The big picture of the Tapestry Capri case
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Photo illustration: Annelise Capossela. Photo: Saul Loeb/AFP/Bloomberg via Getty Images
A federal judge sided with the FTC Thursday, blocking Tapestry's $8.5 billion bid to acquire Michael Kors and Versace owner Capri. The news sent Capri's stock down 47% in early trading Friday.
Why it matters: It's a reminder that the FTC can go after sectors that may be considered discretionary goods.
Context: At the heart of the battle was the definition of Tapestry and Capri's actual market. The FTC argued they would become the biggest player in the "accessible luxury" industry. The companies disagreed, arguing bags are a much larger universe.
- That raises the questions if there's now a broader universe the FTC could go after — such as sports supplies, more premium supermarkets, or even cruises.
Zoom in: FTC chair Lina Khan has taken a broad view of antitrust regulation, taking factors like labor competition into account. The Tapestry case was no exception, with the commission citing it as one reason for blocking the case.
- The judge didn't even get to that argument, having found enough evidence of competition around pricing, discounting, and marketing.
The bottom line: This is also a major win for Khan, who has suffered a series of defeats in courts. Critics also took aim at the FTC's challenge of the Tapestry-Capri case, saying the commission's time could be better spent than on handbags.
- "There's a narrative that these guys can't win," says former FTC chair William Kovacic. "There's nothing quite like a litigated victory that helps you rebut the story that you've gone wild."
- The FTC under Khan has now won more cases than it has lost, even by conservative estimates, says Columbia Law School professor Timothy Wu.
- The FTC has won two cases that have gone to court, lost one, and is juggling one appeal (Microsoft).
- Including settlements and blocked deals, the FTC has filed 19 complaints, blocked 15, and lost one, with three still pending, he says.
Capri has said that it plans to appeal the case.
