The ghost-share plan soon came in handy. On February 18, as Arnault attempted to call a special shareholders' meeting to force De Sole to let him name a director to Gucci's board, De Sole's board implemented its poison pill. Arnault immediately challenged it in Dutch court.

To hear Arnault tell it, the whole dispute with De Sole was just a big misunderstanding. "We never understood why De Sole was so hostile. We don't want to buy or invest in a brand if we can't bring something to increase its profitability," Arnault says. "Just look at Gucci versus Louis Vuitton. Vuitton's profit margins are double Gucci's -- 48 percent against 24 percent. The reason is clear, and it is size. We could help move Gucci in that direction."

His company's sheer market power, Arnault argues, enables it to push around malls, department stores, landlords, suppliers, and even the media where his brands advertise. "When we look to locate in a shopping mall, there is a phenomenon where we define which mall is a luxury mall, because they need all our brands," Arnault says. "We are the largest luxury-goods advertiser in the world. I cannot tell you the exact savings -- I cannot give away my secrets -- but it is obvious that the more you buy, the better you get."

As a result, says Arnault, LVMH can economize on everything that creates a brand's aura of style, luxury, and prestige besides the look itself. Many LVMH brands have for a long time sold their wares primarily out of their own shops. Controlling distribution gives the company complete control of how the goods are presented and the ability to ensure that they are never, ever marked down. And LVMH's size gives it considerable leverage in negotiating over presentation for brands sold in department stores. "We know how important it is to be in control of the retail distribution around the globe," Arnault says. "When you go wholesale, as Gucci still does, you risk parallel sales and markdowns that hurt the brand. At Louis Vuitton, we never have a sale."

But how much do all these synergies really help? "That is debatable," says Cedric Magnelia, an analyst at Credit Suisse First Boston in London. He says the real savings on advertising, real estate, and dealing with retailers remain to be proven.

"Comparing Gucci with Vuitton is a clownish argument!" says De Sole. "Our leather goods are more profitable than theirs. But we sell ready-to-wear, which is less profitable, and we use it to enhance the look and make it very exciting. That is how we have grown the company so fast. In 1995, Vuitton was four times Gucci's size. Now we are the same."

Both brands spend a roughly equal portion of their revenue on advertising -- about 5 percent. And De Sole points out that Gucci has no trouble getting all the press the company needs; the fashion magazines can't get enough of Tom Ford right now. "We have been on the cover of 24 of the most important fashion magazines in the last few months," he says.

As far as real estate, "I wouldn't say LVMH has a huge advantage," says Robert Futterman, a New York real-estate broker who specializes in luxury boutiques. "A landlord may say, 'We will give you a prime spot in our Short Hills mall if you go into our Florida mall,' but Arnault is going to want to cherry-pick locations that suit his brand's image. It will be a long time before LVMH has as much clout as tenant as the Gap or Barnes & Noble."

In some ways, exactly what makes fashion and luxury products appealing to sell limits the potential in savings on cost. Economies of scale are mainly important in commodity businesses, like making blue jeans or television sets, where low prices sway shoppers. "With products like Gucci's, people pay an exceedingly high price for the perceived value in owning something that has a timeless design," says Sewall Hodges, a Scudder Kemper Investments portfolio manager whose fund owns Gucci stock.