The Federal Trade Commission filed a lawsuit Monday to block Tapestry’s $8.5 billion acquisition of Capri, a blockbuster fashion partnership that would bring together Coach, Kate Spade, Michael Kors and Versace.
The lawsuit is a rare move by the agency to block a deal in the fashion industry, given that the sector does not suffer from a lack of competition. During her nearly three years as FTC Chair, Lina Khan prioritized the power grab for big business across every industry. The agency moved to block the supermarket merger between Kroger and Albertsons, Meta’s acquisition of virtual reality startup Within and Microsoft’s bid for gaming giant Activision.
The results have been mixed: The FTC failed to block the Microsoft deal and the Meta acquisition, both of which closed last year.
“Aiming to become a serial acquirer, Tapestry seeks to acquire Capri to further solidify its strong position in the fashion industry,” Henry Liu, director of the FTC’s Bureau of Competition, said in a statement.
At the F.TC’s focus are “accessible luxury” accessories – an industry term for the lowest-priced products sold by Coach, Kate Spade and Michael Kors. The agency said tens of millions of Americans could end up paying more for these items because the combined company would no longer have an incentive to compete on price.
“This deal threatens to deprive consumers of competition for affordable handbags, while hourly workers risk losing the benefits of higher pay and more favorable working conditions,” Mr. Liu said.
A classic bag from Michael Kors, a Capri brand, like a medium Marilyn logo tote bag costs $228. Tapestry’s similar Coach Willow Tote Bag costs $350.
“It is clear to us that they do not understand how consumers shop today and they do not understand the dynamics of a market without barriers to entry and a constant influx of new competitors,” said Joanne Crevoiserat, general director of Tapestry. in an interview Monday.
Ms. Crevoisrat added that consumers can buy bags at different retailers and on many websites. “Type in ‘black tote,’ you’ll see thousands of choices and hundreds of brands at any price point,” she said.
She added that Tapestry remained focused on closing the deal this year and was prepared to defend it in court.
Capri said in a separate statement that he also disagreed with the FTC’s decision and planned to defend the deal in court. The company said Americans have hundreds of choices when shopping for handbags.
“Market realities, which the government ignores in its challenge, overwhelmingly demonstrate that this transaction will not limit, reduce or constrain competition,” the statement said.
The fashion deal, announced in August, would create an American luxury conglomerate intended to compete with European powerhouses such as Louis Vuitton’s parent LVMH and Kering, the owner of Gucci. But that would pale in comparison to the size: Based on 2023 figures, Capri, which owns Versace and Jimmy Choo in addition to Michael Kors, and Tapestry, owner of Kate Spade and Stuart Weitzman as well as Coach, together hold approximately $12 billion in assets. income. LVMH had sales of 86.2 billion euros, or approximately $92.2 billion, last year.
The luxury market has seen a slowdown in sales after benefiting from a pandemic surge driven by shoppers’ spending on handbags and other accessories. In February, Capri announced that its quarterly revenue fell 5.6 percent. The same month, Tapestry said it had book record turnover for the quarter after a good holiday.
The FTC has been reviewing the deal for months, even though regulators in the European Union and Japan have approved it. Traders are increasingly betting against the likelihood of the project going ahead: Capri’s shares have fallen 25 percent this year, while Tapestry’s have gained 6 percent. (Typically, the shares of the takeover target win while the shares of the buyer fail.)
The FTC said that, based on documents produced by Tapestry, its acquisition of Capri likely would not be its last and that this deal could give it leverage for future transactions.
“This is the deal that makes sense for Tapestry,” Ms. Crevoiserat said. “That’s the transaction we’re focused on.”