U.S. judicial authority impedes Tapestry's $8.5 billion takeover of competing brand Capri
A U.S. judge thwarted the impending $8.5 billion fusion of U.S. luggage and accessories manufacturer Tapestry and Capri on Thursday, marking a triumph for the U.S. Federal Trade Commission in an area where merger challenges are seldom raised.
The FTC posited during an eight-day trial in New York that the amalgamation would eliminate cutthroat competition between the leading two U.S. handbag brands, yielding an imposing entity with the potential to unfairly heighten prices for buyers.
Tapestry countered these allegations, asserting that the agreement was spurred by an intensely competitive U.S. handbag market and was essential to counteract European competitors, such as Gucci, who have been steadily eroding market share.
Court documents claimed that the ruling in essence perpetually halts the proposed fusion. Merger challenges in the fashion sector are scarce, given its dispersed and fiercely competitive nature, which typically dissuades traditional monopolies.
The victory represents a triumph for the Biden administration as the November 5 presidential election approaches, with growing consumer prices emerging as a key campaign issue.
Had the deal gone through, it would have united six labels under a single roof. These labels include: Tapestry's Coach, Kate Spade, and Stuart Weitzman; and Capri's Versace, Jimmy Choo, and Michael Kors.
Tapestry and Capri contended before U.S. District Judge Jennifer Rochon that revitalizing the Michael Kors brand, bolstering all Capri brands with Tapestry's more extensive resources, and expanding handbag sales would, in fact, foster competition within the industry instead of diminishing it.
The ruling follows the approval of the merger by regulators in Japan and the European Union earlier this year.
The fusion of Tapestry and Capri would have created a powerful entity in the handbag market, potentially leading to increased prices for consumers. However, Tapestry argued that the merger was necessary to compete with European brands like Gucci.
The FTC's success in blocking the $8.5 billion merger between Tapestry and Capri is a significant development in the fiercely competitive business of fashion, where merger challenges are relatively uncommon.
