Judge blocks Coach owner’s $11b buyout of Versace parent, citing risk of higher handbag prices

NEW YORK – A US judge moved Oct 24 to block a merger of the fashion companies that own the Coach, Kate Spade, Michael Kors and Versace brands, ruling that the tie-up would “substantially lessen competition” among makers of accessible luxury handbags.

The Federal Trade Commission (FTC) sued to block the US$8.5 billion (S$11.2 billion) deal in the spring. The case was a rarity in the fashion world, given how competitive the industry is and the relatively low barriers to enter.

Judge Jennifer L. Rochon seemed to accept the trade commission’s argument that millions of consumers could end up paying more for handbags and other fashion items because the combined company would no longer have the incentive to compete on price.

“Antitrust has come into fashion,” Judge Rochon wrote in her ruling.

When Tapestry, the parent company of Coach and Kate Spade, announced its acquisition of Capri Holdings, owner of Versace and Michael Kors, in August 2023, it was seen as a sign of continuing consolidation in the luxury fashion market.

Tapestry said it planned to appeal the ruling, which it described in a statement as “disappointing and, we believe, incorrect on the law and the facts.” The company reiterated its argument that the retail industry is “intensely competitive and dynamic, constantly expanding and highly fragmented.”

Judge Rochon granted a preliminary injunction that prevents the acquisition from moving forward while the FTC investigates the deal in its administrative court.

The ruling is a win for Lina Khan, the head of the FTC, who has come under fire for her aggressive approach to antitrust and has become a lightning rod in the US presidential election. The lawsuit had been fodder for her detractors, who argued that the FTC’s time was better spent protecting industries other than handbags.

At the centre of the FTC’s concerns were “accessible luxury” accessories – an industry term for the less expensive wares sold by Coach, Kate Spade and Michael Kors.

Tapestry and Capri argued that accessible luxury was not a defined category but, rather, a “generalised concept.” Judge Rochon pushed against this, arguing in her ruling that the accessible luxury handbag category seemed to have traits that set it apart from true luxury brands.

Most accessible luxury handbags, including Coach and Michael Kors, the judge said, are more likely to be produced in South-east Asia. The court also determined that the category was defined by bags with an entry price of about US$100 and “heavily rely on discounting.”

In her ruling, Judge Rochon rejected the notion that the price of handbags wasn’t a suitable subject for an antitrust case.

“Downplaying the importance of handbags as nonessential discretionary items that consumers can simply choose not to buy if the price is too high ignores that handbags are important to many women, not only to express themselves through fashion but to aid in their daily lives,” she wrote. NYTIMES

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