Washington D.C. – The Federal Trade Commission is taking action to block an $8.5 billion merger between luxury fashion giants Tapestry and Capri Holdings. The FTC argues that the merger would result in higher prices for consumers in the United States.
Director Henry Liu of the FTC’s bureau of competition expressed concerns about the deal, stating that it could limit consumer choices for affordable handbags and impact the wages and working conditions of hourly workers. The merger would bring together iconic brands such as Coach, Kate Spade, and Stuart Weitzman under Tapestry, and Versace, Jimmy Choo, and Michael Kors under Capri Holdings.
Tapestry defended the merger, emphasizing that the companies operate in a competitive industry alongside numerous rival brands. The union aims to increase competitiveness with European luxury powerhouses like LVMH and Kering, known for brands such as Louis Vuitton, Gucci, and Dior.
Antitrust regulators in Europe and Japan approved the merger, but the FTC believes it could harm American consumers by reducing competition and potentially increasing prices. The FTC’s concerns include the merger giving Tapestry a dominant share of the luxury handbag market, impacting consumer benefits such as pricing, discounts, and innovation.
The global luxury retail market has seen fluctuations, with a slowdown in spending due to inflation and high interest rates. Capri reported a slight decline in revenue, while Tapestry experienced growth, mainly attributed to the popularity of the Coach brand during the holiday season.
Experts suggest that conglomerates like Tapestry and Capri can provide stability for fashion brands amid industry challenges. The merger would allow the companies to expand globally and access shared resources for growth.
The FTC’s lawsuit against the merger aligns with a trend of increased scrutiny on megamergers by federal regulators, following recent efforts to block consolidation deals in various industries. The Biden administration is focused on ensuring competition and protecting consumer interests in the marketplace.