FTC moves to block Tapestry’s acquisition of Capri Holdings

The Federal Trade Commission announces that it has “sued to block Tapestry’s (TPR) $8.5 billion acquisition of Capri Holdings (CPRI), 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. 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 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. The proposed merger threatens to deprive millions of American consumers of the benefits of Tapestry and Capri’s head-to-head competition, which includes competition on price, discounts and promotions, innovation, design, marketing, and advertising. The deal also threatens to eliminate the incentive for the two companies to compete for employees and could negatively affect employees’ wages and workplace benefits. Post acquisition, the combined Tapestry and Capri would employ roughly 33,000 employees worldwide. 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. As the FTC’s complaint states, documents produced by Tapestry indicate that it has no plans to stop acquisitions even after this proposed merger. The Commission vote to issue the administrative complaint and authorize staff to seek a temporary restraining order and a preliminary injunction was 5-0.”