LVMH announced this week that their plan to buy Tiffany & Co for $16.2 billion dollars is now off. Tiffany’s responded with a lawsuit. Stocks fell for both companies in the aftermath, with Tiffany’s bearing the brunt of an 11% decrease.  

While there are many different ways to break down this news, as it would’ve been the biggest takeover in fashion history, the fact that LVMH is blaming this both on Tiffany’s handling of Covid-19, as well as political instability between France and the US, is an important perspective to consider.

First, Covid-19. America still struggles to get a handle on the pandemic. And without a national-level plan, the virus is moving from one location to another. This has made it very difficult for national retailers to develop a comprehensive plan. Instead, companies like Tiffany’s, are left to deal with issues on a geographic level. With states and even cities having their own laws and ordinances around containing the virus, retailers are forced to create more localized plans which draw attention away from more top down leadership and strategy. The impact on the bottom line is real—29% decrease in net profit in the case of Tiffany & Co. But this is not fully the responsibility of Tiffany’s. To blame them is to create a straw man.

Second, political instability. Donald Trump announced 25% tariffs on French luxury goods in the spring, a tit for tat political maneuver for greater political purposes. In fact, the tariffs are a direct retaliation against French President, Emmanuel Macron’s taxes on Silicon Valley tech companies. While this is nothing new in politics, targeting luxury goods, and the luxury consumer, is rare, especially during a pandemic. But, from a less nuanced perspective, it’s striking against France’s largest international conglomerates, LVMH and The Kering Group. And these tariffs are completely out of Tiffany’s control.

Now, that doesn’t mean that Bernard Arnault, president of LVMH, doesn’t have two very legitimate reasons to pull out of the deal. In fact, it is important for him to protect his shareholders, and the companies under the LVMH umbrella. However, it is interesting that Arnault is putting the blame on issues largely outside of Tiffany’s control. And what’s more, he is using the French government as the scapegoat. This isn’t helped by Arnault’s insider connections in the French government, which suggests something more insidious. 

This example of Tiffany’s is playing out in myriad ways across all levels of fashion retail as well as in other sectors. It’s a game of shifting blame and uncertainty—and underlies the need to establish a new balance between government, society and business, on a global level—all accelerated by the pandemic. How the Tiffany & Co. drama plays out, could define what this balance looks like in the near future.

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