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Competition fears over Reckitt deal

Published 22/05/2015

Competition authorities have expressed concerns over the deal
Competition authorities have expressed concerns over the deal

Durex owner Reckitt Benckiser has run into resistance over plans to buy the K-Y lubricant brand after competition authorities found the deal could result in higher prices for consumers.

It could mean Reckitt being prevented from taking over the UK part of the K-Y business, under potential "remedies" identified by the Competition and Markets Authority (CMA).

The body will announce a final decision on August 18, after extending its inquiry timetable following a lengthy scrutiny process.

Reckitt agreed to buy the K-Y brand from America's Johnson & Johnson in March last year, in a deal reportedly believed to be worth around 400 million US dollars (£260 million).

Together, K-Y and Durex personal lubricants hold almost three-quarters of the market share in supermarkets and national pharmacies, where the majority of customers buy these products, the CMA said.

"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.

"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."

Inquiry chair Phil Evans said: "Consumers and retailers differentiate between these two 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 two biggest brands come under single ownership."

The CMA said it had provisionally identified structural remedies, which included: prohibition of the acquisition of the UK business by Reckitt; or sale or licensing of rights of the UK business to another party.

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