The Federal Trade Commission today sued to block Tapestry, Inc.’s $8.5 billion acquisition of Capri Holdings Limited, a deal that seeks 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.
The Commission issued an administrative complaint and authorized a lawsuit in federal court to block the proposed acquisition, alleging that Tapestry’s acquisition of Capri will eliminate fierce competition between the two companies.
Post acquisition, the combined Tapestry and Capri would employ roughly 33,000 employees worldwide.
Where Tapestry and Capri most vigorously compete against one another – mainly between Tapestry’s Coach and Kate Spade brands against Capri’s Michael Kors brand – is in the “accessible luxury” handbag market.
If Tapestry acquires Capri, Tapestry would gain a dominant market share in the “accessible luxury” handbag market, dwarfing every other competitor, the FTC alleges.
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.
This deal isn’t likely to be Tapestry’s last, as the acquisition of Capri will give Tapestry additional leverage to make even more acquisitions in the future, according to the complaint.
Today, Tapestry, Inc. was sued by the Federal Trade Commission. the $8.5 billion purchase of Capri Holdings Limited, a deal aimed at merging three closely held rivals: the Coach and Kate Spade brands from Tapestry and the Michael Kors brand from Capri. Should the deal go through, Tapestry’s and Capri’s brands would no longer compete directly with one another. Moreover, Tapestry would gain a commanding market share in the “accessible luxury” handbag segment—a phrase they invented to characterize high-end, reasonably priced handbags with fine leather and craftsmanship.
Claiming that Tapestry’s acquisition of Capri will end the intense competition between the two companies, the Commission authorized a lawsuit in federal court and issued an administrative complaint to thwart the proposed acquisition.
“Tapeestry wants to become a serial acquirer, and it wants to buy Capri to strengthen its position in the fashion industry,” FTC’s Bureau of Competition Director Henry Liu stated. While hourly workers stand to lose out on better pay and working conditions, this deal threatens to eliminate competition for consumers seeking reasonably priced handbags. “.
Right now, Tapestry and Capri are rivals in the apparel, footwear, and eyewear markets. In the “accessible luxury” handbag market, Tapestry and Capri are most fiercely rivaling one another, primarily between Tapestry’s Coach and Kate Spade brands and Capri’s Michael Kors brand. Today, Michael Kors, Coach, and Kate Spade all keep a close eye on each other’s handbag brands to gauge performance and pricing. Based on this information, they each make strategic decisions, such as raising or lowering handbag prices.
Through the agreement, there would be no longer be severe head-to-head competition on a number of crucial factors, such as price, discounting, and design. According to the FTC’s complaint, prices for tens of millions of Americans who buy Coach, Kade Spade, and Michael Kors products may increase. According to the FTC, Tapestry would dwarf all of its rivals in the “accessible luxury” handbag market if it were to acquire Capri.
In order to fulfill its goal of growing into a significant American fashion conglomerate, Tapestry has been pursuing a ten-year MandA strategy through serial acquisitions. It has persistently endeavored to procure an assortment of fashion labels, effectively pursuing numerous acquisition targets.
The FTC claims that given Tapestry’s history of making repeated acquisitions, the company’s acquisition of Capri will strengthen its position and make it more difficult for new companies to enter the market and establish a significant presence. According to the complaint, Tapestry plans to make more acquisitions in the future thanks to the leverage it will have from the purchase of Capri, so this agreement is probably not the last one. Even after this proposed merger, Tapestry has no plans to stop acquisitions, as stated in documents provided by the FTC in its complaint.
It was 5-0 in favor of the Commission filing the administrative complaint and allowing employees to request a preliminary injunction and a temporary restraining order. Because she has good reason to think that the merger will significantly reduce the parties’ head-to-head competition, Commissioner Melissa Holyoak voted in favor of the merger.
Immediately after this news release is released, a public version of the complaint will be made available and linked to.
