Saying that Tapestry’s planned purchase of Capri Holdings would eliminate head-to-head competition in the “accessible luxury” handbag market, the Federal Trade Commission (FTC) has authorized a lawsuit to block the $8.5 billion deal. The acquisition plan, announced in August 2023, would bring together some of the most iconic names in luxury, uniting Tapestry’s Coach, Stuart Weitzman and Kate Spade brands with Capri’s Versace, Jimmy Choo and Michael Kors labels.
“With the goal of becoming a serial acquirer, Tapestry seeks to acquire Capri to further entrench its stronghold in the fashion industry,” said Henry Liu, Director of the FTC’s Bureau of Competition in a statement. “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.”
Both Tapestry and Capri Holdings have criticized the FTC’s action, noting that the proposed acquisition already has been approved by other regulatory bodies. “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,” according to a Tapestry statement. “Tapestry and Capri operate in an intensely competitive and highly fragmented industry alongside hundreds of rival brands, including both established players and new entrants.”
Capri Holding’s statement said: “The market realities, which the government’s challenge ignores, overwhelmingly demonstrate that this transaction will not limit, reduce or constrain competition. Consumers have hundreds of handbag choices at every price point across all channels, and barriers to entry are low.”
The FTC’s concerns aren’t limited to just this deal, noting that “Tapestry has engaged in a decade-long M&A strategy through serial acquisitions to achieve its dream of becoming a major American fashion conglomerate,” according to its statement. “Given Tapestry’s pattern of serial acquisitions, the acquisition of Capri will further entrench Tapestry’s stronghold, making it harder for new brands to both enter the market and have a meaningful presence, the FTC alleges.”
FTC Chair Lina Khan has been aggressive in policing transactions that might diminish competition, including its move in February 2024 to block the $24.6 billion merger of supermarket giants Kroger and Albertsons. These retailers recently increased the number of stores they would divest if their merger goes forward, from 413 to 579, in a bid to make the deal more palatable to regulators.