Tapestry's acquisition of Michael Kors parent Capri is being blocked by Judge.

• A federal court judge has halted the planned merger between Coach, owned by Tapestry, and Michael Kors' Capri parent.
• The judge's order lacked clarity regarding the reasoning behind it, but the FTC had previously contended that the merger would negatively impact consumers, increase prices, and diminish employee benefits.
• Last year, Tapestry and Capri revealed their $8.5 billion merger, but the deal has been halted due to the FTC's lawsuit to prevent it.

A New York trial last month resulted in a federal judge blocking the acquisition on Thursday.

Judge Jennifer Rochon granted the Federal Trade Commission's motion for a preliminary injunction to halt the merger of America's two largest luxury houses, Tapestry and Capri, which would combine six fashion brands under one company: Coach, Kate Spade, Stuart Weitzman, Versace, Jimmy Choo, and Michael Kors.

After the order was filed, Tapestry's stock increased by 10%, while Capri's stock decreased by approximately 50%.

Representatives for Tapestry and Capri didn't immediately return requests for comment.

The reasoning behind Rochon's order was not immediately clear, as a detailed opinion was filed under seal and is currently not accessible to the public.

The $8.5 billion deal between former rivals and longtime competitors was announced more than a year ago, but the Federal Trade Commission blocked it in April and sought a preliminary injunction to halt the agreement.

The FTC contended that if the companies combined, it would negatively affect consumers by limiting access to affordable handbags and reducing employee compensation and benefits. In contrast, Tapestry maintained that merging with Capri would benefit consumers by enabling them to stay current with trends, improve their product offerings, and expand their customer base.

"The FTC's decision to block Tapestry's acquisition of Capri is a victory for consumers and ensures that the two companies will continue to compete for affordable handbags."

The Biden administration and Vice President Kamala Harris have advocated for the government to intervene in maintaining competition and lowering prices in response to consumer backlash against high prices for various goods following years of inflation.

The FTC, led by Chair Lina Khan, has taken steps to prevent mergers and acquisitions in the grocery, technology, and apparel sectors.

Last month, during the trial, witnesses testifying on behalf of the FTC pointed to studies indicating that the merger could result in higher prices for handbags, accessories, and apparel, and may reduce the motivation for the combined company to prioritize product quality.

Tapestry and Capri's lawyers contended that they are not each other's primary competitors. They emphasized that consumers now have a plethora of options in the handbag market, and trends can shift rapidly in the age of TikTok.

— CNBC's Melissa Repko contributed to this report

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