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FTC plays long game opposing Tapestry-Capri

Illustration of a chess piece with a gavel top

Illustration: Sarah Grillo/Axios

The Federal Trade Commission showed its commitment to evolving the law on mergers when it came out against Tapestry's acquisition of Capri Holdings, experts tell Axios.

Why it matters: Changing how the courts think about antitrust is a yearslong process and involves taking on harder-to-argue cases.

What they're saying: FTC chair Lina Khan and Justice Department antitrust chief Jonathan Kanter "are definitely trying to push the limits of antitrust in an effort to expand what is considered to be illegal behavior," says Baker Botts partner Jeffrey Oliver.

  • These "new sheriffs" are trying to distinguish themselves from prior administrations, adds Oliver, a former FTC attorney.

Zoom in: The FTC may have been encouraged by the Department of Justice's success in blocking the merger of JetBlue and Spirit, say Oliver and Brian Albrecht, chief economist at the International Center for Law & Economics.

  • Like those two airlines, Tapestry and Capri will argue a combination of the two struggling companies will create a viable rival to larger competitors.
  • In their case, that means European fashion conglomerates such as LVMH, Kering and Richemont.

Yes, but: While JetBlue and Spirit didn't succeed in making that argument, it's much easier for consumers to shop around for fashion, Oliver says.

  • There are not high barriers to entry for the fashion and accessories marketplaces and bargains can be found everywhere, namely online, he says.
  • It's why the FTC has historically "leaned out of" challenging these kinds of deals and why it's risky to do so now, Oliver adds.

The intrigue: It's rare that the U.S. is not in lock step with its antitrust counterparts in the European Union and Japan, which both cleared the deal, say Oliver and Albrecht.

  • There's been a level of collegiality between antitrust enforcement around the world in recent years not previously seen, Oliver says.

The latest: The FTC also moved to ban noncompete agreements last week, another sign the agency is now weighing the impact on workers in addition to consumer welfare when it comes to mergers.

  • The FTC argued, for example, that a combined Tapestry and Capri would not be incentivized to compete for employees.
  • In this instance, the point felt tacked on or added at the last minute, because the FTC did not provide as much analysis on the negative labor implications compared to other lawsuits it has filed, Oliver observes.

The bottom line: Like JetBlue-Spirit and Kroger-Albertsons, this will be another battle over market definition, Albrecht says.

Editor's note: This story has been corrected to note it was the Department of Justice that blocked the JetBlue-Spirit merger, not the Federal Trade Commission.

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