(Bloomberg) -- US regulators are moving to block fashion company Tapestry Inc.’s $8.5 billion planned takeover of Capri Holdings Ltd., the New York Times reported, citing people with knowledge of the matter.

The Federal Trade Commission’s members are expected to meet this week to discuss a case, the newspaper said Wednesday, which could precede a vote on whether to file a lawsuit. It’s still possible the agency could decide not to sue, the Times said. 

A suit would have the potential to block the creation of a US-based luxury conglomerate to compete with big European fashion companies, the newspaper said. Tapestry sells leather products and other luxury goods under the Coach, Kate Spade and Stuart Weitzman brands, while Capri controls high-end labels Michael Kors, Versace and Jimmy Choo.

The combined companies would be the fourth-largest luxury company in the world and second-largest in the Americas after LVMH, according to research firm GlobalData. That had already attracted regulatory scrutiny, and had traders increasingly concerned that the FTC might move to block the deal.

Capri’s stock price has fallen over the past several trading sessions based on perceived negative comments last week from FTC officials about how they define market share, Bloomberg News reported April 15. That sent the gap between where Capri is trading and Tapestry’s $57-per-share takeover bid to nearly the widest level since the merger was announced in August.

Wednesday morning, shares of Tapestry rose 1.9% before US markets opened, while Capri’s fell 2.5%. 

(Updates with additional background starting in third paragraph, shares in final paragraph.)

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