CMA sets out provisional concerns over lubricants merger

22 May 2015 07:03 AM

The CMA has provisionally found that Reckitt Benckiser’s anticipated acquisition of the K-Y brand could lead to higher prices for personal lubricants.

Reckitt Benckiser (RB) and Johnson & Johnson (J&J) supply personal lubricants to a number of retailers, including grocery retailers and national pharmacy chains, under the Durex and K-Y brands respectively. RB agreed to purchase the K-Y brand from J&J in March 2014.

The Competition and Markets Authority (CMA) referred the case for a phase 2 investigation in January 2015 and the inquiry group of independent CMA panel members looking at the merger has examined the companies’ internal documents, the views of competitors and retailers, sales and price data and the results of a customer survey.

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.

K-Y and Durex hold almost three quarters of the market share in supermarkets and national pharmacies, where the majority of customers buy these products. Whilst customers can choose from a wide range of products and suppliers in specialist shops or when buying online, there is little evidence that these other outlets will act as a brake on any price rises in national chains, and smaller suppliers have historically had little success getting access to the shelves in these larger shops.

Phil Evans, Inquiry Chair said:

Consumers and retailers differentiate between these 2 products to some extent. However, on balance, there seems 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 2 biggest brands come under single ownership.

We are now inviting responses to these provisional findings and will continue to assess all the evidence before we make our final decision.

As well as the provisional findings, the inquiry group has also published a notice of possible remedies. This outlines measures the group could take if it still believes the merger will lead to a substantial lessening of competition when it makes the final decision.

The inquiry group has also announced that it has extended the inquiry timetable by 8 weeks (see notes for editors) so it must now publish its final decision by 18 August 2015. This was because of the delay caused to the publication of the recent provisional findings by the need to consider significant new information supplied after the main party hearings.

The provisional findings summary, notice of possible remedies and notice of extension are available on the investigation case page along with all other published information relating to the investigation. The full provisional findings report will be published shortly.

Anyone wishing to respond to the provisional findings should do so in writing, by no later than 5pm on 12 June 2015.

Email ReckittBenckiser.K-YBrand@cma.gsi.gov.uk or write to:

Notes for editors

1. The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition and certain consumer functions of the Office of Fair Trading, as amended by the Enterprise and Regulatory Reform Act 2013.
2. The inquiry group may extend the 24-week period within which it is required to publish its report by no more than 8 weeks if it considers that there are special reasons why the report cannot be published within that period.
3. All the CMA’s functions in phase 2 merger inquiries are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision makers on phase 2 inquiries.
4. The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business; the membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
5. The members of the Reckitt Benckiser / K-Y Brand merger inquiry group are: Phil Evans (Chairman), Marisa Cassoni, Roger Finbow and Andrew Popham.
6. For more information on the CMA see our homepage or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on merger cases.
7. Enquiries should be directed to Rory Taylor (rory.taylor@cma.gsi.gov.uk, 020 3738 6798).