A lawsuit was filed on Wednesday by the US Justice Department to stop Sweden’s Electrolux AB from buying General Electric Co’s appliance business.
The Justice Department said the US$3.3 billion deal would hurt competition, and consumers, by combining two of the three top makers of stoves, cooktops and ovens. The third major player is Whirlpool Corp which bought Maytag in 2006.
GE, which also has the Hotpoint brand, is well known to the Australian market, particularly through its high-end refrigeration range which has been distributed locally for more than thirty years.
“Electrolux and GE intend to vigorously defend the proposed acquisition,” GE said in a statement.
In its complaint, the Justice Department said that Whirlpool, GE and Electrolux had 90% of the US market for stoves and ovens. It is concerned that the deal would lead to higher prices for consumers.
According to deputy assistant attorney general at the Justice Department’s Antitrust Division, Leslie Overton, “This lawsuit also seeks to prevent a duopoly in the sale of these major cooking appliances to builders and other commercial purchasers.”
Barbarians at the gate
Not surprisingly Electrolux disagreed and its antitrust attorney Joe Sims argues that LG, Samsung and others were moving into the market to challenge the Big Three.
“There is absolutely no barrier of any kind to any other manufacturer participating,” he said, adding that the company and Justice Department had been in settlement talks.
Sims described Electrolux as “rational” and explained that the company was “more than happy to come to a reasonable settlement if the DOJ (Justice Department) is. If not we’re just going to have to win in court.”
When he announced the takeover in September last year, President and CEO of Electrolux , Keith McLoughlin, said the deal could close by the end of the 2015.
However, on Tuesday GE warned that the appliances sale would not close in the second quarter because of an ongoing regulatory review, and expected an after-tax gain of roughly US5 to US7 cents per share should the deal close. GE is expected to earn US$1.29 per share this year, according to Thomson Reuters I/B/E/S.