HOUSTON - A federal judge won't block a big mattress merger, denying the Federal Trade Commission's attempt to keep Tempur Sealy and Mattress Firm from joining forces.
Houston judge Charles Eskridge on Jan. 31 issued a 115-page ruling in the case, which alleges the two companies will monopolize the market on "premium" mattresses - those that are sold at a cost of $2,000 or more.
The FTC went to court last year to halt the merger while it conducted its own administrative proceedings. Eskridge first granted a temporary restraining order before refusing to go further.
"We are excited to move forward with our combination with Mattress Firm, which creates the leading vertically integrated global bedding company and which we strongly believe will bring significant benefits to all of our stakeholders," Tempur Sealy CEO Scott Thompson said.
The FTC said Tempur Sealy's $4 billion purchase of Mattress Firm would allow it to suppress competition and raise prices for customers. It alleged Tempur Sealy planned to limit competitors' access to Mattress Firm's nationwide network of stores.
The FTC looks different today than when the case was filed, with former chair Lina Khan gone and one seat on the five-member commission open.
To address anticompetitive concerns, Tempur Sealy agreed to divest 104 Sleep Outfitter stores, 74 Mattress Firm stores and seven distribution centers.
"(T)he divestiture guarantees further, reasonable retail alternatives for Serta Simmons, Purple and other rivals of Tempur Sealy by reducing both Mattress Firm's market share and the already-low total possible foreclosure percentage," Judge Eskridge wrote.
Tempur Sealy also agreed that at least 20% of slots on the floor at Mattress Firm stores would be reserved for other brands, with 75% of those being for mattresses that cost $1,500 or more.
It then revised that plan to increase floor space for other companies' mattresses for the next five years, though the FTC objected and called the change "legally unenforceable."
The FTC said the plan allowed Tempur Sealy to monitor its own compliance, five years is too short and Tempur Sealy could use the slots for companies that it perceives as "less of a threat."
"To the contrary, the revised slot commitment indicates remarkable good faith by Tempur Sealy in response to concerns noted by the Court during closing arguments," Eskridge wrote.
"It isn't prejudicial to receive such information and further commitment when it simply addresses and updates points that have been plainly at issue between the parties for the duration of this litigation.
"And despite whatever inadequacies the FTC believes this commitment bears, it doesn't change the overall conclusion that this deal, in light of the evidence, is not anticompetitive."
The FTC said it would not file a motion for relief pending an appeal of Eskridge's order. The docket shows the FTC has not filed an appeal.