FTC Challenges Tapestry-Capri Merger

By Siddharth Cavale
NEW YORK (Reuters) – The U.S. Federal Trade Commission (FTC) urged a federal judge in New York to block Tapestry (NYSE: TPR)’s $8.5 billion merger with rival handbag maker Capri Holdings (NYSE: CPRI) at a trial on Monday, arguing it will eliminate fierce competition in the market for “accessible luxury.”

The FTC argues the merger announced in August 2023 would end head-to-head competition between Tapestry’s Coach and Kate Spade brands and Capri’s Michael Kors brands, leading to worse prices, fewer discounts, and reduced benefits for employees.

The deal would also give Tapestry a dominant share of the accessible luxury handbag market, controlling over 50% of it once completed. The regulator defined the “accessible luxury” market as handbags sold between $100 and $1,000, a price range that covers most of Coach and Kors’ lines.

FTC Chief Trial Counsel Nicole Lindquist told U.S. District Judge Jennifer Rochon that the burden of the merger would be felt by “the working and middle-class women of America.”

The FTC presented evidence of emails from Capri CEO John Idol discussing competition with Coach’s pricing strategies, indicating that companies actively monitor each other.

In response, Tapestry argues that the U.S. handbag market is fragmented, with low entry barriers and varying consumer preferences. Tapestry lawyer Lawrence Buterman claimed that the FTC’s understanding of the market is outdated, stating, “The commercial reality is that customers have a Gucci bag lined up next to a Kors bag, lined up next to a Calvin Klein bag.”

A lawyer for Capri noted that Kors has lost relevance among shoppers since 2016, with the average price of a Kors handbag falling to $92, below the FTC’s accessible luxury threshold.

This year, the FTC has already fought to block various mergers, including the acquisition of Kroger by Albertsons and Tempur Sealy’s acquisition of Mattress Firm. The trial is expected to last for about a week and a half. Earlier this year, the merger received approval from antitrust regulators in Japan and the EU.