Compass Lexecon Client, The Federal Trade Commission, Granted Preliminary Injunction Pausing the Proposed Merger of Tapestry and Capri

On October 24, 2024, following a seven-day hearing, New York federal judge Jennifer Rochon ruled in favor of Compass Lexecon’s client, the Federal Trade Commission (FTC), granting the FTC’s motion for a preliminary injunction to pause the proposed merger of Tapestry, Inc.—the owner of Coach, Kate Spade, and Stuart Weitzman—and Capri Holdings Limited—the owner of Michael Kors, Jimmy Choo, and Versace. Following the Court’s decision, the parties abandoned the merger.

Compass Lexecon Executive Vice President, Dr. Loren K. Smith, appeared during the hearing on behalf of the FTC and testified that the proposed merger would substantially lessen competition in the market for accessible luxury handbags.

In her decision, Judge Rochon ruled “the Court finds that the merging parties are close competitors, such that the merger would result in the loss of head-to-head competition. The Court thus finds that there is persuasive additional evidence of unilateral effects of the merger causing anticompetitive harm.”

Judge Rochon relied on Dr. Smith extensively for her decision, citing his reports and testimony more than 200 times in her opinion, noting “the Court finds Dr. Smith’s diversion analysis…to be reliable;” “the analysis conducted by Dr. Smith demonstrates that the luxury handbag market passes the HMT [hypothetical monopolist test] by significant amounts, and thus is an appropriate relevant market for antitrust purposes;” and that “Dr. Smith’s UPP and merger simulation are persuasive additional evidence that the merger will cause consumer harm…”

Dr. Smith was supported by a Compass Lexecon team that included Dan Gaynor, Chris Rybak, Tongtong Shi, John Campbell, Catherine Barron, Michael Matelis, Sencer Ecer, Benjamin Wolters, Lauren Lau, Jeffrey Tan, and Niya Dai.