FTC Seeks to Block $8.5 Billion Tapestry-Capri Merger, Citing Competition Concerns

The U.S. Federal Trade Commission (FTC) is set to ask a New York federal judge to halt the $8.5 billion merger between handbag makers Tapestry and Capri Holdings, arguing that the deal would stifle competition in the market for “accessible luxury” goods. The trial, beginning Monday, comes after months of regulatory scrutiny over the merger, which was initially announced in August 2023.

According to Reuters, the FTC contends that the merger would significantly reduce direct competition between Tapestry’s Coach and Kate Spade brands and Capri’s Michael Kors brand. This competition, the FTC argues, has led to better pricing, discounts, and promotions for consumers, as well as improved wages and benefits for employees. The agency’s April lawsuit claims the merger would give Tapestry a dominant position in the “accessible luxury” market, a term coined by the company to describe high-quality handbags at more affordable prices.

Tapestry, however, disputes the FTC’s claims. Per Reuters, the company argues that the regulator’s analysis misrepresents the nature of the handbag market and consumer behavior. Tapestry maintains that “accessible luxury” is more of a marketing concept rather than a distinct market category, and that the U.S. handbag industry is highly competitive, with numerous players and low barriers to entry. The company also points to shifting consumer tastes, which further complicate market dynamics.

Read more: New York Civic Group Defends Fashion Merger Against FTC’s Antitrust Action

The FTC has made a concerted effort to block several high-profile mergers in recent months. In addition to its challenge against Tapestry and Capri, the regulator is currently seeking to prevent supermarket chain Kroger from acquiring Albertsons, and is fighting to block mattress manufacturer Tempur Sealy International’s $4 billion purchase of Mattress Firm. These cases have kept the agency’s schedule packed as it intensifies its antitrust enforcement.

The trial, presided over by District Judge Jennifer Rochon of the Southern District of New York, is expected to last about a week and a half. According to Reuters, both sides are likely to call key witnesses, including former Macy’s CEO Jeff Gennette, who will likely testify on the diversity of handbag options available to consumers. The FTC, on the other hand, plans to present evidence demonstrating the physical similarities between Tapestry and Capri’s products and how U.S. shoppers respond to price shifts.

The U.S. trial follows the merger’s clearance by regulators in Japan and the European Union earlier in 2023, indicating that global antitrust authorities have taken varied approaches to the deal.

Source: Reuters