Luxury rivals LVMH Moet Hennessey Louis Vuitton and Hermès are embroiled in several bitter legal battles at the moment. However, a case involving the Autorité des Marchés Financiers is no longer one of them. In July, France’s stock market watchdog, the Autorité des Marchés Financiers (AMF)’s sanctions committee slapped LVMH with a fine of $10.4 million, stemming from its acquisition of nearly 20% in Hermès. The AMF began an investigation into LVMH’s purchase of stake in Hermès in 2010, and in April, announced that it found that LVMH had secretly bought shares in rival Hermès to build a stake in the iconic Paris-based design house, and not merely to make a financial investment as LVMH has claimed. While LVMH denies that any insider trading and share price manipulation has taken place, the luxury conglomerate is not filing an appeal, a decision which “reflects LVMH’s commitment to ensuring the soundest possible management of its investment in Hermès.”
The company released a press statement, saying, “LVMH has decided to terminate the AMF proceedings in relation to its acquisition of approximately 10% of Hermès’ share capital in October 2010. This decision reflects LVMH’s commitment to ensuring the soundest possible management of its investment in Hermès. To this end, LVMH will not appeal the 25 June 2013 decision of the AMF’s disciplinary commission. Throughout its proceedings, the AMF expressly confirmed that in acquiring its equity stake in Hermès, LVMH never breached regulations regarding ownership thresholds or engaged in insider trading or market manipulation.“
The AMF’s only criticism (other than in relation to certain accounting records which the AMF confirmed had no impact on LVMH’s annual accounts), concerned the timing of LVMH’s disclosure of the Hermès equity swaps, which the AMF considered should have been made in June, rather than October, 2010. The AMF argued that LVMH reached an agreement with two of the three banks involved in June 2010, when in fact the agreement was not achieved until October. As promptly remarked by eminent observers, the AMF disciplinary commission’s position is therefore highly questionable, both in law and in fact.
As a result, LVMH would be entirely justified in appealing the disciplinary commission’s administrative decision, as envisaged at the time it was announced. However, the interests of LVMH’s shareholders go beyond the defence of these legal principles. Instead, LVMH must also consider the time and cost of further proceedings and the fact that such proceedings would interfere with the sound management of LVMH’s investment in Hermès.
These priorities have led LVMH to decide to bring a definitive conclusion to the AMF proceedings. In the same spirit, LVMH will take all necessary action to end the baseless legal proceedings being pursued by Hermès management and to recover compensation for the serious harm their actions have caused.
In regard to “the baseless legal proceedings being pursued by Hermès,” LVMH is referring to the criminal complaint the company filed against LVMH in a Paris court (which is separate from the AMF’s investigation), accusing the luxury conglomerate of insider trading, collusion and manipulating stock prices. LVMH subsequently filed a suit against Hermès for “blackmail, slander and unfair competition.”
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