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Editor’s note: This story has been updated with comment.
The Federal Trade Commission has won a lawsuit blocking the planned merger of Tapestry Inc. and Capri Holdings Inc., an FTC spokesperson confirmed to Fashion Dive on Thursday.
Tapestry and Capri Holdings plan to appeal, the companies said in separate press releases after the decision.
The $8.5 billion merger would combine Tapestry’s Coach, Kate Spade and Stuart Weitzman brands with Capri’s Michael Kors, Versace and Jimmy Choo brands. The deal would have created one of America’s largest luxury conglomerates after LVMH.
In April, the Federal Trade Commission accused Tapestry of anticompetitive conduct, arguing that the deal would give Tapestry “a dominant share of the ‘accessible luxury’ handbag market.” A lawsuit was filed seeking an injunction.
Tapestry said in a statement that the decision was disappointing and “incorrect in law and fact.”
“Tapestry and Capri operate in an industry that is highly competitive, dynamic, constantly expanding and highly fragmented among both existing players and new entrants,” Tapestry said. “We continue to believe that this transaction is pro-competitive and pro-consumer as we face competitive pressures from both lower- and higher-priced products.”
But Wyatt Foer, an antitrust attorney at Schinder Kantor Lerner, called the decision “a clear and unequivocal victory for the FTC.”
“Ultimately, the court does not seem to think this is a significant issue,” Foer said in an email to Fashion Dive.
The decision primarily focused on defining the “accessible luxury” handbag market, a term the FTC said was coined by Tapestry.
“This is another ‘established theory’ decision,” Fore said. “The court found that the challenged horizontal merger increased concentration in the relevant market, sufficient to warrant a presumption of illegality, and the merging parties were unable to rebut that presumption. This is as simple a legal theory as a Section 7 case could be. Although the FTC’s complaint offered several additional theories, including the exclusion of direct confrontation, the court applied the most obvious theory. I didn’t really approach them.”
In Thursday’s ruling, the court rejected Tapestry and Capri’s argument that accessible luxury handbags are a discretionary product, saying consumers can choose whether to purchase them.
“I was surprised to see the merging parties make this argument, but I wouldn’t be surprised if the court quickly rejected it,” Fore said.
In a statement to Fashion Dive following the decision, Henry Liu, director of the FTC’s Bureau of Competition, said the decision is a victory for consumers seeking access to affordable, high-quality handbags. said.
“These bags are products that millions of people rely on throughout their daily lives,” Liu said. “This decision ensures that Tapestry and Capri will continue to compete directly for the benefit of the American people.”
David Swartz, senior equity analyst at Morningstar Research Services, said in an email that even if the appeal is heard by the February 2025 deadline, the judge will reject Tapestry and Capri’s claims. As a result, the acquisition is unlikely to be completed.
“The potential end of the merger is extremely disappointing, especially for Capri, but it is not fatal,” Swartz said. “Michael Kors, although struggling, is still a major handbag brand, and Versace and Jimmy Choo have potential. From a Tapestry perspective, this has been a long and expensive battle, but Coach’s It’s in good shape. We think Michael Kors can be repaired, so from a Tapestry perspective we’re more positive about this merger than many investors and analysts.”
But Swartz said if the Tapestry sale doesn’t go through, Capri may look for other buyers for its brands.
“Michael Kors could be attractive to private equity buyers, while Versace and Jimmy Choo will attract interest from European luxury companies,” Swartz said.
