U.S. Court Blocks Tapestry's $8.5 Billion Acquisition of Rival Capri, Citing Competition Concerns.

A U.S. judge has blocked the proposed $8.5 billion merger between Tapestry and Capri, two major U.S. handbag and accessories makers. The Federal Trade Commission (FTC) argued that the merger would eliminate competition between the top two U.S. handbag makers and create a company with the power to unfairly raise prices. Judge Jennifer Rochon rejected the companies' defense, including their argument that handbags are nonessential items whose prices consumers can control by not purchasing.

The ruling is seen as a victory for the Biden administration ahead of the November 5 presidential election, where rising consumer prices have become a top concern for voters. The decision sent Capri shares tumbling by 47%, while Tapestry shares rose by around 13% in after-market trading.

Tapestry plans to appeal the ruling, stating that they believe it is incorrect and that the transaction is pro-competitive and pro-consumer. The deal would have brought six brands under one roof: Coach, Kate Spade, Stuart Weitzman, Versace, Jimmy Choo, and Michael Kors. The companies had argued that the merger was necessary to compete against European players like Gucci, who are increasing market share in the U.S.

The judge's ruling effectively blocks the proposed deal permanently, as it would require another lengthy review by the FTC, which would extend beyond the deal's termination date of February 10. The decision follows approval of the merger by regulators in Japan and the European Union earlier this year.

Report by Reuters