NEW YORK (AP) — The Federal Trade Commission has unanimously voted to bring a lawsuit against mattress maker Tempur Sealy to block its $4 billion acquisition of Mattress Firm, saying the deal would allow the world’s largest mattress supplier to suppress competition that would result in higher prices for shoppers.
The deal was announced in May 2023. At the time, analysts had praised the acquisition and said it would allow Tempur Sealy to expand its distribution and reach more consumers at a crucial time for increasing sales. Acquiring Mattress Firm would also help Tempur Sealy buck the current slowdown in sales, caused by the cost-of-living crisis and many households having upgraded their mattresses during the pandemic, analysts said.
Mattress Firm, Houston, operates more than 2,300 brick-and-mortar retail locations and an e-commerce platform. The combined companies would have a total of some 3,000 retail stores, 30 e-commerce platforms, 71 manufacturing facilities and four research and development facilities worldwide.
But the FTC said Tuesday in its release that the acquisition would create “enormous power” at multiple parts of the mattress supply chain. By acquiring Mattress Firm, Tempur Sealy would wield significant power over its rival mattress suppliers, which include Serta Simmons Bedding and Purple Innovation Inc. and could cut or limit their access to Mattress Firm’s stores, the FTC alleged in the complaint.
The deal would also enable Tempur Sealy’s mattress brands — which include Stearns & Foster and Tempur-Pedic — to dominate the market over those of its competitors, the FTC said. By cutting off rivals’ access to Mattress Firm as a retail channel, Tempur Sealy’s acquisition could result in higher mattress prices, decreased product quality and choice, or reduced innovation, FTC said.
The FTC also alleged that the combined firm could also drive other rivals to bankruptcy. For example, it could limit present and future rivals’ access to Mattress Firm’s floor space, award sales workers higher commissions on Tempur Sealy products sold, or otherwise take steps meant to steer customers away from rivals’ products and toward Tempur Sealy’s mattresses.
In a statement posted on its corporate website, Tempur Sealy said it was “disappointed” that it initiated litigation and noted it has been working constructively with the FTC to secure regulatory approval for this transaction.
“We ultimately believe the FTC’s perspective does not reflect all the relevant facts and law,” Tempur Sealy said.
The Lexington, Kentucky-based mattress company noted that the bedding industry is highly competitive, offering consumers a diverse selection of products, brands, price points, and purchasing channels. It added that there are thousands of brick-and-mortar storefronts across the U.S. where consumers can purchase bedding products, only a small fraction of which are operated by Mattress Firm.
In addition, brick-and-mortar retailers and direct-to-consumer bedding brands sell millions of bedding products online each year.
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AP Business Writer Wyatte Grantham-Philips in New York contributed to this report.
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Rephrased content:
The Federal Trade Commission has made a unanimous decision to file a lawsuit against mattress manufacturer Tempur Sealy in order to prevent its planned $4 billion acquisition of Mattress Firm. The regulatory agency believes that if the acquisition were to proceed, it would give Tempur Sealy, the largest mattress supplier globally, the power to stifle competition, ultimately leading to higher prices for consumers.
The agreement between Tempur Sealy and Mattress Firm was disclosed in May 2023. Analysts initially spoke positively about the merger, foreseeing advantages for Tempur Sealy in expanding its distribution network and reaching a larger consumer base. With the mattress industry experiencing a sales slowdown due to economic challenges, such as increased living costs, and a significant number of households already having upgraded their mattresses during the pandemic, acquiring Mattress Firm was expected to help Tempur Sealy counter the decline in sales.
Mattress Firm, headquartered in Houston, operates over 2,300 physical retail stores and an online platform. If combined, the two companies would have a total of approximately 3,000 retail stores, 30 e-commerce platforms, 71 manufacturing facilities, and four research and development centers worldwide.
The FTC argued that this acquisition would grant Tempur Sealy substantial influence throughout the mattress supply chain, providing it with control over competitors like Serta Simmons Bedding and Purple Innovation Inc. The FTC complaint suggests that by limiting or cutting off access to Mattress Firm’s stores for rival mattress suppliers, Tempur Sealy could manipulate the market in favor of its own brands, potentially resulting in increased prices, reduced product choices, and limited innovation.
Furthermore, the FTC raised concerns that the merged entity could drive competitors out of business by restricting their access to Mattress Firm’s retail spaces or incentivizing sales employees to prioritize Tempur Sealy products. In response, Tempur Sealy expressed disappointment over the FTC’s decision to litigate, stating that it has been collaborating with the regulatory body to gain approval for the merger.
The mattress company based in Lexington, Kentucky, emphasized the competitive nature of the bedding industry that offers consumers various product options, brands, price ranges, and purchasing avenues, including numerous brick-and-mortar stores and online platforms apart from those operated by Mattress Firm.
