Kylie Cosmetics: Coty’s Controversial Billion-Dollar Deal
In 2020, beauty giant Coty acquired a 51% majority stake in Kylie Cosmetics, the company founded by the celebrity Kylie Jenner in 2015, in a deal reportedly valued at $1.2 billion. However, this acquisition was not without controversy. Subsequent investigations revealed that the brand’s financials had been significantly overstated, leading to claims of misrepresentation and even false tax returns. This controversy resulted in Forbes reassessing Jenner’s net worth, concluding she was no longer a billionaire.
Legal Complications from the Kylie Cosmetics Deal:
The acquisition sparked legal issues, primarily concerning trade secrets and breach of contract:
- Trade Secrets: Seed Beauty, the manufacturer for Kylie Cosmetics, sued Coty and King Kylie (Jenner’s company), alleging that Kylie Cosmetics shared Seed Beauty’s “pioneering and proprietary digital-first business model” trade secrets with Coty, and that Coty knowingly accepted them.
- Breach of Contract: Seed Beauty further claimed that King Kylie breached its contract by partnering with Coty for color cosmetics development or manufacturing, potentially using Seed Beauty’s trade secrets.
- Injunctions: A temporary injunction was obtained by Seed Beauty to prevent the release of any trade secret information by Kylie Cosmetics and Coty.
- Contract Interpretation: Disputes arose over how contract terms, including the definition of “trade secrets,” should be interpreted.
- Other Legal Matters: The deal also saw a domain name dispute over “kyliecosmetics.net” and a lawsuit filed by a model for unpaid photoshoot fees.
These complications have reportedly led Kylie Jenner to explore potentially buying back her 51% stake from Coty Inc. Similarly, her sister Kim Kardashian is also reportedly in talks to buy back Coty’s 20% stake in her SKKN by Kim skincare line, with both women reportedly expressing frustration over Coty’s management of their brands.
Who Could Be Next? The Future of Celebrity Beauty Acquisitions
The trend of celebrity beauty brands attracting major investment or acquisition continues to reshape the industry. Several other prominent brands, while not yet acquired, could be prime candidates for future deals:
- Haus Labs (Lady Gaga): After an initial slow start with Amazon, Haus Labs successfully revamped in 2022 with a new partnership with Sephora, projected to reach $45-50 million in retail sales post-relaunch.
- Rare Beauty (Selena Gomez): Founded in 2019, Rare Beauty saw yearly sales of $400 million in 2024. While reports of Gomez hiring investment bankers to evaluate options surfaced, a formal sale process had not begun.
- Cécred (Beyoncé Knowles-Carter): Launched in 2024, Beyoncé’s hair care brand quickly secured Ulta Beauty as its largest retail partner, integrating products into over 1,400 locations and salons.
- Blake Brown (Blake Lively): Blake Lively’s hair care brand, launched at Target in 2024, marked the retailer’s largest hair care launch, generating $16 million in media impact value within a week.
- Lemme (Kourtney Kardashian Barker): Co-founded in 2022, this wellness supplement brand has expanded its reach through online sales, Amazon, Ulta Beauty, and a partnership with Target in early 2024 to manage demand.
- Goop (Gwyneth Paltrow): Evolving from a newsletter in 2008 to a major lifestyle brand, Goop Beauty launched in 2016. After restructuring in 2023 to focus on fashion, beauty, and food, Goop Beauty saw a 40% revenue increase last year.
- R.E.M. Beauty (Ariana Grande): Initially launched through Forma Brands in 2021, Ariana Grande successfully bought back her brand and remaining inventory for $15 million in 2023 after the former licensee filed for bankruptcy. This highlights a different path—reacquiring control—that some celebrities might pursue.
The beauty market has experienced a huge influx of celebrity brands and when successful, the resulting deals can be extremely lucrative. The opportunities of these deals are paired with legal complexities spanning intellectual property, competition, and contract law. From ensuring valid trademark transfers and navigating antitrust scrutiny to meticulously drafting purchase agreements and addressing potential post-acquisition disputes, legal counsel plays an indispensable role. As more celebrity-founded brands mature, understanding these legal considerations will be key for both buyers and sellers in future beauty industry transactions.
If you would like to learn more about legal implications of business acquisitions, do not hesitate to contact one of our experienced business attorneys at EPGD Business Law, with office in Miami, FL. Call us at (786) 837-6787 or email us to schedule a consultation.
