The Federal Trade Commission is preparing to file a lawsuit to block luxury fashion giant Tapestry's $8.5 billion acquisition of Capri Holdings Inc., two people familiar with the matter said.
The five FTC commissioners are scheduled to meet next week to discuss the matter, potentially ahead of a formal vote on whether to file a lawsuit, the people said. The officials, who were not authorized to discuss the deliberations, said the agency could still choose not to sue.
The partnership aims to unite labels such as Tapestry's Coach and Kate Spade with Capri's Versace and Michael Kors, as well as European powerhouses such as Louis Vuitton's parent company LVMH and Gucci owner Kering. creating an American luxury conglomerate to compete with
Exclusive cases in the fashion industry are rare. Because there's no shortage of new labels looking to displace legacy brands. “It's an exemplary part of a highly competitive economy,” said Howard Hogan, head of law firm Gibson Dunn's fashion, retail and consumer practice.
Investors have been increasingly betting that the deal, announced last August, will go through, with Capri's shares down more than 20% this year, while Tapestry's shares have risen 6%. (Typically, the target's stock rises and the buyer's stock falls.) Capri's stock fell further in Wednesday trading, while Tapestry's stock rose.
The FTC has been scrutinizing this transaction for months. Even if it has been approved by European Union and Japanese regulators. U.S. regulators believe that placing Michael Kors and Coach under the same roof could limit the need for these brands to compete on price, resulting in lower product prices for consumers. It could be argued that it could be higher.
Tapestry and Capri could refer to the rise of emerging brands like Cult Gaia and Orpen, which celebrities like Taylor Swift have helped popularize.
The incident could also invite political scrutiny. If regulators determine that a case is particularly likely to establish a precedent that can be used in future litigation, as the Justice Department did when it failed to block Gillette's acquisition of a luxury fountain pen company 30 years ago, The company may file a competition lawsuit. former FTC Chairman William Kovačić;
But Kovacic added that the Tapestry-Capri agreement “is not a lawsuit that has a lot of appeal as a way to protect downtrodden people.”