Kate Spade deal veto is lucky dip for trustbusters
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jonathan Guilford
NEW YORK, April 23 (Reuters Breakingviews) -If one company controls Kate Spade and Michael Kors, does that reduce competition for handbags? And hurt the labor market? And roll up too much customer data? That’s the kitchen-sink approach U.S. trustbusters took on Monday in challenging Tapestry’s TPR.N $8.5 billion takeover of rival Capri CPRI.N. It’s a soft target for competition cops eager to battle-test novel theories.
It might seem a stretch that two medium-sized companies could sew up the American handbag market. Bernstein analysts peg the pair’s combined share of the U.S. bag business at 17%. But antitrust cases stand or fall on whether regulators can draw a conceptual line around companies’ products to show that they face few true competitors.
The Federal Trade Commission’s preferred definition in this case is “affordable luxury.” In practice, plenty of other handbag makers offer their wares at similar prices to Tapestry, whose brands include Kate Spade, and Capri, owner of Michael Kors. Direct-to-consumer brands like Cuyana, maker of a $268 bag sported by Meghan Markle, Britain’s Duchess of Sussex, compete at the lower end. European marques like Saint Laurent, owned by luxury giant Kering PRTP.PA, might dip into the mid-market.
The FTC responds that it is focusing on the bags’ physical attributes. Its definition refers to products made with high-quality materials largely in Asia. Using similarly carefully drawn boundaries, Tapestry and Capri have a 53% market share, Bernstein reckons.
That’s a neat solution, provided courts agree. But the FTC isn’t relying on a single path to victory. The agency is also applying new rules for policing mergers which it finalized in December. Key among them is that market share is irrelevant if companies compete head-to-head by basing prices on what their rival charges. The FTC’s heavily redacted complaint hints at tantalizing evidence. Shareholders take an increasingly dim view of the deal going forward.
Testing out this new legal doctrine isn’t a one-off. If judges accept the FTC guidelines, that establishes precedent for future cases. And there’s lots to test. The agency says this deal would reduce competition for hiring, and that new entrants would struggle to compete because of Tapestry’s hoard of consumer data.
This lucky-dip approach is far from guaranteed to succeed. The FTC has struggled elsewhere, as in its losing case against Microsoft’s acquisition of video-game developer Activision Blizzard. But Tapestry and Capri do not have technology giants’ resources for mounting legal defenses. The case also lacks the broader political considerations at work in, say, the takeover of United States Steel X.N. Consumers, though, may favourably note the government’s attempts to maintain competition in a product they recognize. That offers trustbusters an opportunity to mount a challenge with far-reaching implications.
Follow @JMAGuilford on X
CONTEXT NEWS
The U.S. Federal Trade Commission on April 22 filed an administrative complaint and simultaneously authorized a lawsuit in federal court to block Tapestry’s $8.5 billion acquisition of Capri.
The complaint charges that the two companies dominate the market for “affordable luxury” handbags. It defines these as mass-market bags, manufactured in Asia from high-quality materials and sold at mid-market prices.
The complaint notes that new guidelines issued in 2023 argue that a merger is illegal if it substantially lessens intense, head-to-head competition regardless of market share.
Capri shares fell as much as 3.1% to $36.79 in early trading on April 23. Tapestry’s cash offer values the shares at $57 each. Tapestry shares were down as much as 3.9% at $38.73.
Graphic: Investors give Capri deal increasingly poor odds https://reut.rs/3Wcw2wp
Editing by Peter Thal Larsen and Sharon Lam
Mga Kaugnay na Asset
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
