"},"content":{"rendered":"In the USA, as the Kamala Harris-Donald Trump battle enters its final phase, another debate is raging: would a merger between Tapestry (Coach, Kate Spade, Stuart Weitzman) and Capri (Michael Kors, Jimmy Choo, Versace) favor or harm the American consumer?<\/strong><\/b> In short, would it or would it not favor competition?<\/p>\n On October 24, a federal judge in Manhattan<\/strong><\/b> ruled on this issue, blocking the acquisition of Capri by its competitor Tapestry<\/strong><\/b>. In her decision, Magistrate Jennifer Rochon argued that there was \u201cevidence that this merger would lessen competition<\/strong><\/b>\u201d.<\/p>\n The case began after Tapestry expressed its desire to acquire Capri, in August 2023.<\/strong><\/b> Six months later, the FTC,<\/strong><\/b> the US competition authority,<\/strong><\/b> took legal action<\/strong><\/b> against the creation of such a group. In its view, it would have enjoyed a dominant position <\/strong><\/b>in the accessible luxury handbag<\/strong><\/b> segment.<\/strong><\/b><\/p>\n\n Of the six brands brought together by the new entity, two (Coach and Kate Spade)<\/strong><\/b> are basically leather goods specialists<\/strong><\/b>, and fashion designer Michael Kors<\/strong><\/b> himself owes much of his success story to his reasonably priced it bags<\/strong><\/b>. For the FTC, the new American giant, deprived of competition, would then be free to raise prices…<\/p>\n The FTC’s decision took everyone by surprise, as lawsuits for risks of dominance usually affect sectors other than fashion<\/strong><\/b>, which is considered highly competitive, with a multitude of players.<\/p>\n Tapestry and Capri had challenged the FTC’s decision.<\/p>\n John D. Ido, CEO of Capri Holdings,<\/strong><\/b> had argued that a deal with Tapestry would bring value to Tapestry shareholders, offer new opportunities to Tapestry employees, and allow Versace, Jimmy Choo and Michael Kors to expand.<\/strong><\/b><\/p>\n This transaction will not limit, reduce or restrict competition,\u201d he said. Tapestry and Capri operate in the highly competitive and fragmented global luxury fashion industry.<\/strong><\/b> Consumers have hundreds of handbag choices at all price points, in all channels, and barriers to entry are low.<\/p>\n For its part, Tapestry argued during a three-week civil trial last September that the deal was necessary to combat fierce competition from European luxury players.<\/strong><\/b><\/p>\n But the Manhattan judge was not sympathetic to these arguments. Several observers pointed out that her decision to oppose the merger was a victory for the Biden administration,<\/strong><\/b> which had made it a priority to combat rising consumer prices<\/strong><\/b>, against a backdrop of galloping inflation….<\/p>\n But Tapestry<\/strong><\/b> is not throwing in the towel. In a press release, the group indicated its intention to appeal<\/strong><\/b> against a ruling it considers \u201cfactually and legally incorrect\u201d.<\/p>\n Wall Street’s reaction<\/strong><\/b>to the stalled merger was mixed<\/strong><\/b>. Capri<\/strong><\/b> shares plummeted 47%<\/strong><\/b> in after-hours trading on the New York Stock Exchange. With sales down 8.4%<\/strong><\/b> at constant exchange rates to $5.17 billion in 2023-2024, Capri was counting on its merger with Tapestry to give it new impetus.<\/p>\n On the other hand, Tapestry shares rose by 12%<\/strong><\/b>. The price proposed by the group to acquire Capri ($8.5 billion) had been judged excessive by a number of analysts.<\/p>\n Tapestry posted sales of $6.7 billion in its last fiscal year, ending June 2024.<\/p>\n The twists and turns across the Atlantic in the Capri-Tapestry soap opera are all the more surprising given that the regulatory authorities in the European Union and Japan themselves gave the green light<\/strong><\/b> to this decision earlier this year.<\/p>\n It is estimated that the new group,<\/strong><\/b> with its 33,000 employees, would have represented sales of $12 billion, or 6% of the global luxury apparel and accessories market<\/strong><\/b> ($200 billion). But the creation of an American luxury group capable of competing with its European rivals has once again been postponed indefinitely…<\/p>\n <\/span><\/p>\n <\/span><\/p>\n \t\tDominant position?<\/b><\/h2>\n
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Judge insensitive to Tapestry and Capri’s arguments<\/b><\/h2>\n
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Tapestry’s appeal<\/b><\/h2>\n
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Green light in Europe and Japan<\/b><\/h2>\n
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