French luxury group LVMH has announced it is abandoning its appeal against the record-breaking fine it incurred for its secret stake in rival luxury house Hermes.
LVMH remained defiant, however, saying in a statement that it still disputed the ruling but had to consider the time and cost of further proceedings and focus on the management of its slice of Hermes.
Bernard Arnault's giant was hit with an €8 million penalty from the French financial regulator Autorite des Marches Financiers in early July for failing to comply with disclosure rules.
The sum is the harshest ever fine imposed by the AMF for this type of offence since its inception in 2003 when it was formed from the merger of three smaller regulatory bodies focusing on different areas of the financial markets.
The highest fine it can impose for non-disclosure offences is €10 million.
Shareholders in companies traded on the French stock exchange are obliged to disclose their stake in 5% increments – the AMF's investigation began in 2010 when LVMH suddenly announced it had managed to covertly acquire a 14.2% stake in Hermes.
LVMH built its Hermes shares through a complex web of equity derivatives purchased through foreign investment vehicles, ensuring none held more than a 5% stake.
The shares were later consolidated on LVMH's balance sheets.
In its ruling, the Autorite des Marches Financiers said individually LVMH's actions did not breach regulations, but taken together they were a deliberate breach of disclosure requirements.
Hermes – controlled by the descendents of the founder Thierry Hermes – filed its own criminal case against LVMH for insider trading in June, which was immediately countered by a libel case from LVMH against Hermes.
The dispute between the two companies is still unresolved, and LVMH said: "LVMH will take all necessary action to end the baseless legal proceedings being pursued by Hermes management and to recover compensation for the serious harm their actions have caused."
Since 2010, LVMH has continued to increase its holdings in Hermes through stocks purchased on the open market, and its stake now stands at 23.1%.
Hermes saw revenues of €3.5 billion in 2012, but LVMH reported sales of €28.1 billion across its collection of luxury companies.