The fate of Capri Holdings, the parent company of Michael Kors, is on hold following an ongoing Federal Trade Commission (FTC) lawsuit challenging Tapestry’s proposed 8.5 billion dollar acquisition of the group.
According to the FTC, the merger of the Coach and Kate Spade brands, owned by the multinational holding company Tapestry, with Michael Kors, would create a dominant giant in the market for affordable luxury handbags. A near-monopoly that would allow the merged entity to set prices freely, most likely leading to higher prices for consumers.
“The proposed merger threatens to deprive millions of American consumers of the benefits of direct competition between Tapestry and Capri, including on pricing, discounts and promotions, innovation, design, marketing and advertising. The transaction also threatens to eliminate the incentives for both companies to compete for employees and could negatively impact wages and benefits in the workplace. Following the acquisition, Tapestry and Capri together would employ approximately 33,000 people worldwide,” the FTC said in its statement.
The trial, which could determine the future of the acquisition, featured several executives from both companies, including Michael Kors himself. The famed fashion designer spoke about his brand’s history, its current challenges and the intense competition in the handbag industry.
Kors noted the fierce competition in the market, citing rivals such as Ralph Lauren, Louis Vuitton and even major retailers like Target. He also acknowledged the challenges his brand faces, including declining sales and the need to reinvent itself.
The FTC argues that the merger would reduce competition and allow Tapestry to raise prices. However, both companies defended the acquisition, saying it would benefit consumers by creating a stronger, more innovative company.