US sues to block merger of Coach and Michael Kors handbag makers

April 22 (Reuters) - The U.S. Federal Trade Commission on Monday sued to block Coach parent Tapestry's (TPR.N)New Tab, opens new tab $8.5 billion deal to buy Michael Kors owner Capri (CPRI.N)New Tab, opens new tab, 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.

In an interview with Reuters, Tapestry CEO Joanne Crevoiserat said the company was "proud of the wages and benefits" it offers to employees and that the competition for talent goes beyond just the fashion industry.

"We see the FTC as fundamentally misunderstanding the marketplace and the way consumers shop today as well as the impact of this deal on employees and workers in our industry," Crevoiserat said.

"We source talent and lose talent to a vast array of competitors," she added.

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 from labels launched every year.

"The FTC's deci...
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