FTC Sues To Stop $8.5 Billion Luxury Brand Handbag Deal – Antitrust, EU Competition

Bag Maker Says Commission Just Doesn’t Get the
Industry

The Federal Trade Commission (FTC) filed an administrative
complaint to block Tapestry, Inc.’s acquisition of Capri
Holdings Limited, a deal valued at $8.5 billion. The proposed
merger would combine three major fashion brands: Coach and Kate
Spade from Tapestry, and Michael Kors from Capri.

The FTC alleges that the deal would stifle competition in the
“accessible luxury” handbag market, a term coined by
Tapestry to describe high-quality leather handbags at affordable
prices. The agency argues that by eliminating direct competition
between these brands, consumers could face higher prices, fewer
choices, and reduced innovation. The Commission also alleges the
deal would adversely impact hourly workers who could lose the
benefits of higher wages and more favorable workplace conditions
(In the Matter of Tapestry, Inc. and Capri Holdings
Ltd., FTC, No. 9429).

Head-to-Head Competition on Hold

The FTC’s complaint highlights the intense competition
between Tapestry and Capri, particularly between their handbag
brands – Coach, Kate Spade, and Michael Kors. These brands
reportedly monitor each other’s pricing, promotions, and design
strategies, leading to a more competitive landscape for
consumers.

The FTC argues that the merger would eliminate this
“head-to-head competition” on several key factors,
including:

• Price: Consumers might see higher handbag
  prices due to reduced competition.




• Discounts and Promotions: Fewer incentives and
  promotions could be offered with a combined market leader.




• Innovation: Reduced pressure to develop new
  and exciting designs could stifle innovation in the handbag
  market.

Market Domination and Serial Acquisitions

The FTC also raises concerns about Tapestry’s broader
acquisition strategy of absorbing other brands, suggesting the
Capri deal is part of a larger plan to dominate the industry.
Allowing Tapestry to continue as a serial acquirer could not only
harm competition but make it more difficult for new brands to enter
the market and compete effectively. “Entry and repositioning
to counteract the Proposed Acquisition’s anticompetitive
effects is not likely, timely, or sufficient. Coach, Kate Spade,
and Michael Kors are household names in the United States, scoring
as some of the most recognized brands in the fashion industry in
consumer research studies. These types of brands do not appear
overnight, and more importantly, are not easily scaled ….”
the complaint reads.

Potential Impact on Employees

The lawsuit also considers the potential impact on employees.
With a combined workforce of roughly 33,000, the FTC suggests that
the merger could lead to job losses or reduced wages and benefits
for employees.

Tapestry’s Response

Tapestry responded to the suit via press statement: “There
is no question that this is a pro-competitive, pro-consumer deal
and that the FTC fundamentally misunderstands both the marketplace
and the way in which consumers shop. Tapestry and Capri operate in
an intensely competitive and highly fragmented industry alongside
hundreds of rival brands, including both established players and
new entrants.”

The company says it competes for customers who are
“cross-shopping a wide range of channels and brands along a
vast pricing spectrum” when making buying decisions. “The
reality is that consumers have a host of choices when shopping for
luxury handbags and accessories, footwear, and apparel, and they
are exercising them.” Tapestry and Capri face competitive
pressures from both lower- and higher-priced products, the
statement continues, adding that the Commission ignores the reality
of the “dynamic and expanding $200 billion global luxury
industry.”

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