Briefing: October 20, 2023

Farfetch & Richemont, LV v. Counterfeiters, and Resale Funding Rounds

All eyes are on Farfetch, as the e-commerce platform awaits a decision from the European Commission on the future of its deal with Richemont. You will recall that the London-headquartered e-commerce fashion site made headlines this summer when it confirmed a highly-anticipated deal with Swiss conglomerate Richemont in furtherance of which Farfetch will acquire a 47.5% “non-controlling” stake in its closest rival Yoox-Net-a-Porter (“YNAP”), and in exchange, Richemont will get a 10-11% stake in Farfetch and a 2.7 billion euro write-down. Taken together, Richemont and Farfetch said in August that this will make YNAP “a neutral industry-wide platform,” and position Farfetch to “potentially acquire the remaining shares in YNAP.”

The European market regulator – which can approve the deal “with or without remedies,” per Reuters or could launch a four-month investigation in the event of serious antitrust concerns – is expected to release its decision today.

> Approval from the UK: The EU’s deadline comes after regulators in the United Kingdom gave the deal a greenlight earlier this year. In a statement on March 29, the UK’s Competition & Markets Authority said that it “has decided, on the information currently available to it, not to refer the anticipated acquisition by Farfetch Limited of interest in, and governance rights over, YOOX Net-a-Porter Group S.p.A from Compagnie Financière Richemont S.A., in consideration for the acquisition by Compagnie Financière Richemont S.A. of interest in Farfetch Limited, to an in-depth Phase 2 investigation under the provisions of the Enterprise Act 2002.”

The bigger picture here … is the ailing state of Farfetch, which – once hailed as the future of fashion retail with its inventory-less model that connects hundreds of boutiques to consumers and technology that underlies many brands’ e-commerce operations – is now facing mounting issues. In what appears to be part of an effort to narrow its focus, the company announced this week that it will sell off beauty brand Violet Grey. Farfetch acquired Violet Grey in early 2022 for $49.4 million in cash, along with $1.3 million of reverse vesting shares and $5 million of Farfetch restricted share units. (For more Farfetch M&A info., you can find that here.)

The impending offloading of Violet Grey comes just a few months after Farfetch announced that it would shutter its beauty division entirely.

> More broadly, Nasdaq-listed Farfetch, which has yet to reach profitability due in large part to sizable technology and marketing costs, is sputtering. The company’s market cap has plunged from $5.8 billion as of its initial public offering in September 2018 to its current market cap of $557.12 million. And revenues continue to fall. While Farfetch has seen a rise in overall business volume and reached a record number of more than 4 million online customers in the second quarter of 2023, its revenues for the 3-month-period ending in August dropped to $572.1 million from $579.3 million in Q2 2022. (Farfetch attributed the decline to a 42.2% decrease in brand platform revenue and a 15.1% decrease in in-store revenue.)

> Reflecting on the state of Farfetch on the heels of its Q2 earnings results in August, Bernstein analysts said that they see 5 possible scenarios for the retailer going forward: (1) Farfetch confirms and achieves its FY25E guidance (less than 5% probability); (2) Farfetch continues standalone, with FY25E reduced guidance and revised strategic goals (60%+ probability); (3) Richemont steps in, in a replay of the YNAP takeover from the market (less than 10% probability); (4) Other investors step in – Alibaba (less than 10% probability), or other players (less than 10% probability); and (5) Farfetch runs out of liquidity, no “white knight” appears (less than 5% probability).

Bernstein’s Luca Solca said this week in connection with the Farfetch-Richemont deal that “Farfetch could still survive if it narrows its focus, but it will remain a drag on Richemont’s share price until they alleviate investor concerns on how far they are willing to go to help their new partner.”

As for the broader impact of Farfetch’s potentially mounting woes: Solca said that they “could have ripple effects through an already suffering industry” in light of many companies’ reliance on Farfetch platform and/or its tech.

Some Litigation Updates

– Bush Baby Zamagate, Inc. v Chapter 4 Corp: Supreme & Mobb Deep have been named in a trademark infringement & unfair competition complaint by Bush Baby Zamagate – the label that owns the IP of hardcore band Sick of It All – for allegedly putting the band’s dragon logo on items in a SS23 capsule collection.

– Molo Design v. Chanel: On the heels of mixed IPR determinations this summer (more on that soon), the stay in this case has been lifted & the court ordered the parties to file a revised case management plan by Oct. 31. (You can find a dive into that case – a patent infringement matter over window displays – here.)

– Louis Vuitton v. BESTLOUISVUITTONOUTLET.COM, et al: Louis Vuitton has named the entities behind dozens of domains in a new complaint. The interesting parts of the otherwise largely run of the mill counterfeiting case include broader commentary on the state of the market for fakes …

– Louis Vuitton’s confirmation that despite significant investment in anti-counterfeiting efforts, it is still falling prey: “Like many other famous trademark owners, Louis Vuitton suffers ongoing daily and sustained violations of its trademark rights at the hands of counterfeiters and infringers, such as the defendants, who wrongfully reproduce & counterfeit Louis Vuitton’s trademarks for the twin purposes of (i) duping and confusing the consuming public & (ii) earning substantial profits.”

– A bit more on that … “The exponential growth of counterfeiting over the Internet, including through online marketplace platforms & social media sites, has created an environment that requires Louis Vuitton to file a number of lawsuits, often it later turns out, against the same individuals & groups” in order to protect consumers & itself from confusion & “erosion of goodwill in the Louis Vuitton brand.”

– As for the role of the domain names, themselves, which include,,, etc., Louis Vuitton claims that the defendants are using its famous brand name & trademarks “to drive Internet traffic to the websites operating under [such domain names], thereby increasing the value of the [infringing domains] & decreasing the size & value of Louis Vuitton’s legitimate marketplace & IP rights.”

– Continuing the trend of consumers doing business with counterfeit-sellers via messaging platforms as opposed to more traditional e-commerce methods (in large part to enable the counterfeit-sellers to avoid detection & heightened anti-piracy measures on online marketplaces), Louis Vuitton asserts some of the domains don’t offer the shopping cart feature. Instead, “Consumers are able to browse the listings of Louis Vuitton branded products via the websites [and] … inquire and make direct purchases … via e-mail and/or WhatsApp and WeChat.”

In the biggest deal-making & investment news this week …

– JOOR, “the fashion industry’s premier wholesale management platform,” has raised $25M in a new round.

– End-to-end creative operations workflow platform provider Creative Force has raised $8.9M in a Series A .

– Reality Defender, “the premier deepfake and AI-generated media detection platform,” has raised $15M in a Series A.

– Engaged Capital has built up a position in VF Corp, arguing that the North Face, Vans, and Supreme owner is mismanaged.

– Frasers Group has signed a binding agreement to acquire SportScheck, one of the leading sports retailers in Germany.

– Frasers Group has increased its stake in fast fashion retailer Boohoo Group Plc again, after taking on a larger position in June.

– Uruguayan resale startup has raised $4M in new funds.

– Bulgarian resale company NOLD has raised €1M in a Seed round.

*For up-to-date M&A and investment deals across fashion/luxury, retail tech, legal tech, ESG, supply chains, the secondary market, and AI, you can find find those here.