Merger of handbag makers Tapestry, Capri halted as judge sides with FTC in antitrust case

NEW YORK -- A U.S. District judge has halted nan merger betwixt nan makers of Coach and Michael Kors handbags, saying it would trim title and wounded consumers.

In her ruling Thursday, U.S. District Judge Jennifer Rochon noted that Tapestry Inc. and Capri Holdings are “close competitors” and that nan merger would consequence successful “the nonaccomplishment of head-to-head competition" and raise prices for shoppers.

The determination followed 7 days of testimony.

In aft hours trading shares of Capri fell much than 50% while shares of Tapestry roseate 12%.

The ruling came six months aft nan FTC sued to block Tapestry's $8.5 cardinal acquisition of Capri, saying that nan woody would destruct nonstop title betwixt nan manner companies’ brands for illustration Coach and Michael Kors successful nan alleged affordable luxury handbag arena.

The agency besides said that nan woody announced successful August 2023 threatens to destruct nan inducement for nan 2 companies to vie for labor and could depress employees’ wages and workplace benefits. The mixed Tapestry and Capri would employment astir 33,000 group worldwide, nan agency said.

The 2 companies' brands screen a wide array of items from clothing to eyewear to shoes. Tapestry has been connected an acquisition binge for nan past respective years, and already owns Kate Spade New York, Stuart Weitzman and Coach. Capri owns nan Versace, Michael Kors and Jimmy Choo brands.

Specifically, Tapestry’s Coach and Kate Spade brands and Capri’s Michael Kors marque are adjacent rivals successful nan handbag market. The FTC had said that they continuously show each other’s handbag brands to find pricing and performance, and they each usage that accusation to make strategical decisions, including whether to raise aliases trim handbag prices.

Tapestry said successful an emailed connection to The Associated Press connected Thursday that nan determination granting nan FTC's petition for a preliminary injunction was “disappointing” and “incorrect connected nan rule and nan facts.”

“Tapestry and Capri run successful an manufacture that is intensely competitory and dynamic, perpetually expanding, and highly fragmented among some established players and caller entrants,'” Tapestry said successful a statement. "We look competitory pressures from some lower- and higher-priced products and proceed to judge this transaction is pro-competitive and pro-consumer. "

The institution said it intends to entreaty nan decision, accordant pinch its obligations nether nan merger agreement.

Capri could not beryllium instantly reached for comment.

Neil Saunders, managing head of GlobalData, said successful a published statement that nan blocking of Tapestry’s acquisition of Capri will travel arsenic a rustle to some companies.

“For Tapestry, it puts an extremity to nan extremity of becoming a bigger location of brands, and it leaves its plans for early maturation successful tatters,” he said. He noted that successful a slower market, Tapestry will now request to trust connected pushing its existing brands harder, which he believes will beryllium challenging. He noted that nan group could, successful time, besides look to make smaller acquisitions.

The ruling leaves Capri “in mediocre style and, successful betting connected being acquired, has neglected nan difficult activity that needs to beryllium done to people correct galore of its anemic brands," Saunders said.

Capri will either request to find different statement to bargain it aliases it will person to embark connected a awesome reinvention plan, he said.