NEW YORK — The Japanese Fair Trade Commission on Thursday ruled against Coach's complaint against LVMH Moët Hennessy Louis Vuitton. But the U.S. company believes the exercise has resulted in LVMH changing its behavior in Japanese department stores.
In its complaint, Coach alleged LVMH had used anticompetitive practices by applying pressure on Japanese department stores to stop carrying Coach; if not, it threatened to stop developing Louis Vuitton's business in those stores. The JFTC determined that department stores are using their discretion and were not influenced by LVMH.
"We believe our filing with the JFTC and the subsequent investigation served our primary goal," said Lew Frankfort, chairman and chief executive officer of Coach Inc., in a statement. "To send a strong message that we will not tolerate any actions that limit consumer choice." However, he added, "This finding is surprising, because it contradicts what department stores repeatedly reported to Coach executives prior to the filing of the complaint."
Frankfort conceded the investigation wasn't for naught, however.
"We are hopeful that the increased scrutiny brought to bear by the filing of this complaint — which appears to have resulted in an abatement of LVMH's interference with our department store partners — will continue in the future and contribute to the promotion of fair competition in the Japanese market."
A senior LVMH executive said in a statement, "Coach's tactics in filing this compliant and in seeking media attention were nothing but desperate efforts to compensate for the inability of their products, manufactured in regions with cheap labor, to compete with true luxury brands manufactured in Europe, such as Louis Vuitton. Louis Vuitton will continue its extraordinary success in Japan and its leadership in the true luxury goods sector in that market."
Sources close to the situation said that JFTC never interviewed anyone from LVMH in conjunction with this matter.
Despite the outcome, Coach continues its high-flying performance. In August, the company upped its first-quarter earnings projection to above analysts' estimates after recently reporting a 48.6 percent jump in fourth-quarter earnings on a 23.8 percent sales gain. The firm predicts earnings per share to be at least 25 cents on sales of at least $445 million in the first quarter, with same-store sales expected up in the low teens. The company also projected that fiscal year 2006 sales will reach $2.11 billion — the first time sales would top $2 billion.