The Federal Trade Commission voted unanimously to block Tempur Sealy International, Inc. (Tempur Sealy) that proposed the $4 billion acquisition of Mattress Firm Group Inc. (Mattress Firm).
The commission issued an administrative complaint and authorized a lawsuit in federal court to block the acquisition, alleging that Tempur Sealy — the world’s largest mattress supplier and manufacturer — will have the ability and incentive to suppress competition and increase mattress prices for millions of one-time consumers. she wins Mattress Firm. The proposed vertical acquisition would merge Tempur Sealy’s manufacturing and supply operations with the mattress firm’s extensive retail footprint, giving the combined company great power in multiple parts of the mattress supply chain.
Multiple settlement documents show Tempur Sealy plans to limit rivals’ access to the duo’s nationwide network of stores to harm competition. Competing mattress suppliers—which are primarily U.S. manufacturers employing thousands of workers—would likely lose access to the single most important retail channel, significantly harming their ability to compete and potentially leading competing suppliers to reduced production, closing factories and layoffs.
“Through emails, presentations and other settlement documents, Tempur Sealy has made it clear that its purchase of the mattress firm is intended to crush competitors and dominate the market,” said Henry Liu, Director of the FTC’s Bureau of Competition. “This agreement is not about creating efficiency; it’s about crippling competition, which would raise prices for an essential commodity and could lead to layoffs for good-paying American manufacturing jobs in nearly a dozen states.”
Mattress Firm is the nation’s largest retailer of mattresses and is considered one of the most important retail channels for mattresses given its national footprint, unparalleled consumer insight and unique ability to convert new brands in important competitors. By acquiring the mattress firm, Tempur Sealy would wield significant power over its rival mattress suppliers—which include Serta Simmons Bedding and Purple Innovation, Inc. – and may curtail or limit their access to the mattress firm’s stores, the FTC alleges in the complaint.
The FTC alleges that the vertical acquisition would harm competition throughout the premium mattress market — an industry term for a segment comprised of products known for superior quality, enhanced features and reputable brand names. Working class, older adults with limited disposable income make up a significant portion of premium mattress buyers. A large percentage of customers who purchase Tempur Sealy’s premium Tempur-Pedic mattresses rely on financing to afford this rare purchase. These mattresses are sold primarily through brick-and-mortar furniture stores and mattress specialty stores, the largest of which is Mattress Firm.
The acquisition would allow Tempur Sealy’s mattress brands — which include Stearns & Foster and Tempur-Pedic — to dominate the market over those of its competitors. By disrupting or degrading rivals’ access to the mattress firm as a retail channel, the acquisition of Tempur Sealy could result in higher mattress prices, reduced product quality and choice, or reduced innovation.
After Tempur Sealy acquires the mattress firm, the FTC alleges that the combined firm could exclude its rivals in many ways. For example, the combined firm may limit current and future rivals’ access to the mattress firm’s floor space, give sales associates higher commissions on Tempur Sealy products sold, or otherwise take steps to designed to steer customers away from competitors’ products and toward Tempur Sealy mattresses.
In the past, the closing of competing mattress suppliers has benefited Tempur Sealy, which has further motivated Tempur Sealy to want to see even more competitive mattress suppliers close. Tempur Sealy’s purchase of the mattress firm could result in even more factory closings, ultimately benefiting Tempur Sealy, the FTC’s complaint said. By significantly harming rivals’ ability to compete, the acquisition could force rival suppliers to cease operations at their manufacturing plants across the country, including Georgia, North Carolina, Ohio and Wisconsin, to Arizona, Colorado and Utah, it claims FTC complaint.
The Commission’s vote to issue an administrative complaint and authorize staff to seek a temporary restraining order and seek a preliminary injunction was 5-0. Commissioner Melissa Holyoak released a statement.
The federal court complaint and request for preliminary injunctive relief will be filed in the U.S. District Court for the Southern District of Texas to halt the transaction pending an administrative proceeding. A public version of the complaint will be available and attached to this notice as soon as possible.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been violated or is being violated and it appears to the Commission that a proceeding is in the public interest. The filing of an administrative appeal marks the beginning of a proceeding in which claims will be adjudicated in a formal hearing before an administrative law judge.