F.T.C. Sues to Block $8.5 Billion Fashion Merger

The Federal Trade Commission on Monday sued to block Tapestry’s $8.5 billion acquisition of Capri, a blockbuster fashion tie-up that would bring together Coach, Kate Spade, Michael Kors and Versace.

The lawsuit is a rare move by the agency to block a fashion deal, given that the industry does not suffer from a lack of competition. In her time as the chair of the F.T.C., Lina Khan has prioritized taking on the power of big business in suits across industries. The agency has moved to block the supermarket merger between Kroger and Albertsons; Meta’s acquisition of the virtual reality start-up Within; and Microsoft’s bid for the gaming giant Activision. These efforts have come with mixed results: The F.T.C. failed to block Microsoft’s deal and Meta’s acquisition, both of which closed last year.

“With the goal to become a serial acquirer, Tapestry seeks to acquire Capri to further entrench its stronghold in the fashion industry,” Henry Liu, director of the F.T.C.’s Bureau of Competition, said in a statement.

“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 favorable workplace conditions,” he said.

Tapestry said in a statement that “the F.T.C. fundamentally misunderstands both the marketplace and the way in which consumers shop.”

“Tapestry and Capri operate in an intensely competitive and highly fragmented industry alongside hundreds of rival brands, including both established players and new entrants,” the statement said.

The fashion deal, announced in August, would create an American luxury conglomerate intended to compete with European powerhouses like Louis Vuitton’s parent, LVMH, and Kering, the owner of Gucci. But it would pale in comparison by size: Based on 2023 figures, Capri, which owns Michael Kors, Versace and Jimmy Choo, and Tapestry, the owner of Coach and Kate Spade, together have about $12 billion in revenue. LVMH had a revenue of 86.2 billion euros, or about $92.2 billion, last year.

The F.T.C. has been scrutinizing the deal for months, even as it was approved by regulators in the European Union and Japan. Traders have increasingly bet against the likelihood of its being approved: Shares of Capri have fallen more than 14 percent this year, while Tapestry’s gained 6 percent. (Typically, shares of the target of a takeover gain while shares of the buyer fall.)

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