The Federal Trade Commission (FTC) has taken legal action to block Tapestry's $8.5 billion acquisition of Capri Holdings Limited, the parent company of Michael Kors. The FTC cited concerns about competition in the luxury handbag market. 

FTC Seeks to Block Coach and Michael Kors Handbag Makers Merger

The FTC on Monday issued an administrative complaint and authorized a lawsuit in federal court to block the proposed acquisition, alleging that the merger between Capri and Tapestry, which owns brands like Coach and Kate Spade, would eliminate direct competition between their brands.

The commission also argued that this consolidation could lead to higher prices and fewer consumer choices.

The FTC alleged that Tapestry's acquisition of Capri would gain a dominant market share in the "accessible luxury" handbag market, dwarfing every other competitor and giving Tapestry significant leverage over pricing and product offerings. 

The FTC also said the merger could eventually harm consumers by reducing competition and limiting their options.

"With the goal to become a serial acquirer, Tapestry seeks to acquire Capri to further entrench its stronghold in the fashion industry," said Henry Liu, Director of the FTC's Bureau of Competition.

"This deal threatens to deprive consumers of the competition for affordable handbags, while hourly workers stand to lose the benefits of higher wages and more favorable workplace conditions," he added.

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Response of Tapestry

In an interview with Reuters, Tapestry CEO Joanne Crevoiserat defended the merger by criticizing the FTC's understanding of the marketplace.

"We see the FTC as fundamentally misunderstanding the marketplace and the way consumers shop today as well as the impact of this deal on employees and workers in our industry," Crevoiserat told the outlet. "We source talent and lose talent to a vast array of competitors."

Crevoiserat also told Reuters that the firm was "proud" of the wages and benefits it provides to employees and that the competition for talent goes beyond the fashion industry. According to FTC, Tapestry and Capri currently compete on everything from clothing to eyewear to shoes.

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