Federal Trade Commission opposes Tapestry's takeover of Capri

The U.S. Federal Trade Commission (FTC) recently took the high-profile step of filing a lawsuit to block Tapestry’s takeover of Capri. This action raises important questions about competition in the luxury goods sector, and has sparked lively debate about its implications for consumers and employees.

A decision that marks a turning point in the application of antitrust legislation in the fashion industry. On Monday April 22, the U.S. Federal Trade Commission (FTC) filed suit to block the $8.5 billion deal between Coach parent Tapestry and Michael Kors owner Capri Holdings Ltd.

The FTC claims that the deal would “eliminate direct competition” between the two luxury handbag makers’ iconic brands. In its view, the proposed merger, which would create a company employing around 33,000 people worldwide, could lead to a reduction in wages and benefits.

“The proposed merger threatens to deprive millions of American consumers of the benefits of direct competition between Tapestry and Capri, which includes pricing, discounts and promotions, innovation, design, marketing and advertising,” the institution said.

Misunderstanding

Tapestry strongly disputed the FTC’s allegations, arguing that the agency does not understand the market and overstates the impact of the agreement on consumers and employees.

The group said that “in bringing this action, the FTC has chosen to ignore the reality of today’s dynamic and growing $200 billion global luxury industry”.

Capri also vigorously defended the transaction. “This transaction will not limit, reduce or impede competition”, as both companies “operate in the global luxury sector, which is extremely competitive and highly fragmented”, said the owner of Versace and Jimmy Choo.

By mid-April, the companies had also received approval from the European Union and Japan to proceed with the transaction.