Fashion likes its fights — and when big brands, big money and big personalities come together, the brawls can spill over into the courthouse in spectacular fashion.
Many of the industry’s most important court cases have revolved around intellectual property and the brands that power businesses, but that could be changing with new legal territory rapidly opening up in fashion.
The FTC has typically stepped into retail to protect broader markets — the ongoing challenge to Kroger’s $24.6 billion merger with Albertsons Cos. is a good example — tackling competition in the grocery store sector.
With Tapestry-Capri, the FTC has taken a novel approach, going after not fashion, or even accessories, but the much more narrow category of affordable luxury handbags.
As arguments in the case start on Monday, it will be more than Tapestry’s chief executive officer Joanne Crevoiserat and Capri CEO John Idol paying attention.
Each side is slated to get 20 hours to make their case and a host of industry executives are expected to show up to testify in the lower Manhattan courtroom, either in person or via video deposition.
The result could rewrite the rules in fashion dealmaking.
“How far can we really go?” asked attorney Jonathan Lazarow, founding member and co-chair of Ambrose, Mills & Lazarow’s Corporate Group, examining what’s at stake in the case. “What do we have to do in industry consolidation? Does that ‘roll up’ strategy of consolidating the market really work? Or is the FTC going to continue to step in and say, ‘Sorry, guys, that’s a problem.’ That might affect private equity strategies. For some of these larger players, like these larger strategic companies, it might define or dictate long-term business strategy.”
It might matter a lot just who is doing the buying — including both the corporate dealmakers and the customers.
Hudson’s Bay Co.’s $2.65 billion deal to acquire Neiman Marcus and merge it with Saks Fifth Avenue is said to have skated by its FTC review without a second look, even as it brings together two of the largest luxury department stores in fashion.
Many experts were surprised the deal didn’t get a closer examination from regulators.
But Lazarow said other issues might have come forward given the companies’ luxury positioning.
“The customer set is far more educated, far wealthier, and they probably do have the full spectrum of choice,” 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 some concerns outside of fashion and business might have played a part.
“The Biden administration made the political determination that, ‘Hey, we want to demonstrate above and beyond our ability to protect the middle class. We want that to be unassailable,’” 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 prevails. Even though this will go to trial, I’m not sure this doesn’t end up at the Supreme Court, where you wonder whether or not the FTC even has authority to do this.”
That all speaks to just some of the complexities fashion companies face as they navigate the ever-evolving legal landscape.
While Tapestry tests the new bounds of fashion mergers and acquisitions, new laws are being developed that don’t just impact fashion, as is the case in intellectual property law, but zero in on the industry specifically.
“The future will bring even more cases as several pending regulations will address fashion’s greatest problem, that of sustainability — both in terms of ecological and human rights impact,” said fashion attorney Douglas Hand of Hand Baldachin & Associates.
As new laws are adopted and then implemented, they will put fashion’s environmental, social and governance practices on trial, literally.
“With these new ESG-disclosure-centric regulations pounding on the door, there will undoubtedly be litigation around brands’ lack of, or misleading, disclosures of ‘sustainable practices’ or lack of diligence regarding their supply chains,” Hand said.
The cases could be brought by private groups or district attorneys in New York or California, two of the prominent states that have seen significant pushes to establish new fashion-centric laws polishing ESG.
“Fashion law is getting bigger,” said Hand, who wrote produced 1,000-page tome, “The Business and Law of Fashion and Retail” on the topic.
“The number of cases will now grow because there is actual black letter law, or there will be black letter law with respect to regulation of the fashion industry,” he said.
Hand pointed to the federal Fabric Act, New York’s Fashion Act and California’s Responsible Textile Recovery Act as legislation that is in the works and will eventually become law in some form.
“The regulators write the law, but then the courts essentially interpret the law and the case law evolves from there,” he said. “And so the law evolves based on not just the regulations, but the case law, which interprets the regulation. We’re absolutely at the chrysalis stage of that.”
Tapestry’s day in court might be just the beginning of a new look for fashion law.