Conglomerates Compete for Dominance
In August 2023, Tapestry, the New York-based parent company of Coach, declared intentions for an $8.5 billion merger with Capri, which owns labels led by founders, including Jimmy Choo, Michael Kors, and Versace. In April 2024, the FTC (Federal Trade Commission) sued to obstruct the merger — which would unify six brands like Michael Kors and Coach under one entity — claiming that the merger would monopolize the leather bags and accessories sector, likely diminishing competition and providing consumers with fewer affordable selections. The lawsuit expresses concerns that such consolidation could impede innovation and increase prices, as reduced competition typically results in complacency among industry leaders. According to Reuters, the FTC asserts that the merger would also grant Tapestry a commanding share of the “accessible luxury” handbag sector, controlling over 50% post-merger.
Brands under Capri Holdings
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The FTC also emphasized potential ramifications for employees, warning that a monopoly could adversely affect wages and benefits by diminishing their negotiating leverage. This highlights a growing trend of mergers and acquisitions within luxury conglomerates that sometimes prioritize market dominance over consumer choices. Perhaps regulatory scrutiny from bodies like the FTC should be welcomed, as the outcome of this legal conflict could reshape the future of these brands and establish a standard for how accessible luxury markets function in the years ahead.
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Defining “Accessible Luxury”
Accessible luxury pertains to mid-range luxury goods priced between high-end luxury items and mass-market brands. The FTC categorizes “accessible luxury” as handbags priced from $100 to under $1,000, where brands like Capri’s Michael Kors and Tapestry’s Coach and Kate Spade fall within this range.
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A 2015 article by Forbes described Michael Kors consumers as those aged 25 to 54 with annual incomes exceeding $50,000. This demographic represented the newly affluent or established upper middle class, possessing disposable income and a desire for luxury amenities, according to the article’s analysis. However, nearly a decade later, this age group is becoming older millennials, while competition from Coach and Kate Spade intensifies, compounded by a thriving second-hand and counterfeit market where Gen Z opts for superfakes and luxury replicas as a statement against capitalism and the democratization of luxury fashion.
Jonathan Akeroyd, Donatella Versace, John D. Idol. (Photo: Rahi Rezvani)
This situation inevitably results in Michael Kors gradually losing its previously established niche. An acquisition would significantly alter the competitive landscape, enabling the combined entity to utilize shared resources and enhance brand visibility, allowing it to become a powerful force within the accessible luxury market. Michael Kors has acknowledged the increasing struggle to remain relevant “in a world where brands can rise and fall based on viral TikTok videos and images of handbags carried by celebrities like Taylor Swift and Beyoncé.” Beyond the potential merger, a rebranding similar to the 2018 acquisition of Gianni Versace by Michael Kors Holdings for EUR 1.83 billion (approximately $2.12 billion) could be considered, which initiated the formation of Capri Holdings Limited.
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Coach storefront image
While one could hope that this move might lead to broader distribution channels and a richer product selection appealing to a wider audience while preserving the essence of luxury, a more probable outcome would involve a merging of brand identities that risks diluting distinct brand equity, potentially sacrificing uniqueness in a market that thrives on individuality. This could lead to a more uniform product range that may not resonate deeply with discerning consumers seeking the exclusivity that characterizes accessible luxury.
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Michael Kors Tote
Kate Spade Tote
Coach Tote
Imagine a scenario where the average consumer, not particularly brand-loyal, enters a department store (or goes online at MyTheresa or FarFetch) looking for a mid-market luxury bag and finds three monogrammed tote bags of similar shape and size, all priced similarly. They may struggle to differentiate between the brands, causing them to view each option as equally appealing. This situation is arguably more insidious than merely price control; it potentially deceives consumers into believing they are making informed choices when they are simply responding to superficial branding and marketing strategies that obscure the lack of meaningful differences in quality or design. While it could be said that each brand has signature pieces, such as the Coach Tabby Shoulder bag or the Kate Spade Flower Duffle Crossbody, the silhouettes are fairly interchangeable and replicable, with the primary distinguishing factor being an emblem or monogram print.
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Current Status of the Pending Lawsuit
Fashion designer Michael Kors
Currently, the legal proceedings are at a standstill, with designer Michael Kors recently testifying about competition in the handbag market, acknowledging that “Sometimes you’ll be the hottest thing on the block. Sometimes you’ll be lukewarm. Sometimes you’ll be cold,” recognizing that his brand has lost favor and requires rejuvenation, according to reports from CNBC news.
The FTC argues that the merger between Tapestry and Capri — particularly with Coach and Michael Kors under one ownership — would create a powerful handbag conglomerate capable of raising prices while delivering identical or subpar products to consumers. In contrast, lawyers for Tapestry and Capri contest the FTC’s depiction of a merged handbag market. They maintain that competition has risen as shoppers now weigh the options of high-end luxury brands against cheaper fast-fashion alternatives and the ease of access provided by online-only retailers and secondhand marketplaces, as reported in a recent CNBC News article.
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As noted by Glossy.Co, mergers among prominent fashion companies frequently garner regulatory scrutiny. Notable cases include LVMH’s $16.2 billion acquisition of Tiffany & Co. in 2020, Essilor’s $49 billion merger with Luxottica in 2018, Michael Kors’s $2.1 billion purchase of Versace the same year, Kering’s takeover of Gucci in 1999, and Prada’s acquisition of Jil Sander in 1999. These mergers and acquisitions received careful examination from regulators concerned about possible reduced competition and increased consolidation within the luxury fashion sector.
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The outcome of the lawsuit regarding the merger of Tapestry and Capri is still uncertain, yet it has considerable implications for consumers and the accessible luxury landscape. If the FTC successfully blocks the merger, it may prevent the rise of a dominating entity that could restrict options and elevate prices. This would help sustain a competitive environment that fosters innovation and diverse offerings. Conversely, if the merger proceeds, consumers might encounter a diminished selection, as the joint entity might concentrate on a standardized product array, sacrificing uniqueness for brand unity. Nevertheless, increased competition from fast-fashion contenders and a growing secondhand market could prompt brands to innovate and differentiate, ensuring consumers have access to various choices. Ultimately, this legal conflict will shape not only the future of these iconic brands but also the framework of accessible luxury.
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