The US Competition Commission has filed a lawsuit to halt fashion accessory giant Tapestry’s $8.5 billion (£6.9 billion) acquisition of rival Capri.
Michael Kors is one of Capri’s brands, and Coach and Kate Spade are among the handbag manufacturers owned by Tapestry.
If approved, “the deal would eliminate direct head-to-head competition between Tapestry’s and Capri’s brands,” according to the US Federal Trade Commission (FTC).
“The FTC fundamentally misunderstands both the marketplace and the way in which consumers shop,” Tapestry said.
The companies together employ over 33,000 people worldwide, but the FTC claimed the acquisition would result in lower pay and benefits for them.
Coach and Kate Spade are well-known for their “accessible luxury” handbags, which are reasonably priced, well-made items made of leather with fine craftsmanship.
In an attempt to establish a US fashion conglomerate capable of taking on larger rivals in Europe like Chanel, Hermes, and parent company LVMH for Louis Vuitton, Tapestry made an August approach to purchase Capri.
In November, the FTC asked for additional details on the transaction.
The FTC declared that the transaction would give Tapestry a commanding market share when it announced its intention to file a lawsuit.
“In bringing this case, the FTC has chosen to ignore the reality of today’s dynamic and expanding $200 billion global luxury industry,” according to a statement from Tapestry.
Versace and Jimmy Choo are both owned by Capri, which stated that “this transaction will not limit, reduce, or constrain competition” because the two companies “operate in the fiercely competitive and highly fragmented global luxury industry”.
The US regulator’s attempt to obstruct a merger in the upscale apparel industry is unique.
But to promote just, transparent, and competitive markets, officials released new merger criteria in December.
The FTC has asserted that the combination of Tapestry and Capri would adversely affect hourly workers who would miss out on greater earnings due to lower competition for employees by employing a new strategy allowed under the rules.
The European Union and Japan gave the firms regulatory approval for the acquisition earlier this month.
By August 10th, the two businesses must complete the transaction.
