UK competition regulator stumps Reckitt Benkiser's acquisition of J&J's brand K-Y
22 May 2015
The anticipated acquisition of the K-Y brand by UK consumer goods company Reckitt Benckiser Group PLC's brand could lead to higher prices for personal lubricants, according to the UK's competition regulator.
The maker of Durex condoms, which already sells lubricants under the Durex brand, signed an agreement in March 2014 to buy the K-Y brand of lubricants from Johnson & Johnson subsidiary McNeil-PPC Inc for an undisclosed sum.
The UK's Competition and Markets Authority said yesterday that it provisionally believed the merger could lead to a substantial reduction in competition, possibly through higher prices.
"We are now inviting responses to these provisional findings and will continue to assess all the evidence before we make our final decision," inquiry chairman Phil Evans said.
The Competition and Markets Authority referred the deal for an in-depth probe in January and established an inquiry group to examine the companies' documents and test the market.
According to the competition authority, it believed that the deal "could lead to higher prices for personal lubricants".
"After considering the full range of this evidence, the group provisionally believes that on balance the merger could lead to a substantial reduction in competition, possibly through higher prices, making customers buying these products in grocery retailers and national pharmacy chains worse off", the CMA said.
According to the CMA, KY and Durex held almost three quarters of the market share in supermarkets and national pharmacies.
The Telegraph quoted Phil Evans, inquiry chairman as saying, consumers and retailers differentiated between these two products to some extent.
He added, however, on balance, there seemed to be enough of an overlap in the market for personal lubricants for there to be a realistic prospect of consumers facing less competition and possibly higher prices if the two biggest brands came under single ownership.
The CMA said that it would publish a list of possible remedies that Reckitt could take, including disposals, and would extend the timetable ahead of a final decision deadline of 18 August 2015.
According to the authority, the timetable had been stretched as it needed to consider "significant new information" supplied after the companies hearings.