A planned merger of fashion groups Tapestry Inc (NYSE:TPR), which owns Kate Spade and Coach, and Capri Holdings, which owns Michael Kors, Versace and Jimmy Choo, has been blocked by the US antitrust watchdog.
Tapestry’s $8.5 billion deal to buy Capri, agreed last August, was halted by the Federal Trade Commission as it said the Coach, Kate Spade and Michael Kors brands are close competitors.
"If allowed, the deal would eliminate direct head-to-head competition between Tapestry’s and Capri’s brands. It would also give Tapestry a dominant share of the 'accessible luxury' handbag market," the FTC said.
The commission's Bureau of Competition has sued to block the deal by issuing an administrative complaint and authorized a lawsuit in federal court, alleging that the deal "will eliminate fierce competition between the two companies".
Currently, this competition provides consumer benefits on price, discounts and promotions, innovation, design, marketing, and advertising, the regulator said in a statement.
“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, alleging that it will make it harder for new brands to enter the market and have a meaningful presence.
As this deal follows a decade of M&A by Tapestry, the FTC argues that the Capri acquisition will give Tapestry additional leverage to make even more acquisitions in the future.