Whether regarded as superfluous accessories or vital resources, handbags have a long and storied history, and their different versions can provide different benefits to different consumers. For example, some handbags display superior materials and craftsmanship but at a relatively lower price point, which constitutes an “accessible luxury” market segment. With entry prices hovering around $100, marketers often tout these items by highlighting their comparable value. 

The best known names in this subcategory include Coach and Kate Spade, both of which are owned by the same parent company Tapestry, and Michael Kors, which is owned by Capri. Noting these ownership rights, the Federal Trade Commission (FTC) recently moved to block a proposed merger between the parent companies, citing the concern that it would eliminate significant, head-to-head competition and thereby result in higher prices for all three brands. The FTC also argued that the merger threatened the livelihoods of employees at both companies, by eliminating competitive hiring practices and removing a key incentive for offering wage increases and benefits.

When a federal judge sided with the FTC, the injunction issued prevented the merger from going forward. As their main contention, Tapestry and Capri argued that accessible luxury is not an official category, but the judge ruled that because “accessible luxury” has definable traits, it constitutes a market, that Tapestry and Capri account for a notably sizeable portion of that market.

Following the ruling, shares of Capri fell by more than 50 percent. The decision also put Tapestry’s long-term health at risk; the company owes much of its recent success to its serial acquisitions of similar fashion brands, and it planned to persist in this strategy after its scheduled merger with Capri. But the ultimate outcome of the case threatens to set a precedent that would halt its future expansion through merger deals.

Tapestry continues to plan to appeal the decision though. According to one retail analyst, the ruling appears unreasonable, given the history of this particular segment of the market. Still, the deal is off the table for now, and any further court proceedings are expected to be lengthy. 

Discussion Questions 

1. Is there a clear market distinction between affordable luxury and true luxury products? Why or why not?
2. Some observers argue that the handbags are discretionary items, and the FTC should prioritize regulations in more vital industries. Do you find this argument convincing? Why or why not?

Sources: Lauren Hirsch and Jordyn Holman, “Judge Blocks Luxury Fashion Deal, Citing Risk of Higher Handbag Prices,” The New York Times, October 24, 2024; Anne D’Innocenzio, “Merger of Handbag Makers Tapestry, Capri Halted as Judge Sides with FTC in Antitrust Case,” Associated Press, October 25, 2024; “FTC Moves to Block Tapestry’s Acquisition of Capri,” Federal Trade Commission, April 22, 2024