US Federal Trade Commission Opposes Tapestry’s Acquisition of Capri Holdings: Here’s Why

The US Federal Trade Commission (FTC) has taken a firm stance against Tapestry Inc.’s proposed $8.5 billion acquisition of Capri Holdings Ltd., the parent company of Michael Kors. This marks a notable move in antitrust enforcement within the fashion accessories sector, raising concerns about market competition and consumer welfare under the Biden administration.

Key Points:

1. FTC’s Concerns: The FTC’s opposition to the merger stems from concerns about its potential impact on prices within the affordable luxury segment. The agency worries that the deal could reduce competition for affordable handbags, resulting in adverse effects on consumers and workers. Additionally, the consolidation of Tapestry and Capri could lead to reduced wages and employee benefits, affecting approximately 33,000 workers worldwide.
2. FTC’s Legal Action: The FTC filed complaints in both its in-house and federal courts after a unanimous decision to block the deal. This legal action represents the FTC’s first lawsuit in the fashion accessories sector, highlighting the significance of its intervention.
3. Company Responses: Tapestry’s CEO, Joanne Crevoiserat, contested the FTC’s assessment, emphasizing the company’s commitment to competitive wages and benefits. Capri Holdings also disagreed with the FTC’s decision, asserting that prevailing market realities indicate minimal impact on competition. Both companies vowed to defend the case vigorously in court and reiterated their commitment to completing the acquisition.
4. Tapestry’s Acquisition Motives: Tapestry’s pursuit of Capri Holdings aims to establish a US-based fashion conglomerate specializing in accessible luxury. The merger seeks to leverage Coach’s strengths in China and Michael Kors’ presence in Europe to enhance geographic reach and revenue growth. Despite challenges in turning around Michael Kors’ declining sales, Tapestry remains optimistic about the deal’s potential benefits.
5. Market Implications: If the merger proceeds, the combined Tapestry and Capri entity would become the second-largest personal luxury goods company in the US, rivaling industry giants like LVMH. However, the FTC’s opposition underscores broader concerns about market consolidation and its impact on competition and consumer choice.

The FTC’s legal action against Tapestry’s acquisition of Capri Holdings reflects growing scrutiny of mergers and acquisitions in the fashion industry, signaling a proactive approach to antitrust enforcement under the Biden administration.