CMA orders remedy to meet concern over lubricants merger
The CMA has found that Reckitt Benckiser’s anticipated acquisition of the K-Y brand could lead to higher prices for personal lubricants.
In its final report published today, the Competition and Markets Authority (CMA) has concluded the merger could lead to a substantial lessening in competition making customers buying these products in grocery retailers and national pharmacy chains worse off due to higher prices. This confirms the CMA’s provisional findings which were published in May.
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.
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. There is little evidence that other outlets, such as specialist shops and online retailers, could act as a brake on any price rises in supermarkets and national pharmacy chains. Historically smaller scale suppliers have had little success getting access to the shelves in these larger shops.
To remedy the competition concerns of higher prices RB will be required to license the K-Y brand in the UK to a competitor for 8 years, allowing time for it to develop a new brand to rival the Durex range that could gain access to supermarkets and national pharmacy chains.
Phil Evans, Chair of the Reckitt Benckiser / K-Y brand inquiry group, said:
Consumers and retailers differentiate between these 2 products to some extent. However, on balance, there is 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.
To preserve the benefits of competition in this market we have concluded that an effective and proportionate remedy is to require RB to license the K-Y brand in the UK to a competitor for 8 years. During this period the licence will give a competitor an existing platform from which it can develop a new brand to rival the Durex range. The licence will also facilitate that new brand in gaining access to supermarkets and national pharmacy chains to protect competition.
The summary of the final report is available on the investigation case page along with all other published information relating to the investigation. The full final report will be published shortly.
Notes for editors
- 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.
- 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.
- 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).
- The members of the Reckitt Benckiser / K-Y brand merger inquiry group are: Phil Evans (Chairman), Marisa Cassoni, Roger Finbow and Andrew Popham.
- Enquiries should be directed to Siobhan Allen (email@example.com, 020 3738 6798).
- For more information see our homepage or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on mergers cases.