LVMH has been fined €8 million by the French financial regulator for the clandestine stake it built up in rival luxury family business Hermes – the largest fine ever issued by the Autorite des Marches Financiers.
The AMF enforcement committee said it made the ruling after considering the "seriousness of the successive breaches of public disclosure requirements, which consisted [of] concealing each stage of LVMH's stake-building in Hermes".
The dispute between the two has been ongoing since October 2010 when Bernard Arnault's luxury giant revealed it had built up a 14.2% stake in Hermes. Under French financial regulations it was obliged to declare its holdings in 5% increments.
LVMH acquired the stake through a web of equity derivatives purchased through its investment vehicles in Hong Kong and Luxembourg; neither vehicle was mentioned in LVMH's annual reports.
LVMH then distributed these securities between three banks, but made sure none held more that a 5% stake.
It then changed the terms of the settlement of the securities, demanding they be settled in Hermes stock rather than cash as originally agreed with the seller.
The enforcement committee said "taken in isolation, none of these [actions] constituted an infringement of disclosure rules," but concluded that collectively they amounted to a deliberate breach of disclosure requirements.
It added: "Having noted the material impact this announcement might have had on the price of Hermes and LVMH shares, the enforcement committee found that all aspects of the rule breach had been established."
LVMH plan to appeal the ruling.
At the time of publication no one from LVMH or Hermes was available for comment.