The US Federal Trade Commission (USFTC) has blocked the merger of Coach’s parent company Tapestry with Capri, the owner of Michael Kors. This $8.5 billion deal would eliminate direct competition between the two luxury handbag brands, thus potentially reducing employee wages and benefits, warns USFTC.

USFTC states, the merger could prevent millions of American consumers from benefiting from competition between Tapestry and Capri, which includes factors such as pricing, discounts, innovation, design, and marketing. This challenge from the USFTC might establish a precedent for regulating such mergers.

Antitrust lawyers noted that the USFTC's opposition is based on new merger guidelines issued in December, which prioritise maintaining fair and competitive markets. The commission’s argument also highlights concerns about potential negative impacts on workers, such as lower wages and poorer working conditions.

Tapestry had proposed the acquisition in August, with an aim to create a dominant force in the US fashion market capable of competing with larger European rivals like LVMH, the parent company of Louis Vuitton. Despite receiving regulatory clearance from the European Union and Japan, the FTC's challenge has thrown the deal into uncertainty.

Capri Holdings expressed strong disagreement with the FTC's decision, asserting that the merger would not harm competition. Tapestry echoed this sentiment, emphasising the pro-competitive and pro-consumer nature of the deal.