FTC votes 5-0 to block $4B Tempur Sealy, Mattress Firm deal

WASHINGTON – Tempur Sealy International’s proposed $4 billion acquisition of Mattress Firm has hit a snag.

The Federal Trade Commission voted unanimously to block the deal alleging that the merger would give Tempur Sealy the ability and incentive to suppress competition and raise prices for mattresses for consumers.

The FTC referenced deal documents alleging Tempur Sealy plans to limit competitors access to Mattress Firm’s more than 2,200 stores. The announcement also said competing mattress makers – mostly American-based companies would likely lose access to “the single most important retail channel, significantly impairing their ability (to) compete and potentially leading competing suppliers to reduce output, close factories and lay off workers.”

“Through emails, presentations, and other deal documents, Tempur Sealy has made it abundantly clear that its acquisition of Mattress Firm is intended to kneecap competitors and dominate the market,” said Henry Liu, director of the FTC’s bureau of competition. “This deal isn’t about creating efficiencies; it’s about crippling the competition, which would raise prices on an essential good and could lead to layoffs for good paying American manufacturing jobs in nearly a dozen states.”

The industry’s largest mattress retailer, Mattress Firm is considered one of the most important retail channels, the FTC said.

If the acquisition were to go through, the FTC said, Tempur Sealy would have “significant power over its rival mattress suppliers, including Serta Simmons Bedding and Purple Innovation, Inc.” and could impair their ability to sell through Mattress Firm.

The “vertical acquisition would harm competition across the premium mattress market—an industry term for a segment made up of products known for superior quality, enhanced features, and reputable brand names. Working class, older adults with limited disposable income make up substantial portion of buyers of premium mattresses. A large percentage of customers who buy Tempur Sealy’s premium Tempur-Pedic mattresses rely on financing to afford this infrequent purchase. These mattresses are sold predominantly through brick-and-mortar furniture stores and mattress specialty stores, the largest of which is Mattress Firm.

The announcement goes on to say an acquisition would allow Tempur Sealy brands, including Stearns & Foster and Tempur-Pedic, to “dominate the  market over those of its competitors” and suggested that preventing competing mattresses brands from selling through Mattress Firm could result in higher pricing, decreased quality and choice, and reduced innovation.

“Once Tempur Sealy acquires Mattress Firm, the FTC alleges that the combined firm could foreclose its rivals in a multitude of ways. For example, the combined firm could limit present and future rivals’ access to Mattress Firm’s floor space, award sales associates higher commissions on Tempur Sealy products sold, or otherwise take steps designed to steer customers away from competitors’ products and toward Tempur Sealy’s mattresses.”

The commission said previous closings of competing mattress factories has benefitted Tempur Sealy in the past and “further motivated Tempur Sealy to want to see even more competing mattress supplier factories close. Tempur Sealy’s acquisition of Mattress Firm could result in even more factory closures, ultimately to Tempur Sealy’s benefit, the FTC’s complaint states. By significantly impairing rivals’ ability to compete, the acquisition could force rival suppliers to cease their manufacturing plant operations across the country, spanning Georgia, North Carolina, Ohio, and Wisconsin, to Arizona, Colorado, and Utah … ”

See also:

FTC decision on Tempur Sealy, Mattress Firm deal could come next week

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