Capri Holdings (NYSE:CPRI) took a nosedive Friday, with shares sinking 48% after a U.S. judge shut down its $8.5 billion merger with Tapestry (NYSE:TPR), the parent of Coach. The ruling marked a win for the FTC, which had pushed back hard against the deal, arguing that merging the two companies would squash competition in the accessible luxury space. Judge Jennifer Rochon dismissed the notion that consumers could easily find alternatives, calling out the real risk of higher prices and fewer choices if the merger went through. The decision sent a clear signal that the antitrust landscape is tightening.

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For Capri, this setback piles onto a list of existing struggles, from execution blunders to declining brand strength across names like Michael Kors and Jimmy Choo. With the merger now off the table, Capri may need to shake things uppossibly by selling off pieces of the business like Versace or Jimmy Choo to attract fresh capital and refocus. Meanwhile, Tapestry's stock surged more than 13%, with analysts cheering the potential end of a debt-laden deal. The company can now pivot back to its strengths, particularly the Coach brand, while taking advantage of share buybacks and bolstering investor confidence.

This ruling doesn't just stop at Capri and Tapestry; it signals a broader shift in antitrust enforcement under the Biden administration, setting the stage for tougher scrutiny on future mergers. With heightened attention on market consolidation, companies aiming for mega-deals should brace for a bumpy ride. Though Tapestry plans to appeal, the odds of a reversal remain slim, leaving both brands to rethink their next steps in a fiercely competitive luxury market.

This article first appeared on GuruFocus.