Tapestry responds to FTC's lawsuit blocking acquisition of Capri Holdings

The Federal Trade Commission (FTC) has sued to block Tapestry’s 8.5 billion dollars 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.

The Commission issued an administrative complaint and authorised 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 commission said in a statement that the proposed merger threatens to deprive millions of American consumers of competition on price, discounts and promotions, innovation, design, marketing, and advertising.

Responding to FTC’s lawsuit, Tapestry said: “There is no question that this is a pro-competitive, pro-consumer deal and that the FTC fundamentally misunderstands both the marketplace and the way in which consumers shop. The reality is that consumers have a host of choices when shopping for luxury handbags and accessories, footwear, and apparel, and they are exercising them.”

“The bottom line is that Tapestry and Capri face competitive pressures from both lower and higher-priced products. In bringing this case, the FTC has chosen to ignore the reality of today’s dynamic and expanding 200 billion dollars global luxury industry,” Tapestry added.

The deal, according to FTC, 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.

“With the goal to become a serial acquirer, Tapestry seeks to acquire Capri to further entrench its stronghold in the fashion industry. 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 favourable workplace conditions,” said Henry Liu, director of the FTC’s bureau of competition.

If Tapestry acquires Capri, Tapestry would gain a dominant market share in the “accessible luxury” handbag market, dwarfing every other competitor, the FTC alleges.

On the contrary, Tapestry believes that the deal will bring significant benefits to the combined company’s customers, employees, partners, and shareholders in the U.S. and around the world.

“We have strong legal arguments in defence of this transaction and look forward to presenting them in court and working expeditiously to close the transaction in calendar year 2024,” Tapestry further added to the release.

The FTC is the last regulator yet to approve the transaction.