US Competition Watchdog Sues to Block Tapestry-Capri Merger

FILE PHOTO: People walk past a store of the Coach luxury fashion retailer in a shopping district in Beijing, China, October 19, 2022. REUTERS/Thomas Peter/File Photo

The US Federal Trade Commission (FTC) has filed a lawsuit aiming to halt fashion accessory giant Tapestry’s $8.5 billion acquisition of rival Capri. Tapestry, known for its ownership of handbag brands like Coach and Kate Spade, sought to merge with Capri, which boasts brands like Michael Kors.

According to the FTC, allowing the merger would eliminate direct competition between Tapestry’s and Capri’s brands. Tapestry pushed back, asserting that the FTC misunderstands the market and consumer behavior.

The combined entity would employ approximately 33,000 people globally. However, the FTC raised concerns that the merger could lead to reduced wages and benefits for employees.

Tapestry’s brands, Coach and Kate Spade, offer what the company describes as “accessible luxury” handbags, providing quality products crafted from leather at affordable prices. Tapestry’s bid for Capri, announced in August, aimed to create a US fashion powerhouse capable of challenging larger European rivals like Chanel, Hermes, and LVMH, the parent company of Louis Vuitton.

After requesting additional information on the deal in November, the FTC decided to take legal action, arguing that the merger would grant Tapestry a dominant position in the market. However, Tapestry countered, stating that the FTC is disregarding the realities of the rapidly expanding global luxury industry.

Capri, which also owns Versace and Jimmy Choo, maintained that the merger would not stifle competition, emphasising the fiercely competitive nature of the luxury market.

While it’s uncommon for US regulators to block high-end fashion mergers, recent guidelines issued in December aim to foster fair and competitive markets. Leveraging these guidelines, the FTC contends that the Tapestry-Capri merger could negatively impact hourly workers by diminishing competition for employees and potentially reducing wages.

Despite receiving regulatory clearance from the European Union and Japan earlier this month, the companies must finalise the deal by August 10th.

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