Federal Trade Commission v. Tapestry Inc. & Capri Holdings
Plaintiff: Federal Trade Commission
Defendant(s): Tapestry Inc. and Capri Holdings Limited
The Federal Trade Commission issued an administrative complaint leading to a lawsuit blocking Tapestry’s proposed acquisition of Capri Holdings in federal court.
The lawsuit was built on the premise of an elimination of necessary, fierce competition that the two companies contributed to the economy.
The initial proposal by Tapestry dates back to August of 2023, and would be an 8.5$ dollar acquisition. The FTC sued to block the merger on April 22nd, 2024.
The Federal Trade Commission
The Federal Trade Commission (FTC) serves to promote competition, in order to protect and educate consumers.
It is an independent agency of the United States government, established in 1914. They mainly enforce antitrust laws, and prevent unfair business practices across multiple economic sectors.
Tapestry Inc. and Capri Holdings
Tapestry Inc. is an American multinational fashion holding company, based in New York City. The company owns luxury fashion brands: Coach, Stuart Weitzman, and Kate Spade.
Originally named Coach Inc., the name Tapestry Inc. was a result of the companies’ rebrand in 2017.
Capri Holdings Limited is another multinational fashion corporation, based in both London and New York City. The company was founded by Michael Kors in 1981, and owns Versace, Jimmy Choo, and Michael Kors.
Healthy Competition
Both Tapestry and Capri Holdings own fashion brands that shape the market, and provide healthy competition for each other; particularly in the luxury handbag market. All of the brands held by both Tapestry and Capri Holdings are widely present in multiple sectors of fashion that provide monetary success for our industry.
Benefits of competition for the consumer include fair prices, discounts and promotions, and new innovations. The FTC claimed that consumers would lose these benefits, and everything that results from them.
They also claimed that loss of competition would eliminate companies' priorities for competing employees, which would impact workers’ wages and other benefits.
By remaining as competitors, the brands are ultimately able to determine pricing, strategy, and more efficiently plan for each quarter.
Antitrust Law
This case ultimately ruled on the basis of antitrust laws and elements.
Antitrust laws are in place to promote fair competition and protect consumers from unfair business practices. In this case, the court analyzed:
Horizontal Merger Principles: Potential elimination of head-to-head competition between the two companies.
The Preliminary Injunction Standard: The ability the FTC had to block the merger, pending the administrative trial. This allows the agency to halt anticompetitive transactions before completion.
Consumer Welfare: The influence the merger would have on specific markets, such as the luxury handbag market, and how changes would influence one’s welfare.
Market Domination
The FTC also claims that Tapestry would “gain a dominant market share in the accessible luxury market”.
This would make it difficult for brands to enter the market and have a significant presence, as Tapestry would be considered an industry giant. There was also no proof that Tapestry would stop acquisitions, meaning that the company could keep acquiring brands until nearly the entire market is Tapestry-owned.
Declarations
The FTC successfully blocked the merger between Tapestry and Capri Holdings…
Based on the following legal standards:
Section 7 of the Clayton Act
A violation of section 7 requires “not merely an appraisal of the immediate impact of the merger upon competition, but a prediction of its impact upon competitive conditions in the future” United States v. Phila. Nat'l Bank, 374 U.S. 321, 362 (1963).
2. Section 13b of the FTC Act
Authorizes the FTC to “seek injunctive relief if it has ‘reason to believe’ that ‘any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission’ and that such relief ‘would be in the interest of the public’ ”. Fed. Trade Comm'n v. Tapestry, Inc., 1:24-cv-03109 (JLR), 9 (S.D.N.Y. Oct. 24, 2024).
Industry Influence
This blocked merger successfully blocked one the largest potential mergers in the history of luxury fashion. In fact, this case will influence the future of mergers in more than just the fashion industry.
The FTC has proven that they have the authority, and power to win injunctions regarding merger acquisitions.
How does this case impact future antitrust enforcement, and how will it influence mergers in all consumer goods sectors?
