Taylor Swift's bag is a sign of a competitive market, Michael Kors tells judge

Fashion designer Michael Kors told a federal judge that competition in the handbag market is so robust and varied that he learned about a brand only when he saw a photo of a bag on Taylor Swift's arm.

“When I looked at the brand, the website immediately crashed,” Kors testified of Aupen, the brand behind a celebrity handbag that was a huge hit last year and was also worn by Jennifer Lawrence, Kylie Jenner and Olivia Rodrigo.

Kors was on the witness stand Monday in the second week of a hearing that will decide the fate of a planned $8.5 billion acquisition of Capri Holdings Ltd. by Tapestry Inc. He told the judge about the handbags that have received a boost in publicity and popularity by also appearing in photos of Beyoncé and Madonna.

The deal would combine Coach, Kate Spade and Stuart Weitzman of Tapestry with Michael Kors, Versace and Jimmy Choo of Capri and create one of the world’s biggest fashion brands. U.S. antitrust authorities are suing to block the merger, alleging it would reduce competition in the market for “accessible” luxury handbags. It is the first challenge to the fashion industry by the U.S. Federal Trade Commission under Chair Lina Khan, as the agency has fought takeovers in sectors ranging from technology to food, with mixed results.

The companies say competition in the handbag market is diverse, from a $2.99 ​​Trader Joe's tote bag that went viral to European luxury brands selling for thousands of dollars. They argue the acquisition is crucial to revitalizing Kors's stagnant handbag brand.

Kors, 65, told U.S. District Judge Jennifer Rochon how he launched his first womenswear line from his Manhattan apartment in 1981, describing the ups and downs of his four-decade career.

“Sometimes you’ll be the hottest thing in the neighborhood, sometimes you’ll be lukewarm, sometimes you’ll be ice cold,” he testified. In recent years his brand has been in decline, he told the court.

“I think we've reached a point of brand fatigue,” Kors said. “Right now, the brand is in a state of stagnation.”

According to Rochon, Capri has been working to revive the brand, but it hasn’t worked out, in part because of “financial constraints.” The deal would create the world’s fourth-largest luxury company and the second-largest in the Americas after LVMH, according to research firm GlobalData.

TD Cowen analysts led by Oliver Chen define affordable luxury handbags as those that cost an average of $150 and estimate the U.S. market size to be between $10 billion and $15 billion. Looking at the companies' biggest brands, Coach has an 11% market share, while Michael Kors has 9%, the analysts estimate.

Testimony is scheduled to conclude Tuesday. Rochon, who is overseeing the nonjury case, will hear closing arguments Sept. 30 and then decide whether to issue an order preliminarily blocking the deal while an internal FTC proceeding is conducted. An order delaying the deal would effectively kill it.

During Kors' testimony, a Capri lawyer asked the designer which brands he considered rivals to his handbags.

“It’s become much more flexible — everything from Lululemon, Zara, Louis Vuitton, to resale,” she said, referring to secondhand sales, which were not common in the 2000s but are now available to a wide swath of consumers. “Now everyone is there.”

Sales can skyrocket based on the choices of stars and online influencers, who are often paid to wear particular brands, Kors said. Because of the rise of social media, including TikTok, it's much easier to launch a new brand than it was 10 years ago and become a “sensation,” he said.

But he told the judge he was pretty sure that wasn't the case for mega-celebrities like Swift, Beyoncé and Madonna.

“None of these brands have the money to pay them,” he said.

The case is Federal Trade Commission v. Tapestry Inc., 24-cv-03109, United States District Court, Southern District of New York (Manhattan).