by Fashion likes its fights – and when big brands, big money and big people come together, the brawls can spill into the courthouse in spectacular fashion.
Many of the industry’s most important court cases have involved intellectual property and the brands that power businesses, but that could be changing as new legal territory is rapidly opening up in fashion.
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Tapestry Inc. at the forefront when the Federal Trade Commission challenged its $8.5 billion bid to buy Capri Holdings in April.
The FTC has typically gone into retail to protect broader markets — the ongoing challenge to Kroger’s $24.6 billion merger with Albertsons Cos. is a good example — to combat competition in the grocery store sector.
With Tapestry-Capri, the FTC has taken a new approach, going after not fashion, or even accessories, but the much narrower category of affordable luxury handbags.
As arguments in the case begin Monday, it will be more than Tapestry chief executive officer Joanne Crevoiserat and Capri CEO John Idol paying attention.
Each side has 20 hours to make their case and many industry executives are expected to testify in a lower Manhattan courtroom, either in person or by video deposition.
The result could rewrite the rules of fashion marketing.
“How far can we really go?” asked attorney Jonathan Lazarow, founding member and co-chairman of the Ambrose, Mills & Lazarow Corporate Group, examining what is at stake in the case. “What are we going to do in the consolidation of the industry? Does that ‘roll up’ strategy to consolidate the market really work? Or is the FTC going to continue to step in and say, ‘Sorry, guys, that’s a problem.’ This could have an impact on private equity strategies. For some of these big players, like these big strategic companies, it could define or dictate long-term business strategy.”
It can be quite important who is making the purchase – including the corporate dealers and the customers.
Hudson’s Bay Co. is said to have $2.65 billion. to acquire Neiman Marcus and merge it with Saks Fifth Avenue after skating past its FTC review without a second look, even as it brought together two of fashion’s biggest luxury stores.
Many experts were surprised that the deal did not receive closer scrutiny from regulators.
But Lazarow said other issues could have arisen because of the companies’ luxury locations.
“The customer base is much more educated, much more affluent, and they probably have the full spectrum of options,” he said. “If you’re shopping at Saks or Neiman’s, you can afford an $8,000 handbag, you can afford a $400 handbag.”
And perhaps some concerns outside of fashion and business were involved.
“The Biden administration made the political decision, ‘Hey, we want to demonstrate our ability to protect the middle class. We want that to be out of reach,’” Lazarow said.
“What the FTC is doing, in my mind, is political, they’re making a political statement,” he said. “I’m not sure this is prevalent. Even though this will go to trial, I’m not sure this won’t end up in the Supreme Court, where you wonder if the FTC has the authority to do this or not.”
That’s just some of the complexities facing fashion companies as they navigate the ever-changing legal landscape.
While Tapestry tests the new boundaries of fashion mergers and acquisitions, new laws are being developed that not only affect fashion, such as intellectual property law, but have nothing to do with the industry specifically.
“There will be more cases in the future because some pending regulations will address fashion’s biggest problem, which is sustainability – both in terms of ecological impact and human rights,” said fashion attorney Douglas Hand from Hand Baldachin & Associates.
As new laws are adopted and then implemented, fashion’s environmental, social and governance practices will be put to the test, quite literally.
“With these new regulations focused on ESG Disclosure approaching, there is bound to be litigation over brands’ lack of, or misleading, disclosure of ‘sustainable practices’ or lack of diligence in their supply chains,” said Hand.
Private groups or district attorneys could bring the cases in New York or California, two of the prominent states that have seen significant pressure to establish new laws aimed at polishing the ESG.
“Fashion law is growing,” said Hand, who wrote a 1,000-page book, “Fashion and Retail Business and Law” on the subject.
“The number of cases will increase now because there is a real black letter law, or there will be a black letter law in the regulation of the fashion industry,” he said.
Hand cited the federal Fabric Act, the New York Fashion Act and the California Responsible Textile Recovery Act as legislation that is in the works and will eventually become law in some form.
“Regulators write the law, but then the courts basically interpret the law and the case law develops from there,” he said. “And so the law develops based not only on the regulations, but on the case law, which interprets the regulation. We’re absolutely at the chrysalis stage of that.”
Tapestry’s day in court may just be the start of a new look at fashion law.
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