Tapestry, the luxury brand owner, is appealing a US court decision that blocked its acquisition of Capri Holdings for $8.5bn (£6.7bn).
- The US Federal Trade Commission (FTC) argues that the merger would stifle competition between significant handbag producers by creating a dominating entity.
- US District Judge Jennifer Rochon supported the FTC’s stance, rejecting the companies’ argument of handbags being nonessential items.
- Tapestry insists the merger is beneficial, highlighting its appeal against the court’s decision.
- The court’s decision has stirred discussions about market dynamics in the competitive luxury fashion sector.
The recent legal development centres on Tapestry’s planned acquisition of Capri Holdings, a deal valued at $8.5bn (£6.7bn), which has encountered a significant obstacle. The Federal Trade Commission (FTC), a key regulatory body, presented a compelling argument during an eight-day trial in New York that focused on the potential anti-competitive effects of the merger. According to the FTC, the acquisition would potentially eliminate crucial competition between two leading handbag manufacturers, giving rise to a major market player capable of exerting undue influence on pricing.
US District Judge Jennifer Rochon validated the FTC’s concerns, ruling in favour of a preliminary injunction to halt the acquisition. The ruling came despite Tapestry and Capri’s argument that handbags, being nonessential fashion items, would naturally regulate themselves in the market through consumer choices if prices escalated. Judge Rochon, however, noted the significance of handbags to many women, both as a fashion statement and a practical daily accessory, dismissing the companies’ rationale.
Tapestry has voiced its disagreement with Judge Rochon’s decision, asserting that it disagrees with the legal interpretations and factual conclusions drawn by the court. The company stressed that it operates in a highly competitive and dynamic industry characterised by constant expansion and fragmentation, involving both longstanding brands and emerging market entrants. In its statement, Tapestry reaffirmed its belief that the merger with Capri Holdings is both pro-competitive and beneficial for consumers.
The strategic acquisition announced by Tapestry in August 2023 aims to establish a US-based fashion juggernaut by bringing renowned brands such as Coach, Kate Spade, Stuart Weitzman, Versace, Jimmy Choo, and Michael Kors under a single corporate umbrella. Despite the FTC’s injunction, Tapestry remains committed to pursuing the deal, aligning its actions with its merger agreement obligations.
Tapestry’s appeal against the court’s decision underlines the complexities involved in balancing competitive practices and market growth within the luxury fashion industry.
