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The Federal Trade Commission has sued to block US luxury goods group Tapestry’s $8.5bn acquisition of Capri Holdings, a move that threatens a bid to create a US rival to European giants LVMH and Kering.
The antitrust regulator on Monday alleged that the acquisition would eliminate “head-to-head” competition among the groups’ brands, including Capri’s Michael Kors as well as Tapestry’s Kate Spade and Coach.
A tie-up would give Tapestry a dominant slice of what the company has identified as the “accessible luxury” handbag market, the FTC said.
“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 FTC’s competition bureau, 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 favourable workplace conditions”.
The two companies pushed back against the FTC’s move, arguing they operated in a highly competitive and fragmented sector. They both vowed to defend their case.
“There is no question that this is a pro-competitive, pro-consumer deal and that the FTC fundamentally misunderstands both the marketplace and the way in which consumers shop,” Tapestry said in a statement.
The FTC “is the only regulator that did not approve this transaction, which received required approvals from all other jurisdictions”, Capri said in a statement. The deal has been cleared by regulators in Japan and Europe.
The lawsuit reflects some of the themes adopted by the FTC under chair Lina Khan, who has ushered in a tougher antitrust enforcement policy as Joe Biden’s administration seeks to crack down on anti-competitive conduct across the US economy. Preserving competition in the labour market has been one of Khan’s priorities.
The agency alleged that the transaction could harm competition between Capri and Tapestry over employees, potentially threatening wages and workers’ benefits. The combined business would employ approximately 33,000 people worldwide, the agency said.
The FTC’s move imperils efforts to build a US challenger seeking to shore up the gap with European conglomerates LVMH and Kering, which have grown to dominate sales of luxury handbags, shoes and clothing in part via acquisitions of brands such as Balenciaga, Saint Laurent and Christian Dior.