US Court Blocks Tapestry’s $8.5 Billion Acquisition of Capri, Marking FTC Win

A US federal judge blocked Tapestry’s $8.5 billion acquisition of rival Capri on Thursday, delivering a major win for the Federal Trade Commission (FTC) and the Biden administration ahead of the November 5 presidential election. Rising consumer prices are a primary concern for voters, making this ruling a strategic victory for the administration.

The FTC argued that merging two of the biggest US handbag and accessories brands would stifle competition, allowing the new entity to unfairly raise prices on popular brands. After an eight-day trial, US District Judge Jennifer Rochon ruled against Tapestry and Capri, rejecting the companies’ argument that handbags are nonessential and that consumers could choose not to purchase them if prices rose.

Capri’s shares dropped sharply by 47% following the decision, while Tapestry shares saw a modest increase of 13% in after-market trading. The proposed acquisition would have combined six high-profile brands: Tapestry’s Coach, Kate Spade, and Stuart Weitzman with Capri’s Versace, Jimmy Choo, and Michael Kors. The FTC’s Henry Liu praised the decision as “a victory for consumers across the country seeking access to quality handbags at affordable prices.”

Judge Rochon, emphasizing handbags’ significance in fashion and daily life, indicated the ruling effectively ends the merger, as the required additional FTC review would stretch beyond the deal’s February 10 termination date. Tapestry expressed disappointment, stating its belief that the merger is “pro-competitive and pro-consumer” and indicated plans to appeal.

While Tapestry and Capri argued the merger was needed to combat European competitors like Gucci, the judge ruled that Capri has the resources to sustain its brands independently, deeming the merger unnecessary.

This case adds a notable precedent to FTC intervention in the fashion industry, where mergers are rare due to its fragmented nature, setting a benchmark in consumer protection within accessible luxury markets.

Source: Business Standard