Judge Jennifer Rochon, who was nominated by President Biden to the federal district court for the Southern District of New York, issued a preliminary injunction that stopped the proposed merger of several major fashion companies that sell handbags as the Federal Trade Commission (FTC) continues its investigation. The October 2024 decision was in FTC v Tapestry Inc.
What happened in this case?
In 2023, Tapestry, Inc., a leading maker and seller of “accessible luxury accessories” including handbags, signed a merger agreement with global fashion firm Capri Holdings Ltd., in which Tapestry would pay Capri some $8.5 billion. Together, Tapestry and Capri control a large part of the market in “affordable luxury handbags.” The FTC sued Tapestry and Capri in April 2024, contending that the merger was anti-competitive, would lead to higher prices for consumers, and violated federal antitrust laws.
The FTC filed a motion for a preliminary injunction, seeking to stop the merger until it had completed its investigation. The parties filed extensive briefs and other documentary information. Judge Rochon, to whom the case was randomly assigned, held a seven-day hearing in September, 2024, at which dozens of fact and expert witnesses testified. In late October, Judge Rochon issued a comprehensive opinion of almost 170 pages, carefully analyzing the facts and the relevant law in the case.
How did Judge Rochon rule and why is it important?
Commenting at the outset that the case meant antitrust has now “come into fashion,” Judge Rochon issued an extensive opinion that granted the preliminary injunction and stopped the merger from going forward, at least until after the FTC has completed its investigation and related internal proceedings. An appeal by the corporations to the Second Circuit is likely.
Rochon began by carefully analyzing the evidence in the record concerning the market in “accessible” or “affordable” luxury handbags. She found that the FTC is likely to prevail on its contention that the proposed merger would be anticompetitve, result in higher consumer prices, and violate the federal Clayton Act. After the merger, she found, the companies would control some 59% of the market in these products, which creates a “presumption of anticompetitive effects” under applicable precedent.
On the other hand, Rochon wrote, denying preliminary injunctive relief against the merger “would likely cause irreparable harm to the public” through increased prices, particularly in light of the importance of handbags “to many women” and the extreme difficulty of rolling back price increases once they occur. Although more proceedings will likely take place in the FTC and possibly other courts, Rochon concluded that “[f]or now, the balance of the equities clearly favors granting the FTC’s request for a preliminary injunction.”
Judge Rochon’s opinion is obviously important to the FTC, the companies involved, and the many consumers who would be harmed by higher prices if the merger goes forward. Her extensive analysis is likely to also be helpful in future antitrust cases involving mergers and acquisitions. In addition, the decision serves as a reminder of the importance of promptly confirming fair-minded judges to our federal courts.