Judge blocks Coach owner’s proposed acquisition of Michael Kors parent Capri
The possibility of a U.S.-based luxury giant has been dealt a serious blow.
A federal judge in the Southern District of New York, has blocked the proposed $8.5 billion acquisition of Capril Holdings by Tapestry. The deal would have have brought together six upscale brands: Tapestry’s Coach, Kate Spade and Stuart Weitzman and Capri’s Versace, Michael Kors and Jimmy Choo.
Judge Jennifer L. Rochon granted a preliminary injunction that prevents the deal from moving forward while the Federal Trade Commission investigates the deal in its administrative court.
“Antitrust has come into fashion,” Judge Rochon wrote in the beginning of her ruling.
In a statement, Tapestry said it would appeal the decision, which it called “disappointing and, we believe incorrect on the law and facts.”
“Tapestry and Capri operate in an industry that is intensely competitive and dynamic, constantly expanding, and highly fragmented among both established players and new entrants,” the company stated. “We face competitive pressures from both lower- and higher-priced products and continue to believe this transaction is pro-competitive and pro-consumer. We intend to appeal the decision, consistent with our obligations under the merger agreement.”
The Federal Trade Commission sued to block the deal last spring. It argued the merger would harm consumers by making the affordable handbag market less accessible and would also deal a blow to employees with worse salaries and benefits. 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.
“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,” Henry Liu, director of the FTC’s Bureau of Competition, said in an FTC release at the time.
In her ruling, Judge Rochon pushed back against the notion that the price of handbags wasn’t a suitable subject for an antitrust case.
“Downplaying the importance of handbags as nonessential discretionary items that consumers can simply choose not to buy if the price is too high ignores that handbags are important to many women, not only to express themselves through fashion but to aid in their daily lives,” she wrote.
The FTC praised the ruling by the judge.
“Today’s decision is a victory not only for the FTC, but also for consumers across the country seeking access to quality handbags at affordable prices,” Liu, director of the agency’s Bureau of Competition, said in a statement. “The decision will ensure that Tapestry and Capri continue to engage in head-to-head competition to the benefit of the American public.”
