The U.S. Department of Justice’s Antitrust Division has filed a civil suit to block the acquisition of General Electric’s appliance business by Electrolux.  According to the complaint, the U.S. market for cooking appliances— specifically ovens, cooktops, and ranges—is dominated by GE, Electrolux (which manufactures the Frigidaire brand), and Whirlpool.  The DOJ alleges that Electrolux’s planned acquisition of GE’s appliance business would create a duopoly, which would harm consumers by reducing competition and increasing prices.

As set forth in the complaint, there are two principal sales channels through which cooking appliances are sold.  In the retail channel, appliances are sold to retailers and then resold directly to consumers.  In contrast, in the contract channel, appliances are sold to homebuilders, property managers, hotels, and the like.  The two channels are distinct for the purposes of antitrust analysis, in part because consumers often only buy one appliance at a time whereas contract-channel buyers usually want to outfit a whole kitchen (or series of kitchens) with appliances from the same brand.  For this reason, the three suppliers mentioned above control over 90% of the contract-channel sales, because it is difficult for smaller suppliers to offer not only cooking appliances but also refrigerators and dishwashers with multiple models and price points.

The DOJ alleges that contract-channel purchasers are vulnerable to the targeted price increases that will likely result from the GE-Electrolux deal, because these entities often purchase cooking appliances under individually negotiated contracts and have no practicable alternative to the contract channel.  Moreover, the acquisition would eliminate the currently aggressive competition between GE and Electrolux for the business of home builders and other contract-channel purchasers.  Additionally, the DOJ asserts that retail-channel purchasers would also likely experience higher prices on cooking appliances, especially one of the major brands in the retail space, Kenmore, is also manufactured by Electrolux.

The complaint alleges that Electrolux’s proposed acquisition of GE’s appliance business would likely violate Section 7 of the Clayton Act.  It seeks a permanent injunction to stop the acquisition, as well as costs.  We will continue to monitor this case moving forward.