The $8.5 billion merger between Tapestry Inc. and Capri Holding Ltd. is on hold after a U.S. District Judge granted the Federal Trade Commission’s (FTC) preliminary injunction in New York federal court last week. The development comes six months after the FTC sued to block the merger between the makers of Coach and Michael Kors handbags, on the grounds that it would eliminate direct competition within the affordable luxury handbag sector.

In a Law360 article, Andrew Lee, Nelson Mullins partner and former FTC trial attorney, offered his take on the case, which was featured in the following excerpt:  

Tapestry and Capri also face a tough legal landscape, since the retail industry has been the target of numerous merger challenges where the courts found a distinct submarket, according to Andrew Lee, a former FTC trial attorney and a partner with Nelson Mullins Riley & Scarborough LLP.

Examples include markets for super-premium ice creams, premium natural and organic supermarkets and superstores for office supplies, he said.

"However, by focusing most of their efforts on insisting that the affordable luxury submarket cannot exist, the merging parties may have inadvertently compelled the court to channel most of its precious energies into simply refuting their product market definition," Lee said.

Instead, Lee said the companies could have focused more on arguments that the merger would not harm competition because other players in the industry have the capacity to "reposition" their brands in response.

"I would have welcomed more meaningful analysis — both from the parties and the court — as to whether such dynamic re-positioning by competing brands have occurred or could occur post-merger," he said.

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