Capri shares decline after the New York Times revealed that the US Federal Trade Commission intends to stop Tapestry’s acquisition of the company.

According to a report from The New York Times on Wednesday, the US Federal Trade Commission (FTC) is preparing to take legal action to block Tapestry's (TPR) proposed $8.5 billion acquisition of Capri Holdings Ltd. (CPRI).

This potential deal would merge well-known fashion brands, such as Versace, Michael Kors and Coach.

The New York Times reported that sources familiar with the situation revealed that the FTC's five commissioners plan to meet next week to deliberate on the issue, which could lead to a formal decision on whether to file a lawsuit. However, they stated that the FTC may decide not to take legal action.

The planned merger, which seeks to create a major US luxury goods company to rival European counterparts such as LVMH, has faced regulatory scrutiny in the United States, although it has been approved by regulators in the European Union and Japan.

Investors have reacted negatively to the proposed merger, with Capri Holdings' stock value falling 22.25% this year. In pre-market trading, CPRI shares fell an additional 2.4%. Meanwhile, Tapestry stock rose 1.9% in pre-market trading. This pessimism casts doubt on whether the merger will go ahead as intended.

The potential action by the Federal Trade Commission to intervene in Tapestry's acquisition of Capri Holdings represents a significant event in fashion industry regulation, highlighting a shift in focus on antitrust enforcement under the current government.