LVMH buries its hatchets

Published: 8-Sep-2014

Luxury goods giant settles long-running disputes with Hermès and Google

The long-running feud between Moët Hennessy Louis Vuitton (LVMH) and Hermès has come to an end. On 3 September, the two parties signed an agreement proposed by Franck Gentin, the President of the Commercial Court of Paris, under which the LVMH Group will distribute all its Hermès shares to its shareholders on the understanding that Christian Dior (LVMH's largest shareholder) will, in turn, distribute the Hermès shares it receives to its own shareholders.

LVMH boss Bernard Arnault has been building equity in Hermès since 2002. And, in 2010, conflict between the two companies escalated when LVMH disclosed that it had amassed a 17% stake in its rival; this was subsequently increased to more than 23%. And last year, the Autorité des marchés financiers (AMF) fined LVMH €8m for not declaring its stake building in Hermes.

As part of this new compromise, LVMH, Dior and Groupe Arnault have agreed not acquire any shares in Hermès for the next five years. The distribution of Hermès shares will be completed no later than 20 December this year, following which Groupe Arnault will hold around 8.5% of the capital of Hermes International. But it isn't all bad news for LVMH; based on Hermès' closing share price on 2 September, analysts estimate that LVMH shareholders stand to make a capital gain approaching €3bn from the agreement.

Both Arnault and Hermes chief Axel Dumas are said to be satisfied that relations between the two icons of French luxury are now restored.

The first week of September was clearly one of reconcilement for LVMH, which, in addition to burying the hatchet with Hermès, signed a cooperation agreement with Google, to tackle the sale of counterfeit goods online. According to the luxury goods company, the agreement brings to an end the legal dispute between Louis Vuitton and Google, as both parties focus on enhancing the digital experience of their customers. LVMH had previously accused Google of violating its trademark rights by selling protected words as keywords which then linked users to websites selling counterfeit items when they searched for the French company's brands.

Speaking in Paris on 4 September, Pierre Godé, Vice-President at LVMH, commented: “Today's LVMH-Google agreement paves the way for greater cooperation towards a safer and more engaging digital environment, [whereby] brands will be protected both online and offline. This agreement is a clear illustration of the responsible approach being taken by the different actors in the digital value chain. This cooperation will clearly benefit citizens and businesses alike.”

“We are very happy to reach this agreement with LVMH and to work together to tackle the advertising of counterfeit goods online and preserve the value of trusted brands,” added Carlo D’Asaro Biondo, Google's President of Southern & Eastern Europe, Middle East and Africa Operations. “It is extremely important to build a safe environment for our customers and partners and we’ll continue to work tirelessly to keep them protected online. We are looking forward to engaging with LVMH... through our engineering, product and sales teams.”

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