FT : Amazon under investor pressure over tax transparency

Amazon under investor pressure over tax transparency
Groups overseeing $3.6tn in assets to seek shareholder resolution at annual meeting

Twenty four institutional investors in Amazon are putting pressure on the ecommerce group to increase transparency on where and how much it pays in tax around the world.

The investors — who include asset managers Nordea, Royal London and several large European and US pension funds — are trying to get a shareholder resolution brought at the group’s annual meeting this year, which if passed would significantly overhaul the company’s tax public disclosures.

The resolution demanding Amazon adopt a new reporting standard on tax practices was originally brought by a Catholic investment fund and UK public retirement scheme in December.

Amazon, which has attracted criticism over its tax transparency in the past, is challenging the resolution. In January it wrote to the US Securities and Exchange Commission requesting approval for the resolution to be excluded from voting at its next AGM. Amazon argued that its tax affairs are an ordinary business matter and therefore subject to a shareholder resolution exemption.

However, the investors backing the motion, who collectively oversee assets of around $1.2tn, are pushing back and are lobbying the SEC to allow the proposal.

“A company’s tax practices are financially material,” they said in a letter to the body, which will be sent early this week and seen by the Financial Times. “Aggressive tax practices can expose a company — and its investors — to increased scrutiny from tax authorities, adjustment risks, and increase their vulnerability to changes in tax rules as countries look to protect their tax bases from deleterious practices.”

They argued they needed “to be provided with sufficient information to gauge a company’s tax position and governance approach and anticipate future impacts on and risks to their holdings”.

The shareholder resolution calls on Amazon’s board to issue a tax transparency report to shareholders, “at reasonable expense and excluding confidential information” in accordance with the Global Reporting Initiative’s (GRI) tax standard.

This model requires companies to make a public disclosure of their business activities, revenues, profit and tax paid in each country they operate in. Amazon does not currently publicly disclose its revenues, profits or tax payments on a country-by-country basis outside the US.

The investors argued the compliance burden for Amazon to adopt the increased disclosure would be “minimal” as multinationals are already required to provide country-by-country tax information to the US tax authority, under existing international rules.

This information is shared by tax authorities but is not released to the public. Any additional compliance “would be significantly outweighed by the benefits of these disclosures to investors,” they said.

Amazon said it “already provides extensive and detailed disclosure regarding its income tax contributions . . . in the United States in its publicly filed annual and quarterly reports to the Commission” and added it “also has publicly reported on its total tax contributions in the United States as well as the United Kingdom, Italy, France, and Spain”.

More than 100 groups overseeing $3.6tn in assets signed the letter, including the New York City Office of the Comptroller, which oversees the city’s public pension funds of $274.7bn, and the £82bn Universities Superannuation Scheme, the UK’s largest private pension fund by assets.

Signatories also included several environmental, social and governance-focused and religious funds, although not all of these invest in Amazon.

The original shareholder resolution was filed by the Missionary Oblates of Mary Immaculate, a Catholic investment fund and the Greater Manchester Pension Fund. Shareholder advisory group Pirc co-ordinated the letter.

FT : Driverless cars: convenience means congestion

Driverless cars: convenience means congestion
Study suggests self-driving vehicles will increase demand for journeys

After a decade of hype and hundreds of millions of dollars of investment, you still cannot buy a self-driving car. Undeterred, tech companies and carmakers continue to pour money into the transport revolution, promising a safer future. If they are successful, there would be a lot more cars on the road.

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Predictions for autonomous vehicles often assume travel habits will not change. Commutes will continue, but travellers will be able to work or watch TV instead of looking at the road. The best case scenarios suggest traffic will improve. Precise, machine-controlled driving will close gaps between cars, for example.

But an experiment by the University of California, Berkeley and University of California, Davis suggests this would not be the case. Researchers offered 43 households a personal chauffeur as a stand in for a self-driving car. Freed from the hassle of driving, users chose to take far more trips. Travel by car rose 60 per cent on average. The chauffeur was only available for 60 hours per week. If driverless travel was possible at all hours of the day the total might have been higher.



Just as MIT found that ride-sharing increased traffic in cities, so driverless cars are likely to increase congestion by increasing journeys by car. Children not old enough to drive could take solo journeys. Older people who do not like to drive at night may use their cars more. Traffic jams and city congestion would get worse.

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This could be solved if cars are shared. But drivers will not automatically swap their own vehicle for rides in a robo taxi. General Motors reported it was looking to launch robo taxis in 2019. But at this year’s annual US Consumer Electronics Show it focused on would-be owners, saying they would be able to buy their own self-driving cars this decade.

The most convincing rationale for self driving cars is safety. A blog by Google in 2010 noted the 1.2mn annual traffic deaths around the world and claimed self-driving cars offered a solution. Technology, it said, could cut that number by as much as half. But such statistics do not take into account the dangers created by more cars on the road.

Regulation could change the outcome by limiting car numbers. The future may also be further away than investors hope. Predictions for driverless cars hitting the road en masse have repeatedly been proved wrong. Full autonomy at scale remains a distant goal.

FT : Ukraine says China is ready to act as a peacemaker

Ukraine says China is ready to act as a peacemaker
Kyiv believes Beijing wants to stop the war with Russia but critics warn of a ‘smokesc

Ukraine’s declaration that China had assured Kyiv it would help stop the war has renewed focus on Beijing’s potential role in pressuring Russia to back down.

But China’s public comments, the close ties between presidents Xi Jinping and Vladimir Putin and Beijing’s lack of experience in resolving such disputes hint at the hurdles it will have to overcome to do so, said diplomats and analysts.

The debate over Beijing’s possible role as a mediator intensified after Ukrainian foreign minister Dmytro Kuleba said on Saturday that he had received assurances that “China is interested in stopping this war”.

“Chinese diplomacy has sufficient tools to make a difference and we count that it is already involved . . . and that their efforts will be successful,” he said.

Kuleba’s statements followed a March 1 conversation with Wang Yi, China’s foreign minister, and it is not clear whether they have spoken again.

Beijing has not elaborated on its diplomatic efforts and in a call with US secretary of state Antony Blinken on Saturday, Wang reiterated China’s criticism of America, Nato and the EU for their role in “frictions and problems accumulated over the years”. The crisis could only be solved through dialogue and negotiations, he added.

Blinken told his Chinese counterpart that “the world is watching to see which nations stand up for the basic principles of freedom, self-determination and sovereignty”, said Ned Price, state department spokesperson.

Even as Ukraine appeared to push Beijing to become directly involved in brokering peace, some experts have questioned Beijing’s credibility and its willingness to take on a leading role in the conflict.

Paul Haenle, a former China adviser to US presidents George W Bush and Barack Obama, said Beijing might hope that appearing to support diplomatic efforts would “offset” the reputational damage it suffered from its strategic support for Russia.

“If you’re really aiming to have a positive impact you’ve got to do more than simply rhetorically calling for all sides to show restraint and to negotiate. I don’t think China is prepared to do that,” said Haenle, who was a US negotiator with China and Russia as part of North Korean nuclear talks.

“Will they roll their sleeves up and do the hard work that’s required? Will they shuttle between capitals? Will they send their officials into the war zone?”

But Song Min-soon, South Korea’s former foreign minster, did not rule out the possibility that Xi would play a “constructive role”. He pointed to the economic and strategic influence China has over Russia and suggested the west should exploit Beijing’s self-interest in avoiding a prolonged crisis in Ukraine.

“Putin really has to rely on Xi Jinping . . . he has to listen to advice from Xi. If we do not have an alternative to China playing a brokering role, then why not?” said Song, who has also negotiated with China and Russia.

Several diplomats in Asia accepted that China might not be happy with the situation in Ukraine. But they also noted that the perception of China in many global capitals had deteriorated sharply in recent years, meaning Xi’s entreaties would be treated with caution.

“China doesn’t seem like a natural fit at all,” one diplomat said. “At the end of the day, Putin and Zelensky need to meet.”

China has abstained in two UN votes, including a security council resolution condemning the invasion and a call for Russia to withdraw its troops. Beijing has also criticised international sanctions imposed on Russia in an effort to punish Putin and cut the country off from the global financial system.

John Delury, a professor of Chinese studies at Yonsei University in Seoul, said that Beijing’s statements in support of negotiations “looks like [a] ‘smokescreen’ to provide cover for China”.

“They’re not in a neutral position. Given the gravity of Putin’s war of aggression, China would have to take much stronger steps against Russia before it would have any basic credibility to mediate,” he said. “They’re much closer to Russia.”

Putin and Xi announced a “no limits” partnership on the eve of the Beijing Winter Olympics and China backed Russia’s opposition to Nato expansion.

Since the start of the invasion, Beijing has heavily censored criticism of Russia and silenced pro-Ukrainian voices.

Chinese media cancelled English Premier League football broadcasts at the weekend over fears the Chinese audience would see international football players protesting against the war.

State media also refused to translate comments by Andrew Parsons, the International Paralympic Committee president, condemning the war at the Winter Paralympic opening ceremony in Beijing.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Women now occupy more senior roles in U.S. companies than ever before, and have helped some of the nation’s biggest, most important companies navigate the Covid pandemic and the challenges that have arisen in its wake.

Cover Story:
In honor of International Women’s Day (March 8), this week, the publication identifies 100 from some of the most influential women in the world of finance. Women now occupy more senior roles in U.S. companies than ever before, and have helped some of the nation’s biggest, most important companies navigate the Covid pandemic and the challenges that have arisen in its wake. Women are also shaping the world of finance and economic policy from an array of powerful perches.

Interview:
Anne Walsh, chief investment officer for fixed income at Guggenheim Investments, graduated from college at 19 and started her career as an analyst at The Retirement Systems of Alabama. She joined Guggenheim Investments, the global asset-management and investment-advisory business of Guggenheim Partners, in 2007, after earning a law degree at night and working in the insurance industry. Walsh now oversees more than $250 billion in fixed-income investments, including agencies, credit, municipals, and structured securities. Barron’s has recognized Walsh on its annual list of the 100 most influential women in U.S. finance.

Tech Trader:
This past week of earnings news brought a fresh wave of data points from enterprise tech companies.
HP Enterprise, which makes servers, storage, and networking hardware, posted 2% revenue growth for the quarter. Pure Storage, which makes flash-memory-based enterprise storage, crushed expectations for the January quarter. Pure posted 41% growth in the quarter. It was the company’s best growth in four years. Broadcom, a key chip provider to cloud players, said its April- quarter results would accelerate from 16% growth in the January quarter. The trend is more obvious on the software side. Salesforce, the software-as-a-service sector’s largest and most seasoned player, has expanded its cloud-based offerings from its core customer relationship-management software into a host of new areas, in part via acquisition, including last year’s $28 billion purchase of messaging service Slack. The same pattern is playing out at Workday, which sells human-resources and financial-management software to large enterprises. Workday posted 22% revenue growth in its January quarter.

The Trader:
-The last full trading week of February ended with optimism that Russia’s invasion of Ukraine would end quickly and not become a global issue. How wrong we were. The scenes out of Ukraine have been devastating, and while resistance has been stiff, Russia’s tactics have gotten more extreme. Europe has rallied together in response, but sanctions don’t look like they will bring a speedy end to the war. No wonder, then, that the stock market had a tough week. The Dow Jones Industrial Average shed 1.3%, its fourth week of losses in a row, while the S&P 500 also shed 1.3% and the Nasdaq Composite fell 2.8%.
-For aircraft leasing companies, the Russian-Ukraine conflict is an unwelcome event for an industry looking to emerge from the problems of pandemic. Investors in aircraft leasing companies aren’t happy either. Shares of AerCap, Air Lease and BOC Aviation are down more than 20%, on average, from 2022 highs. The S&P 500 is off about 10% from its 2022 high. AerCap, the world’s aircraft lessor, has been hit the hardest. Its shares are down roughly 30% from recent highs.
-Foot Locker’s fiscal fourth quarter was stronger than expected when it reported results last Friday, but the market focused instead on the sneaker retailer’s outlook, which called for lower full-year revenue as it sells fewer products from main supplier Nike. It was the first major indication that Nike may be distancing itself from Foot Locker, and that spooked investors. The shares dropped nearly 30% that day, and have continued to slide this week, hitting fresh 52-week lows, as numerous analysts downgraded the stock and lowered their estimates. The stock is down about 29% so far this year, and 39% in the past 12 months. Shares closed on Thursday up 0.1% to $30.

Features:
-Ukraine has crept into global markets. Investors confront a rapidly changing geopolitical scene atop an economy already struggling to cope with inflation, supply-chain woes, and looming interest-rate hikes. No wonder stocks have whipsawed around. To help cut through various aspects of this unfolding crisis—energy, Putin, NATO, and, of course, investing—Barron’s spoke with eight leading experts including Daniel Yergin: U.S. Oil Is Now a Security Asset, Carlos Pascual: Former US Ambassador to Ukraine Is Watching One Key Factor and Tina Fordham: Whether Russia Conquers Ukraine or Not, ‘We Are in a New Territory’.
-Russian President Vladimir Putin also turned up the heat on Ukraine’s allies, saying that countries that impose a no-fly zone over Ukraine are participating in the conflict, CNN reported. Putin also likened Western countries’ sanctions to a declaration of war—before noting that has not happened, according to the BBC. The war dominated headlines this past week, sending investors scrambling for the exits: Both the Dow Jones Industrial Average and S&P 500 lost 1.3% for the week, while the Nasdaq Composite tumbled 2.8%.

European Trader:
The airline sector’s recovery has hit multiple bouts of turbulence in the past year. The industry was looking optimistically toward the spring and summer months—until Russia invaded Ukraine. Despite the obvious risks and uncertainties, the steep stock declines of the past month may tempt investors to take a closer look at some of Europe’s best carriers. Hungarian low-cost airline Wizz Air Holdings, a rapidly expanding dominant player in Central and Eastern Europe, has been among the worst affected carriers. The stock has fallen almost 40% since its 2022 high on Feb. 10. In many ways, that isn’t surprising—the carrier has the greatest exposure to Russia and Ukraine, which together account for 9.5% of its first half of 2022 capacity, Raymond James analysts say. The next highest is low-cost rival Ryanair Holdings.

Emerging Markets:
-Chinese leaders on Saturday announced a GDP growth target for 2022 that was the lowest in 30 years and yet still higher than what most analysts predicted. At the country’s largest annual legislative gathering, Premier Li Keqiang said the Chinese economy should expand “around 5.5%” this year. That’s in the upper range of most economists’ forecasts, and far higher than World Bank and International Monetary Fund expectations.
-From an economic standpoint, Putin chose the perfect time to invade. Oil prices are already high and have moved much higher, generating billions of dollars for the Russian economy. Agricultural commodity prices, another major export of the former Soviet Union, have also surged. Europe rendered itself even more beholden to Russia for energy after cutting fossil fuels and shutting down nuclear power. In addition, the U.S. is no longer energy self-sufficient, and we even import oil from Russia. This leaves one wondering whether Putin can exact more-serious sanctions on the West that it can on him.

Commodities:
Palladium prices have climbed to their highest level on record as global sanctions on Russia threaten to disrupt the flow of output from one of the world’s largest producers of the metal. Prices for the precious and industrial metal have soared since the start of Russia’s incursion into Ukraine, with a February gain of more than 6%, up a third month in a row. Palladium settled at $2,981.90/oz. on March 4, its highest based on records going back to November 1984.

Streetwise:
Jack Hough looks at the price of crude oil, and ponders how high it might go in view of Russia’s invasion of Ukraine. The US buys Russian oil for technical reasons that are related to grade, refining profitability, and geography. One of them is that although Houston can launch men to the moon, it can’t easily ship crude to Los Angeles or New York because of maritime restrictions in the Jones Act, passed in the petro predawn of 1920. There’s a thoughtful case for allowing Russian oil imports that has to do with avoiding economic self-harm, and a more satisfying case for banning them that involves unprintable words and impolite gestures. It could go either way.

>>> Weekend Papers Summary

Weekend Papers Summary

NEW YORK TIMES
-Officials said that Russia and Ukraine had agreed to a limited cease-fire in Mariupol, but Ukrainian officials said that Russia was not upholding it.
President Vladimir Putin likened sanctions on Russia to a “declaration of war” and threatened Ukraine with the loss of its statehood.
-The West marshaled a stunning show of unity against Russia in a few frantic days, the West threw out the playbook it used for decades against the Kremlin and isolated Russia with unparalleled sanctions and penalties.
-Across the United States, small groups of military veterans are hungry for what they see as a righteous fight to defend freedom against an autocratic aggressor.
-The US and its allies discuss security of Ukraine’s leaders amid fears for Zelensky’s safety. Concerns about the line of succession were prompted in part because President Volodymyr Zelensky insists he will not be evacuated.
-A Russian news agency identified the Russian basketball League Phoenix Mercury center Brittney Griner as the American women’s basketball player detained in Russia after customs officials said they found hashish oil in her luggage at Moscow Sheremetyevo Airport.
-President Volodymyr Zelensky of Ukraine spoke with more than 300 members of Congress on Saturday, imploring them to ban the importation of Russian crude oil and to send more jets to his country, according to lawmakers on the call.
-“Benevolent sexism: Many pregnant women cannot work remotely, and those who do tend to feel lucky. Not going into a physical office means getting to skip a lot of awkward small talk (“So, will you be breastfeeding?”) and unexpected belly rubs. It also means a chance to avoid a certain kind of seemingly well-intentioned but unwanted help from colleagues — like preemptively lightened workloads — that can make women feel suddenly less capable. This behavior is known as benevolent sexism in academic literature.”
-China calls for heavy government spending and lending, as its leaders seek to project confidence in the face of global uncertainty over the pandemic and war in Ukraine.
Critics accuse the ATF’s acting director, Marvin Richardson, of cozying up to gun industry leaders at a convention in Las Vegas and delaying enacting rules that would outlaw so-called ghost guns.
- Senior White House officials designing the strategy to confront Russia have begun quietly debating a new concern: that the avalanche of sanctions directed at Moscow, which have gained speed faster than they imagined, is cornering President Putin and may prompt him to lash out, perhaps expanding the conflict beyond Ukraine.

THE FINANCIAL TIMES
-Ukraine called off an attempt to evacuate civilians from the besieged city of Mariupol after accusing Russia of violating a ceasefire and attacking the escape route for hundreds of thousands of beleaguered civilians.
-Companies are finding it increasingly hard to extract staff from Ukraine and Russia, as President Vladimir Putin’s invasion cut travel routes. With more commercial flights being cancelled, companies have turned to private security groups.
-Russia gained ground in southern Ukraine and seized more cities while signs that its forces were moving west sparked concerns they could be preparing for an attack on the critical Black Sea port of Odesa.
-Over the past week, western nations have introduced unprecedented financial sanctions on Russia, including on the country’s central bank, which have the potential to decimate its economy. Experts say they amount to full-scale financial warfare of an unheard-of nature and scope.
-Ukrainian foreign minister Dmytro Kuleba said on Saturday that Chinese diplomacy will end the war between Russia and Ukraine. Kuleba told an online press conference that he had received assurances from Beijing that “China is interested in stopping this war”. He spoke to Wang Yi, Chinese foreign minister, “a couple of days ago”, he said. The two did talk on March 1 and it was not immediately clear if they had a second conversation.
-President Volodymyr Zelensky has urged Washington to provide Poland and other eastern European allies with American aircraft that would then enable those countries to send Russian-made military planes to Ukraine.
-The unprecedented economic sanctions imposed on Russia in response to its invasion of Ukraine represented a calculated risk. The US, the EU and other governments moved in the face of warnings that their actions could foul up the short-term lending markets that underpin global finance.
-As the Russian Central Bank Governor Elvira Nabiullina steered Russia through a series of economic shocks over the past few years, investors anxiously watched her rotating collection of brooches for macroeconomic policy clues. A hawk signified a return to key interest rate hikes; a rain cloud meant she wanted to dampen inflation expectations.
-Russia is seeking written guarantees from Washington that US sanctions imposed on the country do not impede its ability to trade with Iran, a move that risks complicating efforts to revive the 2015 JCPOA nuclear accord.
-Another exceptionally strong US jobs report has kept the Federal Reserve on track to deliver a series of interest rate increases this year even as moderating wage growth mitigates the immediate need for aggressive tightening, according to economists.
-Western Luxury products makers such as Hermès, Chanel, and Cartier-owner Richemont and LVMH, as well as tech giants such as Apple, Microsoft, Ikea and Nike have temporarily suspended operations in Russia, citing operational challenges and concerns about staff as the fallout from the invasion of Ukraine spreads.
-China unveiled a growth target of about 5.5%, its lowest in three decades, as Beijing seeks to buttress its economy after a sharp loss of momentum in 2021 and fallout from Russia’s invasion of Ukraine.
-Canada, the US and the UK want Aleksei Mozhin, Russia’s representative at the IMF, to relinquish or be stripped of his title as honorary head of the executive board of the multilateral lender, due to the invasion of Ukraine.
-Four executives of SMBC Nikko Securities have been arrested for alleged market manipulation after prosecutors raided the company’s Tokyo headquarters and the individuals’ homes.

THE NEW YORK POST
-Russian President Vladimir Putin warned that the imposition of a NATO-backed no-fly zone and economic sanctions over his invasion of Ukraine are tantamount to declaring war against the Motherland. “That very second, we will view them as participants of the military conflict, and it would not matter what members they are.”
-China’s leader Xi Jinping is following the fighting in Ukraine and the world’s reaction closely. “There is no doubt Xi hopes that Russian President Vladimir Putin succeeds in taking the former Soviet country. After all, Xi hopes one day soon to launch his own “special military action” against the island of Taiwan.”
- Russian-backed grocery app Buyk abruptly furloughed the vast majority of its staff on Friday as sanctions against Russia left the company without funding. Buyk, which was founded by two Russians and has sizable operations in New York and Chicago, is furloughing about 98% of its employees until it can secure funding from American sources, said CEO James Walker.

Business Of Fashion : Farfetch Faces Tax Scrutiny in Italy

Farfetch Faces Tax Scrutiny in Italy
The online luxury giant said Italian authorities were ‘reviewing’ transfer pricing at an unnamed subsidiary. Its Italian holdings include Off-White operator New Guards Group, Palm Angels and Farfetch Italia.

Luxury e-commerce and streetwear giant Farfetch is facing a “review” by Italian tax authorities at one of its subsidiaries in the country, the company disclosed in its annual report Friday.

Farfetch’s Italian subsidiaries include New Guards Group, the luxury streetwear outfit that operates Off-White and Ambush, as well as Farfetch’s Italia division and Palm Angels, the label in which it acquired a controlling stake last November.

”Italian authorities are currently reviewing the activities of one of our subsidiaries for the years 2015 through 2020, including whether that subsidiary had a permanent establishment in Italy and our transfer pricing policies,” Farfetch said in the report.

Both New Guards Group and Palm Angels were founded in 2015. Farfetch declined to comment on which unit or units were concerned by the inquiry.

Italian authorities have cracked down in recent years on fashion companies who allegedly reduced their taxes and social charges by paying salaries and funnelling revenues through lower-tax jurisdictions.

In 2019, Kering paid $1.5 billion in a settlement over its alleged use of a logistics centre in Ticino, Switzerland, to reduce the taxes of its flagship brand Gucci. Dolce & Gabbana faced a drawn-out court battle over payments to a Luxembourg subsidiary, while Bulgari faced an inquiry over its use of an Irish subsidiary in the years leading up to its sale to LVMH.

Kering and Tom Ford are among the brands to have ceased operations in the low-tax Swiss canton of Ticino, long dubbed “Fashion Valley.”

European governments have recently made a priority of pushing tech giants to pay more taxes locally as well.

WWD : Chanel Again Raises Prices of Classic Handbags

Chanel Again Raises Prices of Classic Handbags
The French luxury brand said the increases in several countries were due to its price harmonization strategy.

PARIS — Bad news for Chanel customers: the French luxury house is raising prices again.

Bruno Pavlovsky, president of fashion and president of Chanel SAS, said the brand was hiking the cost of its four core handbag styles and spring ready-to-wear collection by 6 percent in the euro zone, 5 percent in the U.K., 8 percent in Japan, 5 percent in South Korea and 2 percent in Hong Kong, effective on Thursday.

Its classic 11.12 bag, for instance, now retails for 8,250 euros, compared with 7,800 euros previously. The costs of the Boy, 2.55 and Chanel 19 bags have also gone up.

Prices in the U.S. and China remain unchanged. This marks the sixth time that Chanel has increased its prices since the start of the coronavirus pandemic, and the second time in the space of six months, following an adjustment last November.

Pavlovsky also confirmed a PurseBlog report that it separately raised prices for the Coco Handle, Business Affinity and Boy Bag With Handle handbags on Jan. 15.

Conscious of the growingly vocal discontent among purse aficionados, Pavlovsky spoke to WWD to clarify the brand’s strategy. Chanel introduced a price harmonization policy in 2015 that is designed to guarantee that differences between the retail prices of its products do not vary by more than 10 percent from region to region.

“Our objective is to offer the same price everywhere to limit the parallel market. It’s an important signal to our customers, because it’s a way of engaging with them in an honest way. Nowadays, there is no reason to penalize a Chinese customer versus an American customer. It’s normal that they should pay the same price for the same product,” he said.

“That’s our choice as a brand. But what that means is that if we let prices slip between Europe, for example, and Asia, we know that we are directly or indirectly feeding a parallel market, which is not very satisfactory for our point of view with regard to our local customers,” he added.

While the brand initially lowered prices in China when the policy was introduced, in most cases, it has resulted in price increases, which have snowballed since COVID-19 hit. “We raise our prices more often because of this price harmonization policy. Having said that, it’s not the only reason,” Pavlovsky said.

Since the pandemic began, Chanel has accelerated the pace of increases due partly to rising production costs, and partly to positioning. However, he denied the widespread interpretation that the brand was driving the cost of its handbags upward in order to align itself with rival Hermès’ Birkin bag.

“Hermès bags are great, but I think our bags are very different. The construction of our bags is different, as are the materials. Even the way you wear them is different. So yes, we do compete with Hermès, but we are not in competition on a specific handbag,” he said.

“You can’t be the most luxurious, the most desirable brand and not have a price positioning that is high on the market today,” he argued.

Indeed, pricing power is a key attribute of luxury goods, and Europe’s biggest players have been reporting robust business.

Dior said it pushed through an average 8 percent increase worldwide on Jan. 18, while last month, Louis Vuitton was reported to have hiked the retail cost of its signature bags by 10 percent on average to reflect inflation, and rising production, raw material and transportation costs.

However, in what appeared to be a veiled dig at Chanel, LVMH Moët Hennessy Louis Vuitton chairman and chief executive officer Bernard Arnault in January cautioned against excessive price rises.

“We don’t want to give the impression, like some brands do, of heading toward prices that no longer match the economic reality of the price of the products. You have to be reasonable. We try to be reasonable so that our customers feel that they’re dealing with brands that offer them something realistic, and not something that is artificially inflated, even if the products are very beautiful,” he said.

Pavlovsky said Chanel has invested heavily in improving the quality of its handbags and making sure they meet its environmental responsibility standards. Its seven tanneries, located in France, Spain and Italy, are increasingly using chromium-free and waterless methods.

“Today, we’re investing in our bags to make them even more beautiful, using the finest materials and the latest technologies with the aim of ensuring that these bags are aligned with the CSR transformation that we want them to reflect,” he said. “We’re noticeably increasing the perceived quality of these bags.”

He added that Chanel last year increased the warranty for its handbags to five years from two years and created the “Chanel et moi” program, which offers bag maintenance and repairs.

“It’s not just a price increase for the sake of a price increase, or because of a race against our competitors. It’s because we have a valuable product and this valuable product requires real commitments and real investments to guarantee its existence for the next 20 years,” he said.