FTC acts to block Coach parent’s acquisition of Michael Kors owner Capri Holdings
The Federal Trade Commission (FTC) wants to stop a $8.5 billion blockbuster retail acquisition.
The FTC on Monday sued to block Tapestry Inc.’s acquisition of Capri Holdings, whose portfolio includes Michael Kors, Versace and Jimmy Choo. Tapestry, parent company of Coach, Kate Spade and Stuart Weitzman, entered into an agreement in August 2023 to acquire Capri in a deal valued at approximately $8.5 billion. The commission voted 5-0 to issue the complaint and to seek a preliminary injunction to stop the deal.
If completed, the transaction would create a U.S.-based luxury powerhouse with operations in more than 75 countries. Industry experts said is would also help both companies better compete against their European rivals, particularly LVMH, whose 75 brands include Tiffany, Fendi, Louis Vuitton and Dior.
In a release, the FTC said the deal seeks to combine “three close competitors” — Tapestry’s Coach and Kate Spade brands and Capri’s Michael Kors — and, if allowed, would eliminate direct head-to-head competition between Tapestry’s and Capri’s brands. It noted that Tapestry and Capri “currently compete on everything from clothing to eyewear to shoes.” It also said the deal would also give Tapestry a dominant share of the “accessible luxury” handbag market.
“With the goal to become a serial acquirer, Tapestry seeks to acquire Capri to further entrench its stronghold in the fashion industry,” Henry Liu, director of the FTC’s Bureau of Competition, said in an FTC release. “This deal threatens to deprive consumers of the competition for affordable handbags, while hourly workers stand to lose the benefits of higher wages and more favorable workplace conditions.”
The FTC added that the deal “isn’t likely to be Tapestry’s last, as the acquisition of Capri will give Tapestry additional leverage to make even more acquisitions in the future.
“As the FTC’s complaint states, documents produced by Tapestry indicate that it has no plans to stop acquisitions even after this proposed merger.
Tapestry’s Response
Tapestry responded to the FTC with a statement that, among things, described the deal as “pro-competitive” and pro-consumer and said the agency “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 retailer stated. “The bottom line is that Tapestry and Capri face competitive pressures from both lower- and higher-priced products. In bringing this case, the FTC has chosen to ignore the reality of today’s dynamic and expanding $200 billion global luxury industry.”
Capri Holdings sounded a similar note in its statement, saying that consumers “have hundreds of handbag choices at every price point across all channels, and barriers to entry are low.”
Tapestry and Capri both said they will fight for the deal in court.
“We have strong legal arguments in defense of this transaction and look forward to presenting them in court and working expeditiously to close the transaction in calendar year 2024,” Tapestry stated.