Luxury brand powerhouses Tapestry and Capri Holdings plan to oppose the Federal Trade Commission (FTC) lawsuit that seeks to scuttle an acquisition deal valued at $8.5 billion. The purchase would unite Tapestry’s Coach, Stuart Weitzman and Kate Spade brands with Capri’s Versace, Jimmy Choo and Michael Kors brands.
In April 2024 the FTC authorized its lawsuit against Tapestry’s acquisition of Capri, which had been announced in August 2023. This week, Tapestry and Capri filed their opposition to the FTC’s motion for a preliminary injunction in the U.S. District Court in the Southern District of New York ahead of the trial, which is scheduled to begin on Sept. 9, 2024.
Tapestry and Capri are contesting a key element of the FTC’s opposition — that the planned purchase would eliminate head-to-head competition in the “accessible luxury” handbag market. A website devoted to the proposed acquisition noted that there’s no firm definition of this market’s parameters. Additionally, numerous analysts have said that even though the deal will bring together six luxury brands, handbag consumers still would have numerous alternatives to choose from.
“You only have to walk into any handbag or department store to know that there are innumerable other choices, both more luxurious/expensive and less, than the brands owned by Coach and Tapestry,” said Richard Kestenbaum, a Partner at Triangle Capital LLC writing in Forbes. “Above all, the barriers to entry are nearly nothing, anyone can start a handbag company in their living room and try to make a go of it.”
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In the Wall Street Journal, Barry Nigro, chairman of the antitrust department at the law firm Fried Frank, noted that the high level of competition in the luxury industry is one reason why the FTC rarely challenges such mergers. “It’s relatively easy for existing competitors to reposition their brands,” Nigro said. “As a result, these are hard cases to win.”
During a call discussing Tapestry’s Q4 2024 financial results, Tapestry CEO Joanne Crevoiserat reiterated the company’s determination to complete the merger: “While we are confident that this combination remains an exceptional strategic fit, there is significant work to do to bring innovation to their [Capri’s] brands and reinvigorate their business amid their disappointing decline in standalone results,” she said. “We believe we’re well positioned to execute our integration plans and growth strategies, and that the path to value creation is clear and compelling under our ownership, bringing meaningful benefits to our customers, employees, partners and shareholders around the world.”
