While regulators across the globe have their sights set on Big Tech, mergers in other industries show that not all markets are treated equally. Social fears against the rise of Big Tech have supported a new wave of regulation that is focused on size at the expense of consumers. Mergers and offerings in the beauty space show how misguided and targeted the underlying premise of recent antitrust enforcement truly is.
The luxury company Kering recently announced plans to acquire the fragrance brand Creed. Kering is a current stakeholder of multiple luxury brands including Gucci, Saint Laurent, and Alexander McQueen. Kering’s acquisition of Creed is estimated to be worth between one and two billion euros.
Currently, Kering primarily focuses on leather goods, watches, and sunglasses with the goal of breaking into the beauty space. While Kering maintains that the brands it holds a stake in are independently run, there is overlap as these brands also compete in the fragrance market.
Although specific perfume sales are hard to determine, the brands that Creed will be paired with under Kering are massive. In 2022, Balenciaga reported $946 million in sales, which included fragrances although these sales were done under the umbrella of a different beauty conglomerate Coty. Gucci also sells its fragrances under Coty and boasted $11.2 billion in sales in 2022. Comparatively, Creed generated under $300 million in 2022, making the brand a much smaller competitor to Kering’s other labels.
While Kering is free to build out its product offerings through acquisitions, the same cannot be said for tech companies. Kering’s acquisition of Creed is likely to move forward without a hitch while Meta’s acquisition of Instagram – valued at $1 billion – faced heavy scrutiny, although admittedly the overall market size for social media was smaller at the time.
Eight years after Meta acquired Instagram, the Federal Trade Commission (FTC) sued Meta for illegal monopolization. If the FTC had been successful, one possibility would have been a forced divestiture of Instagram.
Meta again faced scrutiny with its proposed acquisition of the virtual reality gaming company Within Unlimited. FTC Bureau of Competition Deputy Director John Newman stated that “Instead of competing on the merits, Meta is trying to buy its way to the top.” Kering has adopted the same strategy of using acquisitions to break into a new area, but they don’t face the same barriers as tech companies.
In the FTC’s complaint against Meta, the agency argued that the company’s resources meant that it should be able to enter into the virtual reality fitness industry without having to acquire another company. Despite the FTC dropping the complaint after a failed preliminary injunction, Meta had to expend precious time and resources to fight the FTC’s complaint. Meanwhile, Kering – a giant in the luxury brand space – is not subject to the same argument that its size means it should be able to enter the fragrance market without an acquisition.
The harms from a malfunctioning beauty space aren’t the same as in tech. Many are concerned by Big Tech’s influence over the free exchange of information and free speech, and these concerns don’t translate to the beauty space. Regardless of the validity of these concerns, antitrust regulation is not the tool to address them.
Kering isn’t the only example of a beauty merger avoiding the same level of scrutiny as tech companies. Last year Estée Lauder bought Tom Ford for $2.8 billion. Coty also bought a majority stake in Kylie Cosmetics for $600 million.
The acquisition of Tom Ford followed the introduction of the Platform Competition and Opportunity Act (PCOA) which was introduced by Senator Amy Klobuchar (D-MN) in 2021. While this bill ultimately failed to make progress, it would have banned certain mergers for tech companies and required they be valued at under $50 million and not involve direct or nascent competitors. If this legislation was applied fairly, it would have prohibited Kering, Estée Lauder, and Coty’s acquisitions based on value alone.
The beauty space is full of conglomerates with the largest company L’Oréal having 36 brands, under its umbrella with many of those coming through mergers and acquisitions. Despite this, and with room for improvement, the beauty space as a whole continues to serve diverse consumers at all price points and with an emphasis on inclusivity.
It’s difficult to conceal the bias against tech companies when comparing how differently mergers and acquisitions in the beauty space are treated. The focus of antitrust should be on the consumer. Therefore, if the beauty space can continue to serve its customers despite the presence of large brands, then tech should be permitted to do the same.