Tapestry and Capri Holdings defend merger plans after FTC bombshell

After news that the FTC in the US wants to block Tapestry’s takeover of Capri Holdings on competition grounds, late on Monday both companies issued statements defending their plans.

Tapestry, which owns Coach, Kate Spade and Stuart Weitzman, said: “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.”

Competition concerns can derail major business deals and in the UK, JD Sports was eventually forced to sell its Footasylum business after the country’s antitrust body issued a ruling.

Tapestry said both it and Capri, which owns Michael Kors, Versace and Jimmy Choo, “operate in an intensely competitive and highly fragmented industry alongside hundreds of rival brands, including both established players and new entrants.

“We also compete for consumers who are cross-shopping a wide range of channels and brands along a vast pricing spectrum when considering what to purchase. The reality is that consumers have a host of choices when shopping for luxury handbags and accessories, footwear, and apparel, and they are exercising them.

“The bottom line is that Tapestry and Capri face competitive pressures from both lower- and higher-priced products. In bringing this case, the FTC has chosen to ignore the reality of today’s dynamic and expanding $200 billion global luxury industry.”

The group explained that the deal will unite six brands “that offer products across a wide range of categories. With Capri, Tapestry will gain access to a broader set of global luxury consumers and geographies and will drive sustainable, healthy growth for Capri’s iconic brands, building desire and engagement with consumers globally. Tapestry has a strong record of not only innovating for consumers but also providing industry-leading wages and benefits for our employees. The combined company will continue to set the bar for both consumer and employee experiences.

“We have full confidence in the merits and pro-competitive nature of this transaction. It will bring significant benefits to the combined company’s customers, employees, partners, and shareholders in the US and around the world. We have strong legal arguments in defense of this transaction and look forward to presenting them in court and working expeditiously to close the transaction in calendar year 2024.”

The FTC had claimed that by the two trios of brands no longer directly competing, consumers would be deprived of the outcome of their intense competition — such as price promotions. It also suggested the two would no longer compete with each other to pay higher wages and boost employee benefits.

Capri Holdings, meanwhile, said it “strongly disagrees with the FTC’s decision. The market realities, which the government’s challenge ignores, overwhelmingly demonstrate that this transaction will not limit, reduce, or constrain competition”. 

And echoing Tapestry’s statement, it added: “Tapestry and Capri operate in the fiercely competitive and highly fragmented global luxury industry. Consumers have hundreds of handbag choices at every price point across all channels, and barriers to entry are low. Capri intends to vigorously defend this case in court alongside Tapestry and complete the pending acquisition. The US FTC is the only regulator that did not approve this transaction, which received required approvals from all other jurisdictions. We remain confident in this combination and the value it will bring to all stakeholders.”