FTC unanimously seeks to block Tempur Sealy’s purchase of Mattress Firm

NEW YORK (AP) — The Federal Trade Commission voted unanimously to file 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 limit competition, resulting in higher prices for customers.

The deal was announced in May 2023. At the time, analysts praised the acquisition and said it would allow Tempur Sealy to expand its distribution and reach more consumers at a key time to boost sales. The acquisition of Mattress Firm would also help Tempur Sealy combat the current sales slowdown caused by the cost of living crisis and the fact that many households replaced their mattresses during the pandemic, analysts said.

Mattress Firm, Houston, operates more than 2,300 brick-and-mortar stores and an e-commerce platform. The combined companies would have about 3,000 retail stores, 30 e-commerce platforms, 71 manufacturing facilities and four R&D centers worldwide.

But the FTC said in its Tuesday release that the acquisition would create “tremendous power” in many parts of the mattress supply chain. By acquiring Mattress Firm, Tempur Sealy will exercise significant power over its rival mattress suppliers, which include Serta Simmons Bedding and Purple Innovation Inc., and could cut off or limit their access to Mattress Firm stores, the FTC alleges in the complaint.

The deal would also allow Tempur Sealy’s mattress brands — which include Stearns & Foster and Tempur-Pedic — to dominate the market over rivals’ brands, the FTC said. Cutting off rivals’ access to Mattress Firm as a retail channel could result in higher mattress prices, reduced quality and product selection, or reduced innovation, the FTC said.

The FTC also alleged that the combined company could force other rivals out of business. For example, it could limit access by current and future rivals to Mattress Firm’s space, give salespeople higher commissions on Tempur Sealy products sold, or take other steps to steer customers away from rivals’ products and toward Tempur Sealy mattresses.

In a statement on its corporate website, Tempur Sealy said it was “disappointed” by the initiation of the legal proceedings and emphasized that it was working constructively with the FTC to obtain regulatory approval for the transaction.

“Ultimately, we believe the FTC’s perspective does not reflect all of the relevant facts and regulations,” Tempur Sealy said.

The Lexington, Kentucky-based mattress company noted that the bedding industry is highly competitive, with consumers having a diverse selection of products, brands, price points and purchasing channels. It added that there are thousands of brick-and-mortar stores across the United States where consumers can purchase bedding products, and only a small portion of those are operated by Mattress Firm.

In addition, brick-and-mortar retailers and direct-to-consumer bedding manufacturers sell millions of bedding items online each year.

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AP Business Writer Wyatte Grantham-Philips in New York contributed to this report.