US' FTC moves to block Tempur Sealy's acquisition of Mattress Firm

The Federal Trade Commission (FTC), an independent agency of the US government, has voted unanimously to block Tempur Sealy International, Inc’s (Tempur Sealy) proposed $4 billion acquisition of Mattress Firm Group Inc (Mattress Firm). This decision comes amid concerns that the merger would significantly suppress competition and raise prices for mattresses for millions of consumers.

The FTC has issued an administrative complaint and authorised a lawsuit in federal court to prevent the acquisition. The commission alleges that Tempur Sealy—the world’s largest mattress supplier and manufacturer—would gain the ability and incentive to dominate the market, potentially leading to higher prices and reduced competition. The proposed vertical acquisition would integrate Tempur Sealy’s manufacturing and supply operations with Mattress Firm’s extensive retail network, giving the combined entity substantial power across multiple stages of the mattress supply chain, FTC said in a press release.

Documents related to the deal indicate that Tempur Sealy plans to restrict rivals’ access to Mattress Firm’s nationwide store network. This move is seen as a strategy to stifle competition. Competing mattress suppliers, primarily American manufacturers employing thousands, could lose access to the most crucial retail channel, impairing their competitive capabilities. This could result in reduced output, factory closures, and job losses among competing suppliers.

By acquiring Mattress Firm, Tempur Sealy would gain significant leverage over its competitors, such as Serta Simmons Bedding and Purple Innovation, Inc. The FTC alleges that Tempur Sealy could cut or limit these rivals’ access to Mattress Firm stores. This vertical acquisition is expected to harm competition in the premium mattress market—a segment known for superior quality, enhanced features, and reputable brand names. Many working-class, older adults with limited disposable income who purchase premium mattresses often rely on financing to afford these infrequent purchases. These mattresses are mainly sold through brick-and-mortar furniture stores and mattress specialty stores, with Mattress Firm being the largest.

The FTC argues that the acquisition would allow Tempur Sealy’s brands, including Stearns & Foster and Tempur-Pedic, to dominate the market, overshadowing competitors. By restricting or degrading competitors' access to Mattress Firm as a retail channel, the merger could lead to higher prices, decreased product quality and choice, and reduced innovation.

Post-acquisition, the FTC alleges that the combined firm could marginalise its rivals in various ways, such as limiting floor space for competitors’ products, offering higher sales commissions on Tempur Sealy products, or steering customers away from competitors towards Tempur Sealy’s mattresses.

“In the past, the closure of competing mattress suppliers’ factories has benefitted Tempur Sealy, which has 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, the FTC’s complaint alleges,” said FTC.

The commission's vote to issue an administrative complaint and authorise staff to seek a temporary restraining order and preliminary injunction was unanimous, at 5-0.

The federal court complaint and request for preliminary relief will be filed in the US District Court for the Southern District of Texas to halt the transaction pending an administrative proceeding.

Fibre2Fashion News Desk (DP)