LVMH's Acquisition of Richemont Leather Goods Faces Challenges as FTC Sues to Block Tapestry-Capri Deal

Luxury mergers face antitrust scrutiny: FTC sues to block Tapestry's acquisition of Capri, citing concerns over reduced competition and worker impact. A cautionary tale for serial acquirers in the industry.

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LVMH's Acquisition of Richemont Leather Goods Faces Challenges as FTC Sues to Block Tapestry-Capri Deal

LVMH's Acquisition of Richemont Leather Goods Faces Challenges as FTC Sues to Block Tapestry-Capri Deal

LVMH's acquisition of Richemont's leather goods division is facing difficulties, serving as a cautionary tale for serial acquirers in the luxury industry. The Federal Trade Commission (FTC) has sued to block Tapestry's acquisition of Capri, citing concerns that the deal would eliminate head-to-head competition between the companies' brands and give Tapestry a dominant share of the 'accessible luxury' handbag market. The FTC also said the deal would eliminate the incentive for the companies to compete for employees.

The lawsuit filed by the FTC alleges that Tapestry's proposed acquisition of rival Capri Holdings will eliminate competition in the accessible luxury handbag market and negatively impact employees' wages and benefits. Tapestry, the parent company of Coach and Kate Spade, and Capri, owner of Jimmy Choo and Michael Kors, have defended the merger, stating that it will bring significant benefits to customers, employees, and stakeholders. They argue that the FTC is the only regulator to disagree with the transaction.

Why this matters: The case highlights the challenges that serial acquirers in the luxury industry may face, as regulators scrutinize deals that could potentially reduce competition and harm consumers. It also shows a shift in antitrust enforcement, with the FTC emphasizing the potential impact on workers in addition to the traditional focus on consumer welfare.

The FTC is working to prevent the proposed $8.5 billion acquisition, which would consolidate several major fashion brands under one owner. The agency is concerned not only about higher consumer prices and reduced choice but also about the potential harm to workers, including lower wages and benefits. The case is part of a broader trend of consolidation in the luxury fashion industry, with French conglomerates LVMH and Kering controlling much of the European luxury market.

Tapestry has been focused on the 'affordable luxury' segment, which includes brands like Coach, Kate Spade, and Michael Kors. The FTC is concerned that the merger would reduce competition and innovation in this segment, leading to higher prices for consumers. Additionally, the FTC is worried that the combined company would have the power to limit wholesale discounting, further harming consumers.

In a statement, Tapestry and Capri said, "We are disappointed that the FTC has filed a complaint to block a transaction that will deliver significant benefits to consumers, employees, and our industry. We are confident that the merger will expand access to more brands and styles, while preserving choice and promoting competition." The companies plan to vigorously defend the merger in court.

The difficulties faced by LVMH's acquisition of Richemont's leather goods division and the FTC's lawsuit against the Tapestry-Capri deal serve as a warning for other luxury conglomerates pursuing aggressive acquisition strategies. Antitrust authorities are increasingly scrutinizing mergers for their potential impact on workers and market competition, not just consumer prices. As the legal battles unfold, the outcome of these cases will likely shape the future of consolidation in the luxury industry.

Key Takeaways

  • FTC sues to block Tapestry's acquisition of Capri, citing competition and labor concerns.
  • Regulators scrutinize luxury mergers for impact on competition, consumers, and workers.
  • LVMH's Richemont acquisition faces difficulties, a cautionary tale for luxury consolidation.
  • Tapestry-Capri deal would consolidate major fashion brands, reducing competition in 'affordable luxury'.
  • Outcome of these cases may shape future of consolidation in the luxury industry.