FTC Blocks Tempur Sealy’s $4 Billion Acquisition of Mattress Firm

In a unanimous decision on Tuesday, the Federal Trade Commission (FTC) voted to block Tempur Sealy’s proposed acquisition of Mattress Firm, a $4 billion deal that would merge the world’s largest mattress supplier with the United States’ largest bedding retailer.

FTC Lawsuit to Halt Acquisition

The FTC has authorized a lawsuit in federal court to prevent the acquisition. The commission cited deal documents that suggest Tempur Sealy intends to limit competitors’ access to Mattress Firm’s more than 2,200 stores. The FTC’s announcement highlighted concerns that American-based competing mattress manufacturers could lose access to this crucial retail channel, significantly impairing their ability to compete. This could potentially lead to reduced output, factory closures, and layoffs.

“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.”

Implications for Competition and Consumers

The FTC’s statement emphasized that Mattress Firm is a critical retail channel in the mattress industry. If the acquisition were to proceed, Tempur Sealy would gain significant power over its rival suppliers, including Serta Simmons Bedding and Purple Innovation, Inc. This could hinder these companies’ ability to sell through Mattress Firm and disrupt the competitive landscape.

The commission warned that the “vertical acquisition would harm competition across the premium mattress market,” which includes products known for superior quality, enhanced features, and reputable brand names. This market segment is crucial for working-class, older adults with limited disposable income, many of whom rely on financing to afford premium mattresses.

Potential Market Dominance

According to the FTC, Tempur Sealy’s acquisition of Mattress Firm could lead to the company dominating the market with its brands, such as Stearns & Foster and Tempur-Pedic. By preventing competing brands from being sold through Mattress Firm, Tempur Sealy could drive up prices, decrease quality and choice, and stifle innovation.

“Once Tempur Sealy acquires Mattress Firm, the FTC alleges that the combined firm could foreclose its rivals in a multitude of ways,” the announcement stated. This could include limiting rivals’ access to store floor space, incentivizing sales associates to push Tempur Sealy products, and other tactics designed to steer customers away from competitors’ products.

Economic Impact

The commission pointed out that previous closures of competing mattress factories have benefitted Tempur Sealy and that the acquisition could result in even more factory closures. This could have a widespread impact, potentially forcing rival suppliers to cease operations in states such as Georgia, North Carolina, Ohio, Wisconsin, Arizona, Colorado, and Utah.

The FTC’s complaint underscores the potential economic fallout, stating that “Tempur Sealy’s acquisition of Mattress Firm could result in even more factory closures, ultimately to Tempur Sealy’s benefit.” By impairing rivals’ ability to compete, the acquisition could lead to significant job losses and reduced manufacturing capacity across the country.

Source: FTC Gov