A US judge has blocked the pending merger of Tapestry and Capri, permanently removing the option to move forward with the proposed deal. The US Federal Trade Commission has called the ruling a win for consumers.
In an eight-day trial in New York, the FTC argued the case to “prevent the top two U.S. handbag makers from creating a massive company with the power to unfairly raise prices”.
U.S. District Judge Jennifer Rochon ruled in favor of the FTC, stating that the defence’s argument “ignores that handbags are important to many women, not only to express themselves through fashion but to aid in their daily lives.”
In April, The Federal Trade Commission began proceedings to sue to block Tapestry, Inc.’s $8.5 billion acquisition of Capri Holdings Limited. According to the FTC, the deal sought to combine three close competitors – Tapestry’s Coach and Kate Spade brands and Capri’s Michael Kors brand. “If allowed, the deal would eliminate direct head-to-head competition between Tapestry’s and Capri’s brands. It would also give Tapestry a dominant share of the “accessible luxury” handbag market, a term coined by Tapestry to describe quality leather and craftsmanship handbags at an affordable price.” The FTC stated.
“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, stated. “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.”
“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 alleged.
The decision saw Capri shares fall by 47%, and Tapestry shares up by around 13%.
The ruling is an important win for the Biden administration in the lead-up to November 5.
By CEO NA Editorial Staff
