FTC Blocks Tapestry-Capri Merger, Citing Traditional Antitrust Principles

The Skadden firm reports on the Federal Trade Commission’s (FTC) successful rejection of Tapestry Inc.’s $8.5 billion acquisition of Capri Holdings, which was based on traditional antitrust principles. The merger involved popular “accessible luxury” handbag brands like Coach, Kate Spade, and Michael Kors (Federal Trade Commission v. Tapestry, Inc.).

The decision marks a significant win for the FTC following recent merger litigation losses. The case underscores the ongoing relevance of traditional antitrust principles, including reliance on internal company documents as evidence.

The FTC filed suit in April 2024, alleging that the merger would harm competition for “accessible luxury handbags.” These handbags, positioned between mass-market and true luxury offerings, are defined by quality craftsmanship at an affordable price.

Internal documents revealed that both companies recognized each other as primary rivals, focusing intensely on discounting, marketing, innovation, and design and engaging in price monitoring and competitive strategies that benefited consumers. The FTC argued that combining these competitors would stifle competition, leading to higher prices and reduced consumer choice.

The ruling from the Southern District of New York highlights three key points for merger review:

• Courts remain grounded in established market definition principles, requiring solid evidence for niche market claims
• Internal business documents play a pivotal role, often outweighing testimony in proving the competition dynamic
• While the FTC and DOJ advocate novel merger theories, courts appear more comfortable applying long-standing precedent.

Firms advising on mergers should prioritize document preparation and anticipate traditional analyses while monitoring regulatory shifts.