In a Manhattan courtroom presided over by Judge Jennifer Rochon on Tuesday, September 10th, an exhibit showcased a vibrant, cheerful, and feminine green and white Kate Spade handbag priced at $279. The CEO of the company behind this bag, Tapestry Inc., was full of praise for the bag in front of a room filled with over a dozen lawyers and arbitration experts.
The luxury fashion brand Coach’s parent company, Tapestry Inc., CEO Joanne Crevoiserat mentioned to the judge and attendees that since this bag appeared in a romantic comedy on Netflix, they now refer to it as their “Emily in Paris” bag.
“Emily in Paris” is a light-hearted, entertaining comedy series that has garnered a lot of attention. In May 2017, Coach officially announced the acquisition of Kate Spade.
On April 22nd this year, the U.S. Federal Trade Commission (FTC) filed a lawsuit on antitrust grounds to block Tapestry’s $8.5 billion acquisition of Capri, the parent company of Michael Kors. This marked the first enforcement action taken by the agency in the fashion industry under the leadership of Chairwoman Lina Khan.
During a hearing on Tuesday to determine whether the antitrust enforcers would win the lawsuit and halt Tapestry’s acquisition of Capri, Crevoiserat testified. The FTC argued that consolidating all brands under Tapestry and Capri would lead to higher prices for low to middle-income customers. However, both companies stated that the merger would provide consumers with more choices and help revitalize the declining Michael Kors brand without stifling competition.
Wall Street is closely monitoring any clues from the courtroom to understand whether Judge Rochon will approve the FTC’s requested preliminary injunction freezing and blocking the deal.
Amidst the legal proceedings, an array of stylish bags, including a beautiful Coach Rogue bag priced at $1,095, was presented as evidence to contrast with Kate Spade’s products, showcasing the market’s acceptance of competition at all price points.
To illustrate the plethora of bag options available to customers, Crevoiserat also cited Lululemon Athletica Inc., highlighting how a simple nylon waist bag turned into a $600 million business for the athletic apparel company. She mentioned, “What pains me is that my daughter carries one.”
John Idol, the CEO of Capri Group, was present at the hearing as well. He highlighted Michael Kors’ swift decline from a peak sales figure of $4.7 billion in 2016 to $3.5 billion in 2022. The intensified market competition has squeezed the brand from both the high-end and low-end markets.
An FTC spokesperson voiced concerns about Tapestry monopolizing the luxury handbag market after acquiring Capri Group, potentially harming consumer interests. The FTC pointed out that Coach, Kate Spade, and Michael Kors collectively command more than half of the U.S. luxury handbag market, making it challenging for competitors like Tory Burch and Polo Ralph Lauren to compete.
“This case concerns ‘working-class and middle-class women in America,’ who seek reasonably priced luxury brands. The merger of Tapestry and Capri would weaken market competition, ultimately harming consumer interests,” said FTC representative Nicole Lindquist.
The FTC is worried that post-merger, Tapestry would dominate the “affordable luxury” market, further diminishing market competition. FTC believes that this competition translates to more favorable prices, discounts, and promotional activities for consumers, as well as higher wages and better job benefits for employees.