Lubricant deal slips away as Commerce Commission nixes merger

The Commerce Commission has ruled against a merger between Durex and K-Y, saying competition between them is the main constraint on wholesale prices.

The Commerce Commission has ruled against a merger that would have seen New Zealand's most popular brands of adult lubricant products merged under a single owner.

The decision will slightly complicate the planned global deal in which Reckitt Benckiser Group, owners of Durex, are to purchase Johnson & Johnson's K-Y brand and product assets.

"The commission is not satisfied that the merger of Durex and K-Y would not have the likely effect of substantially lessening competition in the supply of personal lubricants to New Zealand supermarkets and pharmacies," said commission chairman Mark Berry.

Although the merger had been approved in other countries, New Zealand's market was unique due to the limited number of suppliers to main retailers, with Durex and K-Y the leading personal lubricant brands in New Zealand with strong customer loyalty, Berry said.

"Together Durex and K-Y account for the vast bulk of supermarket and pharmacy sales.

"While Reckitt Benckiser submitted that the two brands appeal to different customers, Durex and K-Y are each other's closest rivals across the full product range and competition between them is the main constraint on wholesale prices.

"Nor are we satisfied that supermarkets, in particular, have the incentive to support the expansion of an existing supplier or take action if the merged brands raised prices," he said.

"We could not exclude the real chance that as a result of this merger Durex and K-Y's wholesale prices would increase."

That was despite healthy competition among online retailers of lubricants.