The effect of the coronavirus pandemic can be observed everywhere. A major effect of the global pandemic can be witnessed on the commercial industry and the economy. Its negative effects have also reached the luxury industry. A slump that no one foresaw has been observed in the luxury industry. After growing rapidly for almost a decade, there have been reports of revenue falling by as much as 35 percent in the current financial year. Experts have also commented that it might take a total of 2-3 years for the luxury industry to regain its revenue. Consultancy Bain predicts that by 2022-23, the luxury industry can expect a revenue gain similar to the level observed in 2019.
On Wednesday, i.e. September 9th, 2020, Tiffany & Co., a high end American based jewellery company sued LVMH, a French luxury good giant. This was a result of LVMH not being able to fulfil a USD 16 Billion deal because of two major factors – The French Government and the Coronavirus Outbreak. Bernard Arnault, leader of the French luxury good firm disclosed that he faced immense pressure by the French Foreign ministry. “LVMH said in a statement that it could not complete the deal with Tiffany “as it stands,” citing a request from the French government on Aug. 31 to delay the deal beyond Jan. 6 because of the threat of U.S. tariffs on French goods."
As their next step, Tiffany decided to file a lawsuit that force the detail to occur, It also made accusations stating that LVMH deliberately stalled that resulted in the deal not being complete. Another reason cited by LVMH for not going through with the deal was the threat of additional US Tariffs against French Product. The French Company stated that this increase in Tariff made it very difficult, and nearly impossible for the company to meet its contractual deadlines of November to go ahead with the acquisition. In an English translation of the letter received by LVMH from the French government, France’s Foreign Minister ean-Yves Le Drian wrote to Arnault, ”I am sure that you will understand the need to take part in our country’s efforts to defend its national interests,” Interestingly, the White House has not responded or given a comment on the intervention of the French Government. The deal between the two major luxury houses was the highest bidding deal of the year, with a USD 135 per share offer. This resulted in an equity value of USD 16.2 Billion. Both companies would massively profit from the deal, making the agreement highly symbiotic in nature. Through Tiffany, LVMH would have gained a hold of the market in North America. Similarly, Tiffany, who had experienced a turbulent last few years, was expectant of entering the Chinese market with the help of its to-be parent company LVMH. Although, Tiffany has filed a public statement denoting its intention to sue Tiffany, it has not filed antitrust approval in the European Union. The antitrust approval is mandatory under the Competition law under the European Union.