Founded by Portuguese businessman José Neves, Farfetch is one of the leading online retailers in the luxury fashion industry. Today, the online platform offers access to over 2,900 brands, including Gucci, Dolce & Gabbana, Manolo Blahnik, Fendi, and Off-White, and delivers products to 190 countries worldwide. In September 2018, Farfetch became a publicly traded company, with its shares available on the New York Stock Exchange. Anna Zabrotskaya discussed the impact of the IPO on the online giant's business processes with Alexey Myagchenkov, Head of Legal Department at Farfetch in the Middle East and CIS.
Farfetch was founded in 2008 by José Neves, who started his career creating IT products for the fashion industry. Noticing that boutiques are very poorly represented on the Internet, and customers are increasingly going online, he decided to launch the Farfetch platform, which would work on a marketplace model, serve as a platform for boutiques and receive a percentage of sales. Last year, the global luxury goods market amounted to $307 billion in monetary terms, and it is projected to reach $446 billion by 2025.
Farfetch was founded in 2008 by José Neves, who started his career creating IT products for the fashion industry. Noticing that boutiques are very poorly represented on the Internet, and customers are increasingly going online, he decided to launch the Farfetch platform, which would work on a marketplace model, serve as a platform for boutiques and receive a percentage of sales. Last year, the global luxury goods market amounted to $307 billion in monetary terms, and it is projected to reach $446 billion by 2025.
1. Please tell us what the IPO means for the company. Do you consider this event to be positive?
Farfetch is one of the pioneers of online luxury fashion, and the IPO is of great importance to the company. Over the past 10 years, our team has come a long way, and this event is a logical step in its development. The company's transformation from a non-public company to a public company allows it to develop in accordance with our plans and the expectations of investors and partners.
2. How is the legal department organized at Farfetch: how many lawyers work in the Russian office?
Today, the company employs more than 3,000 people, 20 of them in the legal department. In total, Farfetch has 12 offices around the world. The legal department is primarily located in London, where the head office is located with the largest number of lawyers, as well as in Portugal, China, the UAE, and Russia. In addition to Russia, my area of responsibility includes the CIS and the Middle East.
3. Are there any divisions of lawyers into departments in the offices?
We do not have a strict division into departments: in terms of structure, we are more like a law firm with practices and areas of specialization, and in everything we do, there is a project approach. We do not have departments formed under a particular function. The company as a whole has a free structure, where titles do not have much importance, as in Germany or Russia. We certainly have levels/gradations of managers, but this is more for defining the area of responsibility of employees rather than for strict subordination. Most of the time, we use law firms in our projects, so our department is relatively small in terms of numbers. For example, there are only two of us in Russia, so it makes sense to outsource a significant portion of our legal work.
4. Does the company have any policies or procedures for selecting consultants?
Like any large company, we have certain procedures in place. However, going public does not necessarily require the use of procurement procedures. We have anti-corruption policies, code of conduct, and other policies that we must comply with, particularly when interacting with consultants.
5. How did the Russian legal department participate in the preparation for the IPO?
In Russia, Farfetch is represented by a branch that performs a supporting function. Here, the legal preparation for the IPO consisted of collecting information about the company's activities in Russia. My main work has always been (and still is) focused on the company's global compliance. I was responsible for developing, implementing, and automating the compliance program. In particular, before the IPO, we prepared a code of ethics, an anti-corruption policy, and an insider trading policy. Subsequently, all these documents were "localized" in the regions where the company has offices, including in Russia. We didn't have much work in this area, as Russian anti-corruption legislation generally follows global trends in this field and even resembles the anti-corruption laws of the United States and the United Kingdom.
6. How have the company's work processes changed since its IPO? What has been added to the legal department's work?
Any company that goes public follows a path of formalizing its processes. At the same time, there probably isn't anything significantly new in terms of the legal function in a public company compared to a non-public one. Non-public companies must comply with the same laws and have internal procedures. Today, compliance is no longer a rarity in such companies. In Russia, this primarily refers to anti-corruption regulations, including the Anti-Corruption Law, relevant instructions from the Ministry of Labor, etc.
7. It is possible that the company had anti-corruption provisions even before its IPO. Has there been any new developments in the compliance function?
When preparing for an IPO, we have been forecasting the company's life after this event. The innovations that come into effect when a company goes public are obviously related to the securities market and insider trading. This becomes new for the entire company, not just for the legal department.
8. How are such issues regulated at Farfetch?
They are regulated by the Insider Trading and Training Policies. When we were formulating our policies, we wanted people to read them. No matter how legally perfect a document may be, it is still quite complex for someone who is not a lawyer. We had a team of copywriters who "translated" the policies we created from legal language into "human" language. It went something like this: first, legal English, then plain English. Moreover, we have a team of English language specialists who make all our internal policies simple and understandable. In addition, the company has a specific "tone of voice" for its documents (farfetch tone of voice), which is familiar to its employees. However, this is not enough. If you want to make a specific policy effective, you need to extract the most important information from it, including all the DOs and DON'Ts, so that everyone knows what they can and cannot do. We presented this in a presentation, and for each policy, we developed a document in the company's corporate style that people are likely to refer to.
9. In this regard, I would like to inquire about the application of legal design, which is still a new approach for the Russian market, in your company.
In my opinion, the use of legal design is a natural development for the legal function. Until now, many legal departments in Russia (and beyond) have been perceived as experts who sit in an "ivory tower" and possess secret knowledge that is inaccessible and confusing to others. For me, legal design is definitely a necessary area in a company, as the task is not to write a detailed and beautiful policy on ten pages, which hardly anyone will read, but to ensure its actual implementation. You need to be able to convey the main idea to people.
Digitalization of policies, such as creating a special portal with their placement, a section of frequently asked questions and consultations on combating conflicts of interest and harassment, acceptable gifts and corporate expenses, perfectly serves this goal. On this portal, you can consult with a lawyer online about the practical application of policies. This is much more effective than simply issuing a document and sending it out via email.
We are also preparing to launch online training in the company in the form of internal training modules. This is not a new concept, and there are many ready-made solutions on the market, but we have developed the modules specifically for our company. It is crucial for us that the training aligns with our values and that the modules comply with our brand standards, including design, font, and language.
10. What project are you currently working on?
We are implementing a global compliance program, including the internal platform that I mentioned earlier. Self-assessment is crucial for compliance, as it allows for regular evaluation and revision of existing policies and processes. The creation of a database will facilitate self-improvement based on market best practices and trends.
11. Can you give an example of best practice in the field of compliance?
This is, of course, the automation of procedures. So, on our compliance platform, users can not only find the current versions of the main policies, but also ask a question, report a violation, declare a conflict of interest, report a gift received or made, undergo training, and certify familiarization with a particular policy with an electronic signature.
In addition, we have certain standards in compliance, such as various methods for resolving conflicts of interest. If I were a co-founder of a law firm participating in a tender for legal services to a company, I would have to disclose the existing conflict of interest and not participate in the procurement process or any subsequent issues related to paying the law firm's bills, etc.
There are certain standards regarding gifts and participation in events. For example, an employee is invited to an important conference with hotel accommodations, dinners, excursions, and more. However, after some time, the company begins working with the counterparty that organized and paid for this expensive event. Even if the two events are unrelated, the transaction may still be discredited to a certain extent, especially when the decision to work with the counterparty is made by an employee who participated in the conference. Compliance standards prevent not only violations, but even suspicions of their commission. The standards of cleanliness of companies' behavior are quite high today.
12. Do you have a verification procedure for the counterparties that you connect to the Farfetch platform?
Yes, we have procedures in place regarding connection to the platform and compliance with intellectual property rights and sustainability.
13. What do you do if your supplier commits a violation or becomes involved in a high-profile public conflict?
Most of our contracts are structured according to the principles of common law. This implies the existence of certain assurances and guarantees that allow termination of the contractual relationship with the partner in the event of a material violation. As for public scandals, we believe that this is a crisis of our supplier, and we try not to participate in it. We are always focused on the end consumer, carefully monitor feedback and suggestions, and try to avoid situations that may cause negative emotions among our customers.
Farfetch is one of the pioneers of online luxury fashion, and the IPO is of great importance to the company. Over the past 10 years, our team has come a long way, and this event is a logical step in its development. The company's transformation from a non-public company to a public company allows it to develop in accordance with our plans and the expectations of investors and partners.
2. How is the legal department organized at Farfetch: how many lawyers work in the Russian office?
Today, the company employs more than 3,000 people, 20 of them in the legal department. In total, Farfetch has 12 offices around the world. The legal department is primarily located in London, where the head office is located with the largest number of lawyers, as well as in Portugal, China, the UAE, and Russia. In addition to Russia, my area of responsibility includes the CIS and the Middle East.
3. Are there any divisions of lawyers into departments in the offices?
We do not have a strict division into departments: in terms of structure, we are more like a law firm with practices and areas of specialization, and in everything we do, there is a project approach. We do not have departments formed under a particular function. The company as a whole has a free structure, where titles do not have much importance, as in Germany or Russia. We certainly have levels/gradations of managers, but this is more for defining the area of responsibility of employees rather than for strict subordination. Most of the time, we use law firms in our projects, so our department is relatively small in terms of numbers. For example, there are only two of us in Russia, so it makes sense to outsource a significant portion of our legal work.
4. Does the company have any policies or procedures for selecting consultants?
Like any large company, we have certain procedures in place. However, going public does not necessarily require the use of procurement procedures. We have anti-corruption policies, code of conduct, and other policies that we must comply with, particularly when interacting with consultants.
5. How did the Russian legal department participate in the preparation for the IPO?
In Russia, Farfetch is represented by a branch that performs a supporting function. Here, the legal preparation for the IPO consisted of collecting information about the company's activities in Russia. My main work has always been (and still is) focused on the company's global compliance. I was responsible for developing, implementing, and automating the compliance program. In particular, before the IPO, we prepared a code of ethics, an anti-corruption policy, and an insider trading policy. Subsequently, all these documents were "localized" in the regions where the company has offices, including in Russia. We didn't have much work in this area, as Russian anti-corruption legislation generally follows global trends in this field and even resembles the anti-corruption laws of the United States and the United Kingdom.
6. How have the company's work processes changed since its IPO? What has been added to the legal department's work?
Any company that goes public follows a path of formalizing its processes. At the same time, there probably isn't anything significantly new in terms of the legal function in a public company compared to a non-public one. Non-public companies must comply with the same laws and have internal procedures. Today, compliance is no longer a rarity in such companies. In Russia, this primarily refers to anti-corruption regulations, including the Anti-Corruption Law, relevant instructions from the Ministry of Labor, etc.
7. It is possible that the company had anti-corruption provisions even before its IPO. Has there been any new developments in the compliance function?
When preparing for an IPO, we have been forecasting the company's life after this event. The innovations that come into effect when a company goes public are obviously related to the securities market and insider trading. This becomes new for the entire company, not just for the legal department.
8. How are such issues regulated at Farfetch?
They are regulated by the Insider Trading and Training Policies. When we were formulating our policies, we wanted people to read them. No matter how legally perfect a document may be, it is still quite complex for someone who is not a lawyer. We had a team of copywriters who "translated" the policies we created from legal language into "human" language. It went something like this: first, legal English, then plain English. Moreover, we have a team of English language specialists who make all our internal policies simple and understandable. In addition, the company has a specific "tone of voice" for its documents (farfetch tone of voice), which is familiar to its employees. However, this is not enough. If you want to make a specific policy effective, you need to extract the most important information from it, including all the DOs and DON'Ts, so that everyone knows what they can and cannot do. We presented this in a presentation, and for each policy, we developed a document in the company's corporate style that people are likely to refer to.
9. In this regard, I would like to inquire about the application of legal design, which is still a new approach for the Russian market, in your company.
In my opinion, the use of legal design is a natural development for the legal function. Until now, many legal departments in Russia (and beyond) have been perceived as experts who sit in an "ivory tower" and possess secret knowledge that is inaccessible and confusing to others. For me, legal design is definitely a necessary area in a company, as the task is not to write a detailed and beautiful policy on ten pages, which hardly anyone will read, but to ensure its actual implementation. You need to be able to convey the main idea to people.
Digitalization of policies, such as creating a special portal with their placement, a section of frequently asked questions and consultations on combating conflicts of interest and harassment, acceptable gifts and corporate expenses, perfectly serves this goal. On this portal, you can consult with a lawyer online about the practical application of policies. This is much more effective than simply issuing a document and sending it out via email.
We are also preparing to launch online training in the company in the form of internal training modules. This is not a new concept, and there are many ready-made solutions on the market, but we have developed the modules specifically for our company. It is crucial for us that the training aligns with our values and that the modules comply with our brand standards, including design, font, and language.
10. What project are you currently working on?
We are implementing a global compliance program, including the internal platform that I mentioned earlier. Self-assessment is crucial for compliance, as it allows for regular evaluation and revision of existing policies and processes. The creation of a database will facilitate self-improvement based on market best practices and trends.
11. Can you give an example of best practice in the field of compliance?
This is, of course, the automation of procedures. So, on our compliance platform, users can not only find the current versions of the main policies, but also ask a question, report a violation, declare a conflict of interest, report a gift received or made, undergo training, and certify familiarization with a particular policy with an electronic signature.
In addition, we have certain standards in compliance, such as various methods for resolving conflicts of interest. If I were a co-founder of a law firm participating in a tender for legal services to a company, I would have to disclose the existing conflict of interest and not participate in the procurement process or any subsequent issues related to paying the law firm's bills, etc.
There are certain standards regarding gifts and participation in events. For example, an employee is invited to an important conference with hotel accommodations, dinners, excursions, and more. However, after some time, the company begins working with the counterparty that organized and paid for this expensive event. Even if the two events are unrelated, the transaction may still be discredited to a certain extent, especially when the decision to work with the counterparty is made by an employee who participated in the conference. Compliance standards prevent not only violations, but even suspicions of their commission. The standards of cleanliness of companies' behavior are quite high today.
12. Do you have a verification procedure for the counterparties that you connect to the Farfetch platform?
Yes, we have procedures in place regarding connection to the platform and compliance with intellectual property rights and sustainability.
13. What do you do if your supplier commits a violation or becomes involved in a high-profile public conflict?
Most of our contracts are structured according to the principles of common law. This implies the existence of certain assurances and guarantees that allow termination of the contractual relationship with the partner in the event of a material violation. As for public scandals, we believe that this is a crisis of our supplier, and we try not to participate in it. We are always focused on the end consumer, carefully monitor feedback and suggestions, and try to avoid situations that may cause negative emotions among our customers.
The interview took place in the Moscow office of Farfetch on Stoleshnikov Lane. The company's offices around the world have identical meeting rooms.
- Source: farfetch.com