Tapestry vs. FTC: A Luxury Handbag Merger Dispute

In a significant legal battle, Tapestry, the holding company for luxury brands like Kate Spade and Coach, is in contention with the Federal Trade Commission (FTC) over its proposed acquisition of Capri Holdings, which owns the brand Michael Kors, in a deal valued at $8.5 billion. The FTC argues that such a merger could lead to higher prices for consumers in the accessible luxury handbag market. However, experts like former LVMH chairman Pauline Brown assert that the FTC’s argument lacks merit, suggesting that consumer behavior is dictated by quality and pricing rather than by market consolidation. Brown points out that the handbag market operates on a spectrum where costs influence pricing, indicating that Tapestry and Capri have historically maintained competitive pricing strategies. The FTC's intervention raises questions about future consolidations in the luxury goods sector and creates potential barriers for acquisitions by larger players. Additionally, Brown highlights the evolving arbitrage business surrounding luxury goods, where consumers buy products in European markets at a lower cost and resell them for profit in the U.S. This trend reflects the industry's price hikes, which have averaged around 55% over recent years, inadvertently motivating arbitrage opportunities. As the battle unfolds, the implications of the FTC's decision could reshape not only the handbag market but also the broader luxury goods landscape.