The Competition and Markets Authority (CMA) has found that the merger of two firms that make foam used in products like bedding could lead to higher prices and less choice.
The CMA is concerned that the loss of competition brought about by the merger of Carpenter and Recticel’s global engineered foams business could result in a worse deal for manufacturers.
This could ultimately mean that consumers face higher prices and less choice. The firms must now address the concerns identified or face a further, more in-depth, Phase 2 investigation.
US-based Carpenter agreed to buy Belgian firm Recticel’s global engineered foams business in a €656m deal announced in 2021. The firms both make flexible polyurethane foam used in the manufacture of products like mattresses and sponges. They also produce processed foam, sometimes called converted foam. Both companies own and operate plants in the UK.
The CMA’s initial Phase 1 investigation has found that the merger would remove a close competitor of Carpenter’s, with the firms representing two of just three foam producers with plants in the UK. The CMA is concerned that, if the deal goes ahead, the combined companies will face limited competition in the UK in 3 foam-related markets.
Sorcha O’Carroll, Senior Director at the CMA, said: “Carpenter and Recticel may not be household names but their products can be found in homes throughout the UK.
“We’re concerned that this merger could reduce competition in the supply of foam and foam products. This could ultimately lead to shoppers paying more for bedding products as well as everyday items like kitchen sponges.
“If the firms fail to address our concerns, the deal will be referred for an in-depth investigation.”
The firms now have five working days to submit proposals to address the CMA’s competition concerns. The CMA then has a further five working days to consider whether to accept any offer instead of referring the case for an in-depth Phase 2 investigation.
Commenting on the decision, Recticel said in a statement: “The affected UK Recticel Engineered Foams businesses represent 8.7% of the 2021 turnover of the Recticel Engineered Foams business. Recticel will make further announcements in this respect in due course.”