This week, the Federal Trade Commission filed suit to block the $8.5 billion deal that would see Tapestry acquire Capri Holdings, and bring together Coach, Stuart Weitzman, and Kate Spade (which are owned by Tapestry) with Capri’s Michael Kors, Versace, and Jimmy Choo brands. In the administrative complaint that it filed on April 22, the FTC refers to “accessible luxury” at least 68 times – a count that does not include any time the term may have been mentioned in the redacted sections (and there are plenty of those).
According to the FTC, the deal – if allowed to proceed – would “give Tapestry a dominant share of the ‘accessible luxury’ handbag market,” a term that it claims was coined by New York-based Tapestry “to describe quality leather and craftsmanship handbags at an affordable price.”
The Lina Khan-led FTC’s focus on “accessible luxury” is significant, as that is what it is defining as the relevant market – i.e., the market in which competition would be stifled should the deal come into fruition. According to the FTC, “By combining three of the top players in the market for ‘accessible luxury’ handbags in the U.S. – including the top two (Coach and Michael Kors) by far – the Proposed Acquisition will significantly increase concentration and result in a highly concentrated market, making the proposed acquisition presumptively unlawful under controlling caselaw and the Merger Guidelines.”
What the regulator is looking to do here is to frame the market narrowly – and distinguish it from what it calls the “luxury,” “true luxury,” “high-end luxury” or “European luxury” segment – in order to fashion itself a better chance of success of showing that the merger would have anticompetitive effects. Such a narrow focus is critical to the FTC’s case, in light of the size of the players in the “true luxury” segment. After all, even if combined, Tapestry and Capri are no match for giants like LVMH, Kering, etc.
