General Electric (GE) has walked away from the $3.3bn sale of its home appliances arm to Stockholm-based Electrolux following opposition from the Department of Justice. The deal, which was announced last year, would have combined two of the three leading suppliers of home appliances in the US, leaving Electrolux and Whirlpool as the main players on the market.
The Antitrust Division of the Department of Justice filed a suit in July to block the deal, alleging that the end result of the acquisition would be the elimination of competition, resulting in higher prices and less choice for US consumers. It was particularly concerned that the deal would create a duopoly in the supply of cooking appliances to builders, property managers and other “contract-channel purchasers”, further consolidating an already concentrated market. It also stressed that Electrolux had, in recent years, competed aggressively with GE with resultant consumer benefit and that the acquisition would eliminate this incentive to compete.
The Department, in arguing that the merger was anti-competitive, adopted a narrow market definition looking at the effects, not on the household appliances market more generally, but on the market for “ranges, cooktops and wall ovens” and more specifically where these were being sold to “contract-channel purchasers”. This approach ultimately allowed them to argue that the deal would lead to a highly concentrated market (to the detriment of effective competition) with a combined market share for Electrolux and Whirlpool post-merger of over 90%.
The case is also indicative of a wider trend towards a more interventionist approach by regulators.
For the parties, GE appears confident that it can find another buyer. Termination of the deal does, however, leave Electrolux with limited options to strengthen its position in the US in the short term. It could be that Electrolux now chooses to focus its M&A activities on smaller bolt on acquisitions (both in the US and further afield) which should, in theory, attract less unwanted attention from the competition authorities.