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LUXURY
SUPPLY-CHAIN
&
COMPETITION
LAW

Second International Workshop on Luxury Retail,
Operations and Supply Chain Management

Milan – November, 19th – 2013
POLITECNICO di MILANO
Extract	
  of	
  a	
  more	
  global	
  presenta2on	
  «	
  Towards	
  the	
  Pursuit	
  of	
  Op2mal	
  Legal	
  protec2on	
  of	
  
the	
  Integrity	
  of	
  Selec2ve	
  Distribu2on	
  Networks	
  in	
  the	
  Luxury	
  Brands	
  Sector	
  (Trademark	
  &	
  
compe22on	
  law)»	
  
	
  
Compe&&on	
   law	
   is	
   very	
   involved	
   in	
   each	
   stage	
   of	
   the	
   supply	
   chain	
   –	
   and	
   par&cularly	
   in	
   luxury	
  
industry.	
  
	
  
o  Merger	
  (100%)	
  
o  Acquisi2on	
  of	
  minority	
  stake	
  
o  Joint-­‐venture,	
  etc.	
  
o  Exclusive	
  supplying	
  contracts	
  
o  Selec2ve	
  distribu2on	
  
o  Exclusive	
  distribu2on,	
  etc.	
  
o  Technical	
  use	
  of	
  compe22on	
  law	
  to	
  slow	
  down	
  parallel	
  imports,	
  etc.	
  
	
  
Developments	
  on	
  demand.	
  

w w w . c o n s u l t a n 2 t r u s t . e u 	
  

©	
  
Appropriate	
  ac2on	
  in	
  the	
  SC	
  
Upstream	
  &	
  Downstream	
  

©	
  
Extract of the intervention
(...)	
   For	
   lawyers,	
   the	
   role	
   of	
   supply	
   chain	
   in	
   the	
   luxury	
   industry	
   is	
   to	
   create	
   op2mal	
  
condi2ons	
  that	
  will	
  allow	
  the	
  company	
  to	
  build	
  a	
  strong	
  brand	
  AND	
  to	
  transform	
  gradually	
  
the	
  brand	
  as	
  a	
  "legend"	
  and	
  thus	
  bring	
  the	
  company	
  well	
  above	
  of	
  its	
  compe2tors.	
  
	
  
In	
  the	
  field	
  of	
  Luxury,	
  …Supply	
  Chain	
  has	
  then	
  a	
  fundamental	
  role	
  !	
  
	
  	
  
For	
  lawyers,	
  there	
  are	
  two	
  main	
  types	
  of	
  supply	
  chain	
  strategy	
  :	
  Lean	
  and	
  Agile	
  
-­‐	
  Lean	
  means	
  …“Eliminate	
  waste	
  and	
  reduce	
  costs”	
  
-­‐	
  Agile	
  means	
  …“Quality,	
  speed,	
  responsiveness	
  and	
  flexibility”	
  	
  
	
  	
  
It	
  is	
  well	
  understood	
  that	
  this	
  latest	
  strategy	
  had	
  been	
  adopted	
  long	
  2me	
  ago	
  by	
  the	
  luxury	
  
industry	
  !	
  (…)	
  
	
  
Appropriate	
  ac2on	
  in	
  the	
  SC	
  
	
  
Upstream	
  	
  &	
  Downstream	
  

	
  
Make	
  efforts	
  to	
  be	
  supplied	
  with	
  the	
  best	
  products	
  available	
  for	
  
manufacturers	
  to	
  create	
  luxury	
  products	
  
First-­‐Best	
  SOLUTIONS	
  	
  	
  	
  
	
  

-­‐  Full	
  acquisi2on	
  of	
  suppliers	
  
(Ex.	
   100%	
   of	
   FRANCE	
   CROCO	
   by	
   KERING	
  
for	
  crocodile	
  skin)	
  

©	
  
+ LANEL Embroidery
Dec,	
  5,	
  2013	
  

The same week
Appropriate	
  ac2on	
  in	
  the	
  SC	
  
	
  
Upstream	
  	
  &	
  Downstream	
  

	
  
Make	
  efforts	
  to	
  be	
  supplied	
  with	
  the	
  best	
  products	
  available	
  for	
  
manufacturers	
  to	
  create	
  luxury	
  products	
  
First-­‐Best	
  SOLUTIONS	
  	
  	
  	
  
	
  

-­‐  Full	
  acquisi2on	
  of	
  suppliers	
  
(Ex.	
   100%	
   of	
   FRANCE	
   CROCO	
   by	
   KERING	
  
for	
  crocodile	
  skin)	
  
	
  

-­‐  Minority	
  stake	
  of	
  suppliers	
  
(Ex.	
   HERMÈS	
   acquisi2on	
   of	
   39%	
   of	
  
PERRIN	
  for	
  silk	
  supplying)	
  
	
  

-­‐  Joint	
  Venture	
  with	
  suppliers	
  
(Ex.	
   LVMH	
   &	
   DE	
   BEERS	
   for	
   diamonds	
  
Supplying)	
  

©	
  
Extract of the intervention
(…)	
   For	
   example	
   cashmere	
   supplying	
   is	
   very	
   concentrated	
   in	
   China	
   and	
   Mongolia	
   –	
   (for	
  
example	
  ERDOS	
  hold	
  40	
  %	
  of	
  market	
  share).	
  If	
  you	
  need	
  to	
  protect	
  you	
  as	
  a	
  manufacturer	
  
against	
  poten2al	
  abuses	
  (for	
  example	
  discrimina2on	
  in	
  prices,	
  supply	
  delays	
  bigger	
  than	
  for	
  
other,	
   refusal	
   to	
   supply,	
   bundling	
   or	
   tying	
   the	
   supply	
   of	
   cashmere	
   with	
   other	
   luxury	
   raw	
  
materials	
  like	
  silk,	
  etc.)	
  you	
  can	
  use	
  the	
  compe22on	
  law	
  to	
  put	
  an	
  end	
  to	
  these	
  behaviours.	
  
	
  	
  
An	
  other	
  and	
  very	
  recent	
  example	
  is	
  the	
  problem	
  luxury	
  watch	
  manufacturers	
  had	
  faced	
  for	
  
the	
   supplying	
   of	
   mechanical	
   movements	
   and	
   hair	
   springs	
   (very	
   necessary	
   parts	
   of	
   luxury	
  
watches).	
  The	
  Swatch	
  group	
  hold	
  between	
  70	
  and	
  90	
  %	
  of	
  the	
  market	
  for	
  these	
  parts.	
  But	
  
the	
  Swatch	
  group	
  also	
  hold	
  luxury	
  watch	
  brands	
  like	
  BREGUET	
  and	
  BLANCPAIN.	
  You	
  can	
  then,	
  
easily,	
   imagine	
   the	
   problems	
   that	
   arose	
   the	
   day	
   Swatch	
   group	
   decided	
   to	
   lower	
   its	
  
produc2on	
  (in	
  June	
  two	
  thousand	
  eleven).	
  Compe22on	
  law	
  had	
  been	
  the	
  best	
  tool	
  for	
  other	
  
manufacturers	
  to	
  avoid	
  upstream	
  problems	
  of	
  this	
  kind	
  for	
  the	
  supply	
  chain.	
  	
  
	
  	
  
This	
   is	
   probably	
   the	
   reason	
   why	
   LVMH	
   decided	
   to	
   acquire	
   LA	
   FABRIQUE	
   DU	
   TEMPS	
   (two	
  
thousand	
  eleven)	
  to	
  be	
  fully	
  autonomous	
  on	
  mechanical	
  movements	
  for	
  CHAUMET	
  or	
  BULGARI.	
  
This	
  is	
  one	
  of	
  the	
  first-­‐best	
  solu2on	
  we	
  have	
  men2onned	
  hereabove.	
  
	
  
One	
  month	
  ago	
  they	
  succeed	
  to	
  put	
  back	
  the	
  deadline	
  considered	
  by	
  Swatch	
  group	
  to	
  lower	
  
its	
   produc2on	
   and	
   avoid	
   any	
   discrimina2on	
   between	
   luxury	
   watch	
   manufacturers	
   in	
   the	
  
future.	
  
©	
  
Appropriate	
  ac2on	
  in	
  the	
  SC	
  
	
  
Upstream	
  	
  &	
  Downstream	
  

	
  
Make	
  efforts	
  to	
  be	
  supplied	
  with	
  the	
  best	
  products	
  available	
  for	
  
manufacturers	
  to	
  create	
  luxury	
  products	
  
First-­‐Best	
  SOLUTIONS	
  	
  	
  	
  

Second-­‐Best	
  SOLUTIONS	
  

-­‐  Full	
  acquisi2on	
  of	
  suppliers	
  
(Ex.	
   100%	
   of	
   FRANCE	
   CROCO	
   by	
   KERING	
  
for	
  crocodile	
  skin)	
  

-­‐  Use	
  of	
  tradi2onnal	
  contract	
  law	
  

	
  

	
  

-­‐  Minority	
  stake	
  of	
  suppliers	
  
(Ex.	
   HERMÈS	
   acquisi2on	
   of	
   39%	
   of	
  
PERRIN	
  for	
  silk	
  supplying)	
  
	
  

-­‐  Joint	
  Venture	
  with	
  suppliers	
  
(Ex.	
   LVMH	
   &	
   DE	
   BEERS	
   for	
   diamonds	
  
Supplying)	
  

	
  
	
  
	
  

in	
  conjunc&on	
  with	
  

-­‐  Compe22on	
  law	
  
	
  

(Ex.	
  Exclusive	
  supplying	
  contracts)	
  
	
  
(Ex.	
  avoid	
  abuse	
  of	
  dominance	
  by	
  
monopolists	
  suppliers	
  or	
  oligopole)	
  
	
  
(cf.	
   for	
   exemple	
   cashmere	
   for	
   apparel	
   or	
  
mechanical	
   movements	
   and	
   hair	
   springs	
   in	
  
luxury	
  watches)	
  
	
  
©	
  
Appropriate	
  ac2on	
  in	
  the	
  SC	
  
	
  
	
   Upstream	
  &	
  Downstream	
  

	
  
Make	
  efforts	
  to	
  best	
  distribute	
  luxury	
  products	
  from	
  manufacturers	
  to	
  
final	
  customers	
  
First-­‐Best	
  SOLUTIONS	
  	
  	
  	
  
	
  

-­‐  Direct	
  ownership	
  of	
  distributors	
  
(Ex.	
   460	
   mono-­‐brand	
   LVMH	
   points	
   of	
  
sale)	
  
	
  

-­‐  Direct	
  ownership	
  of	
  distributors	
  
(Ex.	
  mul2-­‐brand	
  department	
  stores	
  –	
  Le	
  
Bon	
  Marché)	
  
	
  

-­‐  Franchise	
  
(Ex.	
   Luxury	
   grocery	
   markets	
   or	
   HERMÈS	
  
in	
   the	
   north	
   of	
   Italy	
   since	
   few	
   months	
  
ago.)	
  
©	
  
Appropriate	
  ac2on	
  in	
  the	
  SC	
  
	
  
	
   Upstream	
  &	
  Downstream	
  

	
  
Make	
  efforts	
  to	
  best	
  distribute	
  luxury	
  products	
  from	
  manufacturers	
  to	
  
final	
  customers	
  
First-­‐Best	
  SOLUTIONS	
  	
  	
  	
  

Second-­‐Best	
  SOLUTIONS	
  

-­‐  Direct	
  ownership	
  of	
  distributors	
  
(Ex.	
   460	
   mono-­‐brand	
   LVMH	
   points	
   of	
  
sale)	
  

-­‐  Exclusive	
  distribu2on	
  
(Ex.	
  BENTLEY	
  or	
  ROLLS-­‐ROYCE)	
  
	
  
-­‐	
  Selec2ve	
  distribu2on	
  
(Ex.	
  Perfumes	
  and	
  cosme2cs)	
  
	
  
-­‐	
  Internet	
  
(Ex.	
  CARTIER)	
  

	
  

	
  

-­‐  Direct	
  ownership	
  of	
  distributors	
  
(Ex.	
  mul2-­‐brand	
  department	
  stores	
  –	
  Le	
  
Bon	
  Marché)	
  
	
  

-­‐  Franchise	
  
(Ex.	
   Luxury	
   grocery	
   markets	
   or	
   HERMÈS	
  
in	
   the	
   north	
   of	
   Italy	
   since	
   few	
   months	
  
ago.)	
  

	
  

©	
  
Appropriate	
  ac2on	
  in	
  the	
  SC	
  
	
  
	
   Upstream	
  &	
  Downstream	
  

	
  
Make	
  efforts	
  to	
  best	
  distribute	
  luxury	
  products	
  from	
  manufacturers	
  to	
  
final	
  customers	
  
First-­‐Best	
  SOLUTIONS	
  	
  	
  	
  

Second-­‐Best	
  SOLUTIONS	
  

-­‐  Direct	
  ownership	
  of	
  distributors	
  
(Ex.	
   460	
   mono-­‐brand	
   LVMH	
   points	
   of	
  
sale)	
  

-­‐  Exclusive	
  distribu2on	
  
(Ex.	
  BENTLEY	
  or	
  ROLLS-­‐ROYCE)	
  
	
  
-­‐	
  Selec2ve	
  distribu2on	
  
(Ex.	
  Perfumes	
  and	
  cosme2cs)	
  
	
  
-­‐	
  Internet	
  
(Ex.	
  CARTIER)	
  

	
  

	
  

-­‐  Direct	
  ownership	
  of	
  distributors	
  
(Ex.	
  mul2-­‐brand	
  department	
  stores	
  –	
  Le	
  
Bon	
  Marché)	
  
	
  

-­‐  Franchise	
  
(Ex.	
   Luxury	
   grocery	
   markets	
   or	
   HERMÈS	
  
in	
   the	
   north	
   of	
   Italy	
   since	
   few	
   months	
  
ago.)	
  

	
  

BUT…	
  RISKS	
  OF	
  
©	
  

OF	
  

PARALLEL	
  
IMPORTS	
  
 
	
  

©	
  

Appropriate	
  ac2on	
  in	
  the	
  SC	
  
Upstream	
  &	
  Downstream	
  

PARALLEL	
  
IMPORTS	
  
Extract of the intervention
(…)	
   As	
   you	
   probably	
   know,	
   these	
   parallel	
   imports	
   can	
   have	
   direct	
   or	
   indirect	
   financial	
   and	
  
image	
  consequences	
  for	
  your	
  luxury	
  houses	
  (…)	
  .	
  
	
  	
  
For	
  example	
  and	
  from	
  a	
  financial	
  point	
  of	
  view,	
  it	
  is	
  well	
  known	
  that	
  luxury	
  products	
  are	
  a	
  
kind	
  of	
  Giffen/Veblen	
  products.	
  This	
  is	
  products	
  for	
  which	
  a	
  rise	
  in	
  price	
  of	
  this	
  product	
  makes	
  
people	
   buy	
   even	
   more	
   of	
   the	
   product.	
   BUT	
   at	
   the	
   opposite	
   a	
   lowering	
   of	
   the	
   price	
   could	
  
lessening	
   the	
   demand	
   for	
   the	
   product.	
   This	
   is	
   the	
   risks	
   parallel	
   imports	
   causes.	
   The	
   prices	
  
dropping,	
  the	
  status	
  will	
  drop,	
  the	
  demand	
  will	
  follows	
  this	
  drop.	
  
	
  	
  
The	
   second	
   reason	
   is	
   that,	
   from	
   an	
   image	
   point	
   of	
   view,	
   uncontrolled	
   parallel	
   imports	
   can	
  
have	
  straight	
  consequences	
  as	
  seing	
  the	
  luxury	
  products	
  being	
  sell	
  on	
  the	
  same	
  shelves	
  that	
  
“ordinary”	
  products.	
  Can	
  you	
  imagine	
  gondola	
  shelves	
  with	
  your	
  caviar	
  in	
  Pam	
  supermarkets	
  
near	
  the	
  private	
  label	
  Tesori	
  pasta	
  ?	
  Or	
  can	
  you	
  imagine	
  an	
  adver2sing	
  for	
  discounted	
  drills	
  
and	
   luxury	
   perfumes	
   on	
   the	
   same	
   page	
   ?	
   Usually	
   distributors	
   use	
   luxury	
   products	
   as	
  
“alrac2on	
   products”	
   and	
   do	
   not	
   care	
   of	
   the	
   environment	
   and	
   image	
   respect	
   of	
   the	
   luxury	
  
products.	
  This	
  is	
  the	
  risks	
  parallel	
  imports	
  causes	
  because	
  you	
  cannot	
  control	
  the	
  distributor	
  
by	
  contract.	
  
	
  	
  
If	
  you	
  want	
  to	
  fight	
  against	
  these	
  risks	
  from	
  parallel	
  imports	
  (…)	
  

©	
  
 
	
  

Appropriate	
  ac2on	
  in	
  the	
  SC	
  
Upstream	
  &	
  Downstream	
  

A.  Create	
  discrimina2on	
  by	
  price	
  to	
  nullify	
  the	
  price	
  gaps	
  between	
  2	
  
countries,	
  
B.  Set	
  up	
  temporary	
  price	
  fixings,	
  
C.  Offer	
  different	
  kinds	
  of	
  products	
  for	
  each	
  zone	
  delivered	
  to	
  avoid	
  at	
  
maximum	
  parallel	
  imports,	
  
D.  Generate	
  financial	
  loan	
  schemes	
  to	
  distributors	
  or	
  wholesalers	
  under	
  
condi2ons	
  of	
  insights	
  about	
  sales,	
  

©	
  

With	
  due	
  respect	
  of	
  
Compe22on	
  law	
  
	
  
 
	
  

Appropriate	
  ac2on	
  in	
  the	
  SC	
  
Upstream	
  &	
  Downstream	
  

A.  Create	
  discrimina2on	
  by	
  price	
  to	
  nullify	
  the	
  price	
  gaps	
  between	
  2	
  
countries,	
  
B.  Set	
  up	
  temporary	
  price	
  fixings,	
  
C.  Offer	
  different	
  kinds	
  of	
  products	
  for	
  each	
  zone	
  delivered	
  to	
  avoid	
  at	
  
maximum	
  parallel	
  imports,	
  
D.  Generate	
  financial	
  loan	
  schemes	
  to	
  distributors	
  or	
  wholesalers	
  under	
  
condi2ons	
  of	
  insights	
  about	
  sales,	
  
E.  Consider	
  a	
  limita2on	
  of	
  supplying	
  (in	
  quan2ty)	
  to	
  the	
  distributor	
  or	
  the	
  
wholesaler	
  suspected	
  of	
  diver2ng	
  products,	
  
F.  Plan	
  a	
  Refusal	
  to	
  deliver	
  a	
  distributor	
  or	
  a	
  wholesaler	
  you	
  suspect	
  to	
  
be	
  part	
  of	
  a	
  parallel	
  importa2on	
  scheme,	
  or	
  
G.  Formulate	
  referral	
  policies	
  and	
  pass-­‐over	
  payments	
  

©	
  

With	
  due	
  respect	
  of	
  
Compe22on	
  law	
  
	
  
29,	
  rue	
  Bassano	
  
75008	
  –	
  Paris	
  
France	
  
	
  
www.consultan2trust.eu	
  

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LUXURY SUPPLY CHAIN & COMPETITION LAW

  • 1. LUXURY SUPPLY-CHAIN & COMPETITION LAW Second International Workshop on Luxury Retail, Operations and Supply Chain Management Milan – November, 19th – 2013 POLITECNICO di MILANO
  • 2. Extract  of  a  more  global  presenta2on  «  Towards  the  Pursuit  of  Op2mal  Legal  protec2on  of   the  Integrity  of  Selec2ve  Distribu2on  Networks  in  the  Luxury  Brands  Sector  (Trademark  &   compe22on  law)»     Compe&&on   law   is   very   involved   in   each   stage   of   the   supply   chain   –   and   par&cularly   in   luxury   industry.     o  Merger  (100%)   o  Acquisi2on  of  minority  stake   o  Joint-­‐venture,  etc.   o  Exclusive  supplying  contracts   o  Selec2ve  distribu2on   o  Exclusive  distribu2on,  etc.   o  Technical  use  of  compe22on  law  to  slow  down  parallel  imports,  etc.     Developments  on  demand.   w w w . c o n s u l t a n 2 t r u s t . e u   ©  
  • 3. Appropriate  ac2on  in  the  SC   Upstream  &  Downstream   ©  
  • 4. Extract of the intervention (...)   For   lawyers,   the   role   of   supply   chain   in   the   luxury   industry   is   to   create   op2mal   condi2ons  that  will  allow  the  company  to  build  a  strong  brand  AND  to  transform  gradually   the  brand  as  a  "legend"  and  thus  bring  the  company  well  above  of  its  compe2tors.     In  the  field  of  Luxury,  …Supply  Chain  has  then  a  fundamental  role  !       For  lawyers,  there  are  two  main  types  of  supply  chain  strategy  :  Lean  and  Agile   -­‐  Lean  means  …“Eliminate  waste  and  reduce  costs”   -­‐  Agile  means  …“Quality,  speed,  responsiveness  and  flexibility”         It  is  well  understood  that  this  latest  strategy  had  been  adopted  long  2me  ago  by  the  luxury   industry  !  (…)    
  • 5. Appropriate  ac2on  in  the  SC     Upstream    &  Downstream     Make  efforts  to  be  supplied  with  the  best  products  available  for   manufacturers  to  create  luxury  products   First-­‐Best  SOLUTIONS           -­‐  Full  acquisi2on  of  suppliers   (Ex.   100%   of   FRANCE   CROCO   by   KERING   for  crocodile  skin)   ©  
  • 6. + LANEL Embroidery Dec,  5,  2013   The same week
  • 7. Appropriate  ac2on  in  the  SC     Upstream    &  Downstream     Make  efforts  to  be  supplied  with  the  best  products  available  for   manufacturers  to  create  luxury  products   First-­‐Best  SOLUTIONS           -­‐  Full  acquisi2on  of  suppliers   (Ex.   100%   of   FRANCE   CROCO   by   KERING   for  crocodile  skin)     -­‐  Minority  stake  of  suppliers   (Ex.   HERMÈS   acquisi2on   of   39%   of   PERRIN  for  silk  supplying)     -­‐  Joint  Venture  with  suppliers   (Ex.   LVMH   &   DE   BEERS   for   diamonds   Supplying)   ©  
  • 8. Extract of the intervention (…)   For   example   cashmere   supplying   is   very   concentrated   in   China   and   Mongolia   –   (for   example  ERDOS  hold  40  %  of  market  share).  If  you  need  to  protect  you  as  a  manufacturer   against  poten2al  abuses  (for  example  discrimina2on  in  prices,  supply  delays  bigger  than  for   other,   refusal   to   supply,   bundling   or   tying   the   supply   of   cashmere   with   other   luxury   raw   materials  like  silk,  etc.)  you  can  use  the  compe22on  law  to  put  an  end  to  these  behaviours.       An  other  and  very  recent  example  is  the  problem  luxury  watch  manufacturers  had  faced  for   the   supplying   of   mechanical   movements   and   hair   springs   (very   necessary   parts   of   luxury   watches).  The  Swatch  group  hold  between  70  and  90  %  of  the  market  for  these  parts.  But   the  Swatch  group  also  hold  luxury  watch  brands  like  BREGUET  and  BLANCPAIN.  You  can  then,   easily,   imagine   the   problems   that   arose   the   day   Swatch   group   decided   to   lower   its   produc2on  (in  June  two  thousand  eleven).  Compe22on  law  had  been  the  best  tool  for  other   manufacturers  to  avoid  upstream  problems  of  this  kind  for  the  supply  chain.         This   is   probably   the   reason   why   LVMH   decided   to   acquire   LA   FABRIQUE   DU   TEMPS   (two   thousand  eleven)  to  be  fully  autonomous  on  mechanical  movements  for  CHAUMET  or  BULGARI.   This  is  one  of  the  first-­‐best  solu2on  we  have  men2onned  hereabove.     One  month  ago  they  succeed  to  put  back  the  deadline  considered  by  Swatch  group  to  lower   its   produc2on   and   avoid   any   discrimina2on   between   luxury   watch   manufacturers   in   the   future.   ©  
  • 9. Appropriate  ac2on  in  the  SC     Upstream    &  Downstream     Make  efforts  to  be  supplied  with  the  best  products  available  for   manufacturers  to  create  luxury  products   First-­‐Best  SOLUTIONS         Second-­‐Best  SOLUTIONS   -­‐  Full  acquisi2on  of  suppliers   (Ex.   100%   of   FRANCE   CROCO   by   KERING   for  crocodile  skin)   -­‐  Use  of  tradi2onnal  contract  law       -­‐  Minority  stake  of  suppliers   (Ex.   HERMÈS   acquisi2on   of   39%   of   PERRIN  for  silk  supplying)     -­‐  Joint  Venture  with  suppliers   (Ex.   LVMH   &   DE   BEERS   for   diamonds   Supplying)         in  conjunc&on  with   -­‐  Compe22on  law     (Ex.  Exclusive  supplying  contracts)     (Ex.  avoid  abuse  of  dominance  by   monopolists  suppliers  or  oligopole)     (cf.   for   exemple   cashmere   for   apparel   or   mechanical   movements   and   hair   springs   in   luxury  watches)     ©  
  • 10. Appropriate  ac2on  in  the  SC       Upstream  &  Downstream     Make  efforts  to  best  distribute  luxury  products  from  manufacturers  to   final  customers   First-­‐Best  SOLUTIONS           -­‐  Direct  ownership  of  distributors   (Ex.   460   mono-­‐brand   LVMH   points   of   sale)     -­‐  Direct  ownership  of  distributors   (Ex.  mul2-­‐brand  department  stores  –  Le   Bon  Marché)     -­‐  Franchise   (Ex.   Luxury   grocery   markets   or   HERMÈS   in   the   north   of   Italy   since   few   months   ago.)   ©  
  • 11. Appropriate  ac2on  in  the  SC       Upstream  &  Downstream     Make  efforts  to  best  distribute  luxury  products  from  manufacturers  to   final  customers   First-­‐Best  SOLUTIONS         Second-­‐Best  SOLUTIONS   -­‐  Direct  ownership  of  distributors   (Ex.   460   mono-­‐brand   LVMH   points   of   sale)   -­‐  Exclusive  distribu2on   (Ex.  BENTLEY  or  ROLLS-­‐ROYCE)     -­‐  Selec2ve  distribu2on   (Ex.  Perfumes  and  cosme2cs)     -­‐  Internet   (Ex.  CARTIER)       -­‐  Direct  ownership  of  distributors   (Ex.  mul2-­‐brand  department  stores  –  Le   Bon  Marché)     -­‐  Franchise   (Ex.   Luxury   grocery   markets   or   HERMÈS   in   the   north   of   Italy   since   few   months   ago.)     ©  
  • 12. Appropriate  ac2on  in  the  SC       Upstream  &  Downstream     Make  efforts  to  best  distribute  luxury  products  from  manufacturers  to   final  customers   First-­‐Best  SOLUTIONS         Second-­‐Best  SOLUTIONS   -­‐  Direct  ownership  of  distributors   (Ex.   460   mono-­‐brand   LVMH   points   of   sale)   -­‐  Exclusive  distribu2on   (Ex.  BENTLEY  or  ROLLS-­‐ROYCE)     -­‐  Selec2ve  distribu2on   (Ex.  Perfumes  and  cosme2cs)     -­‐  Internet   (Ex.  CARTIER)       -­‐  Direct  ownership  of  distributors   (Ex.  mul2-­‐brand  department  stores  –  Le   Bon  Marché)     -­‐  Franchise   (Ex.   Luxury   grocery   markets   or   HERMÈS   in   the   north   of   Italy   since   few   months   ago.)     BUT…  RISKS  OF   ©   OF   PARALLEL   IMPORTS  
  • 13.     ©   Appropriate  ac2on  in  the  SC   Upstream  &  Downstream   PARALLEL   IMPORTS  
  • 14. Extract of the intervention (…)   As   you   probably   know,   these   parallel   imports   can   have   direct   or   indirect   financial   and   image  consequences  for  your  luxury  houses  (…)  .       For  example  and  from  a  financial  point  of  view,  it  is  well  known  that  luxury  products  are  a   kind  of  Giffen/Veblen  products.  This  is  products  for  which  a  rise  in  price  of  this  product  makes   people   buy   even   more   of   the   product.   BUT   at   the   opposite   a   lowering   of   the   price   could   lessening   the   demand   for   the   product.   This   is   the   risks   parallel   imports   causes.   The   prices   dropping,  the  status  will  drop,  the  demand  will  follows  this  drop.       The   second   reason   is   that,   from   an   image   point   of   view,   uncontrolled   parallel   imports   can   have  straight  consequences  as  seing  the  luxury  products  being  sell  on  the  same  shelves  that   “ordinary”  products.  Can  you  imagine  gondola  shelves  with  your  caviar  in  Pam  supermarkets   near  the  private  label  Tesori  pasta  ?  Or  can  you  imagine  an  adver2sing  for  discounted  drills   and   luxury   perfumes   on   the   same   page   ?   Usually   distributors   use   luxury   products   as   “alrac2on   products”   and   do   not   care   of   the   environment   and   image   respect   of   the   luxury   products.  This  is  the  risks  parallel  imports  causes  because  you  cannot  control  the  distributor   by  contract.       If  you  want  to  fight  against  these  risks  from  parallel  imports  (…)   ©  
  • 15.     Appropriate  ac2on  in  the  SC   Upstream  &  Downstream   A.  Create  discrimina2on  by  price  to  nullify  the  price  gaps  between  2   countries,   B.  Set  up  temporary  price  fixings,   C.  Offer  different  kinds  of  products  for  each  zone  delivered  to  avoid  at   maximum  parallel  imports,   D.  Generate  financial  loan  schemes  to  distributors  or  wholesalers  under   condi2ons  of  insights  about  sales,   ©   With  due  respect  of   Compe22on  law    
  • 16.     Appropriate  ac2on  in  the  SC   Upstream  &  Downstream   A.  Create  discrimina2on  by  price  to  nullify  the  price  gaps  between  2   countries,   B.  Set  up  temporary  price  fixings,   C.  Offer  different  kinds  of  products  for  each  zone  delivered  to  avoid  at   maximum  parallel  imports,   D.  Generate  financial  loan  schemes  to  distributors  or  wholesalers  under   condi2ons  of  insights  about  sales,   E.  Consider  a  limita2on  of  supplying  (in  quan2ty)  to  the  distributor  or  the   wholesaler  suspected  of  diver2ng  products,   F.  Plan  a  Refusal  to  deliver  a  distributor  or  a  wholesaler  you  suspect  to   be  part  of  a  parallel  importa2on  scheme,  or   G.  Formulate  referral  policies  and  pass-­‐over  payments   ©   With  due  respect  of   Compe22on  law    
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