NEW YORK (AP) — The Federal Trade Commission sued to block Tapestry, Inc.’s $8.5 billion acquisition of Capri Holdings Ltd., saying that the deal would eliminate direct head-to-head competition between the fashion companies' brands like Coach and Michael Kors in the so-called affordable luxury handbag arena.

The agency also said Monday that the deal, a nnounced in August 2023, threatens to eliminate the incentive for the two companies to vie for employees and could depress employees’ wages and workplace benefits. The combined Tapestry and Capri would employ roughly 33,000 people worldwide, the agency said.

“With the goal to become a serial acquirer, Tapestry seeks to acquire Capri to further entrench its stronghold in the fashion industry,” said Henry Liu, director of the FTC’s bureau of competition in a statement.

The move is the latest by the FTC to take a more aggressive position on antitrust issues.

In February, the FTC sued to block the $24.6 billion merger between grocery giants Kroger and Albertson's, saying the lack of competition would lead to higher grocery prices and lower wages for workers. The supermarket chains said Monday they will sell more of their stores in an effort to quell the federal government’s concerns.

Kroger and Albertsons announced their planned merger in October 2022. The companies said it’s necessary so they can better compete with Walmart, Amazon and other big rivals.

Tapestry's and Capri's portfolio of brands cover a wide array of items from clothing to eyewear to shoes. Tapestry has been on an acquisition binge for the past several years, and already owns Kate Spade New York, Stuart Weitzman and Coach. Capri owns the Versace, Michael Kors and Jimmy Choo brands.

Specifically, Tapestry’s Coach and Kate Spade brands and Capri’s Michael Kors brand are close rivals in the handbag market. The FTC said that they continuously monitor each other’s handbag brands to determine pricing and performance, and they each use that information to make strategic decisions, including whether to raise or reduce handbag prices.

Once completed, the new entity would be the fourth largest luxury company in the world, with a combined market share of around 5.1% of the luxury goods market, according to research firm GlobalData PLC. In the Americas, the company will become the second largest luxury player behind LVMH, with a combined share of 6% of the luxury goods market, GlobalData said.

Both Capri and Tapestry said they strongly disagreed with the FTC’s decision.

“The market realities, which the government’s challenge ignores, overwhelmingly demonstrate that this transaction will not limit, reduce, or constrain competition, ” Capri said in a statement on its website. “Tapestry and Capri operate in the fiercely competitive and highly fragmented global luxury industry. Consumers have hundreds of handbag choices at every price point across all channels, and barriers to entry are low. ”

Capri said it intends to “vigorously defend this case in court alongside Tapestry and complete the pending acquisition.” It said the U.S. FTC is the only regulator that hasn't approved the transaction.

Tapestry said that “there is no question that this is a pro-competitive, pro-consumer deal and that the FTC fundamentally misunderstands both the marketplace and the way in which consumers shop. ”

“Tapestry and Capri operate in an intensely competitive and highly fragmented industry alongside hundreds of rival brands, including both established players and new entrants.” Tapestry said in a statement.