REG - Competition and Mkts - Merger Update - Carpenter / Recticel

Recticel NVAnnouncement

28/09/2022 08:15

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RNS Number : 9105A  Competition and Markets Authority  28 September 2022

CMA considers remedy to address concerns in foam merger

 

Carpenter and Recticel have asked the CMA to consider a "fast-track" remedy to
address concerns that their merger could lead to manufacturers and shoppers
paying more for items like mattresses and kitchen sponges.

 

US-based Carpenter agreed to buy Belgian firm Recticel's global engineered
foams business in a €656 million (Euros) deal announced in 2021. The firms
both supply engineered foam products used to make household goods such as
mattresses, upholstery and kitchen sponges from plants located in the UK.

 

Following an initial Phase 1 investigation, the Competition and Markets
Authority (CMA) identified competition concerns in 3 foam-related markets in
the UK (the supply of comfort foam, unconverted technical foam, and converted
comfort foam) and referred the deal for an in-depth Phase 2 investigation in
July 2022.

 

At the outset of the Phase 2 investigation the two businesses conceded that
the deal raises competition concerns and asked the CMA to "fast-track" the
case to the assessment of a remedy that could address those concerns.

 

The CMA has now accepted the businesses' request and provisionally found that
the deal could reduce competition. This means that, without remedies to
restore this loss of competition, the deal could damage the competitiveness of
UK-based manufacturers that rely on foams to make their products, as well as
leading to less choice and a worse deal for consumers.

 

The CMA has also published an initial consultation on the remedy that the
merging businesses have proposed to address the concerns identified. The
merging businesses are proposing to sell the majority of the UK arm of
Recticel's engineered foams business to an independent third-party approved in
advance by the CMA. The next stage of the CMA's investigation will focus on
assessing whether this will fully replace the loss of competition arising from
the merger.

 

Kip Meek, Independent CMA Panel Chair, said:

 

"The firms accept that the merger could reduce competition in the markets
where we've raised concerns. This could lead to higher costs for UK
manufacturers and mean people may get a worse deal when buying beds and sofas,
as well as everyday items like kitchen sponges."

 

"The next stage of our investigation will primarily focus on making sure that
the remedy put in place properly addresses these concerns to avoid any adverse
impact for UK businesses and consumers."

 

The CMA is now asking for views on the remedy offered by 12 October 2022 and
on its provisional findings by 19 October 2022. The statutory deadline for the
CMA's final report is 22 January 2023.

 

For more information, visit the Carpenter / Recticel merger inquiry page
(https://www.gov.uk/cma-cases/carpenter-co-slash-recticel-nv-slash-sa-merger-inquiry)
.

 

Notes to editors

 

1.   Under the Enterprise Act 2002 the CMA has a duty to make a reference to
Phase 2 if the CMA believes that it is or may be the case that a relevant
merger situation has been created, or arrangements are in progress or
contemplation which, if carried into effect, will result in the creation of a
relevant merger situation; and the creation of that situation has resulted, or
may be expected to result, in a substantial lessening of competition (SLC)
within any market or markets in the United Kingdom for goods or services.

2.   The process that applies where merging parties request to concede a
substantial lessening of competition is set out in paragraphs 7.18 to 7.21 of
CMA2 revised
(https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1044636/CMA2_guidance.pdf)
.

3.   In addition to conceding that the deal raises competition concerns, the
firms have agreed to waive their right to challenge this position during the
CMA's Phase 2 investigation and have also submitted a proposed remedy to
address the concerns identified.

4.   This is the first time that merging businesses have conceded an SLC in
a Phase 2 merger inquiry and is expected to enable the outcome of the
investigation to be reached significantly more quickly than usual.

5.   The CMA has provisionally found that, if the deal went ahead, the
combined companies would face limited competition in the UK in:

·    Comfort foam (uncut foam for mattresses, upholstery etc.)

·    Unconverted technical foam (for sponges etc.)

·    Converted comfort foam (cut up foam ready for larger items like
mattresses)

6.   For media enquiries, contact the CMA press office on 020 3738 6460 or
press@cma.gov.uk (mailto:press@cma.gov.uk) .

 

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