Yang at surugi@hankyung.com
Yeonhee Kim edited this article