French Authorities Say LVMH is Intentionally Building a Stake in Hermès

Another day, another Hermès, LVMH development. The two luxury giants have been in a bitter battle for years, with Hermès fighting LVMH ownership, and as of this past year, the two are involved in rival lawsuits. The latest development stems from an investigation by the French stock market, following Hermès’ lawsuit, which alleges that LVMH is responsible for insider trading, collusion and manipulating stock prices in conjunction with its acquired stake in Hermès, a largely family-owned company.

LVMH chairman Bernard Arnault spoke out in April saying that the luxury conglomerate’s 22.6 percent stake in Hermes had come as a surprise to him. However, as of last week, the French stock market authority 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.

In October 2010, LVMH announced (to much surprise) that it had "amassed a 17.1 percent stake in Hermès via cash-settled equity swaps that allowed it to circumvent the usual regulations requiring firms to declare share purchases." In France, companies are required to disclose when they take a stake worth more than five percent of another company's capital if the target is listed on the stock market. LVMH claims they will fight the stock market authority’s claims on May 31st, when the parties meet with the sanctions committee. After this hearing, the stock market watchdog will announce whether or not it will level sanctions against LVMH.

In response to Hermès' suit, LVMH, filed suit against Hermès for slander, blackmail and unfair competition.