U.S. sues to block merger of Coach and Michael Kors [Video]

The U.S. Federal Trade Commission on Monday sued to block Coach parent Tapestry’s US$8.5 billion deal to buy Michael Kors owner Capri, saying it would eliminate “direct head-to-head competition” between the flagship brands of the two luxury handbag makers.

In a statement, the FTC said the tie-up, which would create a company with about 33,000 employees worldwide, could reduce wages and employee benefits.

“The proposed merger threatens to deprive millions of American consumers of the benefits of Tapestry and Capri’s head-to-head competition, which includes competition on price, discounts and promotions, innovation, design, marketing and advertising,” the FTC said.

The FTC’s rare antitrust challenge against a high-end fashion merger could set a precedent for luxury deal regulation, several antitrust lawyers said.

The U.S. luxury market is highly fragmented with several differentiated brands catering to a wide range of consumers, antitrust experts said, arguing that legacy fashion brands typically face healthy competition …