FTC is said to consider blocking major fashion merger
The Federal Trade Commission is preparing to sue to block a luxury fashion megamerger, Tapestry’s $8.5 billion takeover of Capri Holdings, two people with knowledge of the matter said.
The FTC’s five commissioners are expected to meet next week to discuss the case, a move that could precede a formal vote on whether to file a lawsuit, the two people said. The duo, not authorized to discuss the deliberations, said it was still possible that the agency could opt not to sue.
The deal, intended to bring together labels such as Tapestry’s Coach and Kate Spade with Capri’s
Versace and Michael Kors, would create an American luxury conglomerate to compete with European powerhouses like Louis Vuitton’s parent, LVMH, and Kering, the owner of Gucci.
Monopoly cases in the fashion industry are rare because there is no shortage of new labels looking to undercut legacy brands. “It is the paradigmatic part of the economy where there is ample competition,” said Howard Hogan, chair of the fashion, retail, and consumer practice at the law firm Gibson Dunn.
Investors have increasingly bet against the deal, which was announced last August, being completed. Shares of Capri have fallen more than 20 percent this year, while Tapestry’s have gained 6 percent. (Typically, shares of the target of a takeover gain while shares of the buyer fall.) Capri’s shares slipped further in trading Wednesday, closing down 6.41 percent, while while Tapestry’s was down just 0.91 percent.
The FTC has been scrutinizing the deal for months, even as it was approved by regulators in the European Union and Japan. US regulators could argue that putting Michael Kors and Coach under the same roof may limit the need for those brands to compete on price, which could in turn make their products more expensive for consumers.
Tapestry and Capri could point to the rise of upstart brands like Cult Gaia and Aupen, which celebrities like Taylor Swift have helped make popular.