HOUSTON – The U.S. judge in the Federal Trade Commission’s case to block Tempur Sealy International’s acquisition of Mattress Firm ruled in favor of the companies and against the agency on nearly every point of its lawsuit, according to the opinion released this week.
In the redacted opinion and order, Judge Charles Eskridge, of the U.S. Court for the Southern District of Texas, wrote that the deal would likely increase competition instead of block it as the FTC had argued. He denied the FTC’s request for a preliminary injunction that would have kept the deal from closing while the agency’s administrative court proceedings continued.
While the deal closed earlier this week, the FTC’s administrative court has set an evidentiary hearing for March 12. Sources do not expect that hearing to have an impact on Tempur Sealy’s nearly $5 billion acquisition of the 2,300-unit specialty sleep retailer.
The FTC had argued that the acquisition would give Tempur Sealy an unfair advantage by allowing it to control both manufacturing and retail distribution, potentially squeezing out competitors. However, the judge found that the market remains highly competitive and that the FTC’s definition of the relevant product market — mattresses priced above $2,000 — was not sufficiently supported by evidence.
“The record doesn’t support the requested finding of a relevant antitrust product market with respect to ‘premium’ mattresses,” Eskridge wrote in his decision. He also noted that vertical mergers, such as this one, often result in either neutral or procompetitive effects rather than harming market competition.
The FTC had argued that the combined company would cost consumers an additional $280 million a year; however, the judge disagreed, citing Tempur Sealy’s and Mattress Firm’s expert witness who said the deal could save consumers $896 million.
In his opinion, the judge referenced testimony from executives, including Mark Genender, chairman of Serta Simmons Bedding, and Rob DeMartini, CEO of Purple Innovation, as well as a list of other industry executives included on the in-person witness and deposition lists.
Eskridge referred to FTC’s narrowly defined premium segment and its reliance on Serta Simmons’ – Tempur Sealy’s largest competitor – testimony that the judge called “exaggerated” and “self-serving.”
“On the whole, then, where a vertical acquisition such as this implicates a far wider range of products or services than a much smaller segment targeted as a concern by the FTC, it’s appropriate to infer that the acquisition is either neutral or beneficial as to that much wider range,” the judge wrote.
Taking into account Genender’s testimony alleging that Tempur Sealy could use the deal to remove Serta Simmons’ brands from Mattress Firm floors, the opinion references Serta Simmons’ bankruptcy emergence plan outlining its sales at the retailer would grow over the next five years. The company filed for Chapter 11 bankruptcy protection in January 2023 – ahead of the official announcement that Tempur Sealy and Mattress Firm had an agreement in place – and emerged from bankruptcy five months later in June 2023.
“To be clear, growth at Mattress Firm was a ‘key part’ of the Serta Simmons plan, which identified various risk factors, without identifying removal from the Mattress Firm floor as one of them,” the judge wrote. “This was of considerable concern to the court. When directly asked to explain how such representations could possibly have been made during bankruptcy proceedings within this same courthouse, the chairman had no coherent response.”
As Tempur Sealy referenced in its conference call Thursday, Serta Simmons had not signed a post-closing agreement prior to the deal being consummated. The opinion said Tempur Sealy had offered a two-year extension to for its Mattress Firm contract. In response, Serta Simmons pushed back seeking a 10-year extension with guarantees, the opinion said.
“Not surprisingly, statements by rivals generally aren’t of particularly persuasive value, given evident self-interest in blocking a vertical integration that will make the merged firm more competitive,” the Eskridge wrote. “That is true here to an unusually extreme degree.”
Relying on Serta Simmons as Tempur Sealy’s largest competitor at Mattress Firm, the judge extended his reasoning “to the testimony of all other rival suppliers.”
“To be clear, it’s been determined above that the proposed acquisition won’t substantially harm competition,” the opinion said. “But even if assumed to the contrary, defendants’ commitments to divest certain stores and to maintain going-forward slot allocations resolves any lingering concern.”
In response to the court’s decision, Serta Simmons said in a statement, “We respect the court’s decision. At Serta Simmons Bedding we remain committed to our partners and look forward to continuing our strong relationship with Mattress Firm in 2025 and beyond.”
For the transcript of the judge’s opinion, click here.
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