AAI White Paper on Whirlpool Acquisition of Maytag Urges Rejection

Click here to read the white paper.

Release Date: January 17, 2006

Contacts: Diana Moss, Vice President and Senior Fellow 720-233-5971 or Albert Foer, President 202-276-6002

American Antitrust Institute Opposes Proposed Merger of Whirlpool and Maytag, Warns of Anticompetitive Outcomes

The American Antitrust Institute (AAI) has issued a white paper opposing the proposed merger of Whirlpool and Maytag, the two largest domestic manufacturers of home appliances. Among the most affected of home appliances markets is laundry. There, the AAI warns that the proposed combination would severely concentrate markets, significantly lessen competition, and harm consumers through higher prices, reduced choice, and stifled innovation. Albert Foer, AAI’s President, noted that “American consumers have benefited from the price and quality competition, choice, and innovation generated by competition between these two laundry giants. A merged Whirlpool/Maytag amounts to a wet rag for millions of consumers.”

In a 17-page white paper based on independent review and publicly available information, the AAI’s Vice President and Senior Fellow, economist Diana Moss, noted that “while the effects of the merger on non-laundry home appliance markets are also worth looking into, the Institute has focused its efforts on the most adversely affected markets, including top-loading washers, front-loading washers and dryers.” In a letter transmitting the paper to the Department of Justice Antitrust Division, the AAI urged that the merger be blocked, or at least be conditioned on significant divestitures of laundry assets.

Of particular concern, the white paper explains, is the market for top-loading washers—a unique “American” product for which there is no foreign competition. That market is dominated by Whirlpool and Maytag with only GE and Electrolux the remaining small rivals. No existing or prospective competition–domestic or foreign–the AAI argues, would discipline a post-merger price increase.

The paper suggests that the merged firm would have up to a 75 percent share of the top- and front-loading washer and dryer market. This translates into merger-induced increases in concentration that are significantly above and beyond the thresholds that would trigger serious competitive concerns in the Department of Justice/Federal Trade Commission 1992 Horizontal Merger Guidelines.

The AAI white paper predicts that the merger would have both unilateral and coordinated negative effects. “Merger-induced increases in concentration of this magnitude,” AAI’s Foer states, “raise concerns about post-merger behavior by a dominant Whirlpool/Maytag acting alone, as well as anticompetitive coordination among the few remaining competitors in the industry.”

Of particular concern is the threat of strategic behavior on the part of the merged company. “Whirlpool/Maytag could successfully use their enhanced market power—even against powerful buyers like Lowes, Sears, and Best Buy to demand more advantageous access to retail floor space and other forms of marketing support, edging out or foreclosing competitors,” Moss explained. And the market power wielded by the merged company would raise barriers to entry or expansion by rivals, particularly foreign firms who still have small market shares.

“Any claimed efficiencies would have to be merger-related, well-documented, and enormous to overcome these anticompetitive concerns,” Foer observed, stating that the AAI is skeptical that there is a convincing story for how the antitrust authorities could ignore a deal so clearly anticompetitive.

The American Antitrust Institute, www.antitrustinstitute.org, is an independent, non-profit research, education, and advocacy organization with a mission is to increase the role of competition, assure that competition works in the interests of consumers, and challenge abuses of concentrated economic power in the American and world economy.

Click here to read the white paper.