The FTC claims that if successful, the deal will eliminate direct competition between fashion brands such as Coach and Michael Kors, particularly in the luxury handbag sector where Michael Kors is located.
Is Coach's parent company Tapestry's plan to buy Michael Kors's parent company Capri for 8.5 billion US dollars in vain?
On April 22, according to media reports, the US Federal Trade Commission (FTC) has filed a lawsuit aimed at preventing the conclusion of the above deal. The FTC claims that if successful, the deal will eliminate direct competition between fashion brands such as Coach and Michael Kors, particularly in the luxury handbag sector where Michael Kors is located.
The FTC said that in addition to market competition considerations, the deal could also reduce the enthusiasm of the two companies to compete for talent, which in turn could adversely affect employees' wages and benefits. According to reports, after the merger of these two companies, the total number of employees worldwide will reach about 33,000.
Both Tapestry and Capri objected to the FTC's actions. They believed their industry was highly competitive and the market was fragmented, and said they would firmly defend their positions.
Tapestry said in a statement: “This deal certainly promotes competition and is beneficial to consumers. The FTC completely misunderstood the market and consumers' shopping habits.”
Capri said, “The FTC was the only regulator that did not approve the deal, and all other jurisdictions have given the necessary approvals.” The deal has been approved by Japanese and European regulators.
It is worth mentioning that both Tapestry and Carpi are powerful players in the light luxury industry, but faced with leading brands encroaching on the luxury market, these two groups are not having a very good time.
The move by Tapestry and Carpi is also aimed at narrowing the gap with Europe's LVMH and Kering Group. The latter two have taken a dominant position in sales of luxury handbags, footwear, and apparel through acquisitions of brands such as Dior, Balenciaga, and Saint Laurent.