Written by Abigail Somerville, Grace Vanaik, and Jasper Ward
(Reuters) – The U.S. Federal Trade Commission filed a lawsuit on Monday seeking to block Coach parent company Tapestry's $8.5 billion deal to buy Michael Kors owner Capri, and two luxury handbag makers. He claimed that there would be no “direct direct competition” between major brands. .
The FTC said in a statement that the partnership would create a company with about 33,000 employees worldwide and could result in wage and employee benefits cuts.
“The proposed merger threatens to deprive millions of U.S. consumers of the benefits of Tapestry and Capri's direct competition, including competition on price, discounts, promotions, innovation, design, marketing, and advertising,” the FTC said. ” he said.
The FTC's unusual antitrust challenge to a luxury fashion merger could set a precedent for regulating luxury goods transactions, antitrust lawyers said.
Antitrust experts say the U.S. luxury goods market is highly fragmented with several differentiated brands aimed at a wide range of consumers, with traditional fashion brands typically launched each year. It argued that it faces healthy competition from brands.
“The FTC's decision to litigate is surprising because there is no shortage of competition in fashion, apparel, and accessories. “We are treating it like a unique market that exists in the world.” Howard Hogan, head of the fashion, retail and consumer practice at law firm Gibson Dunn;
new guidelines
U.S. antitrust enforcement authorities issued new merger guidelines in December to encourage fair, open and competitive markets.
Antitrust lawyers say the FTC is taking new tactics based on the guidelines, saying that mergers will have a direct impact on hourly workers, reduce competition for workers, and reduce competition for employees. They argued that they could lose the opportunity to earn higher wages.
“Revised federal merger guidelines outline that potential labor impacts, such as lower wages and working conditions, are grounds for challenging a merger, which is a newer trend, as it allows government agencies to do so. “It's not surprising since they announced it, but this is new and needs to be tested in court,” said Jennifer Rada, a litigation attorney at Holland & Knight.
Tapestry had offered to buy Capri in August, giving the US fashion giant a chance to effectively battle larger European rivals such as Louis Vuitton's parent company LVMH and capture a larger share of the global luxury goods market. I was thinking of creating one.
But the FTC requested more information about the transactions from both companies in November.
“Capri Holdings strongly disagrees with the FTC's decision,” the company said in a statement. “The market realities that the government's challenge ignores overwhelmingly demonstrate that this transaction does not limit, reduce, or constrain competition.”
Tapestry also said in a statement: “There is no question that this is a pro-competitive, pro-consumer transaction, and that the FTC fundamentally misunderstands both the market and the way consumers shop.” .
In early April, the companies received regulatory approval from the European Union and Japan for a deal that would bring top luxury brands such as Kate Spade and Jimmy Choo under one roof.
Capri's stock is trading at $37.96, well below Tapestry's offer of $57 per share, but most analysts expect the deal to be completed by the companies' August 10 deadline. Expect.
“In our view, we do not believe the combination will harm consumers, given the level of competitiveness and cultural relevance of this category,” TD Cowen analysts said in a note in early April. ” he wrote.
(Reporting by Abigail Somerville in New York, Jasper Ward in Washington and Granth Vanaik in Bangalore; Editing by David Ljungren, Shilpi Majumdar, Anirban Sen and Richard Chan)
