Electrolux lashes out at Justice Department over opposition to GE deal

Electrolux CEO Keith McLoughlin, speaks at the Electrolux Capital Markets Day in Charlotte, Thursday, Nov. 20, 2014.
Electrolux CEO Keith McLoughlin, speaks at the Electrolux Capital Markets Day in Charlotte, Thursday, Nov. 20, 2014.

Defending a merger that would give it control of two-fifths of the U.S. appliance market, Electrolux said it “contests vigorously” the federal government’s attempt Wednesday to block its purchase of General Electric Co.’s appliance business.

The U.S. Justice Department filed a civil lawsuit attempting to block the $3.3 billion acquisition, saying the combination of the two appliance companies would eliminate competition that has benefited consumers through lower prices and more options.

In a statement, Electrolux, which has its North American headquarters in Charlotte’s University City area, said the deal would “increase competition and provide consumers access to a greater choice of high quality products at a wider range of competitive prices.”

Joe Simms, a partner at the Jones Day law firm representing Electrolux, told reporters on a conference call Wednesday that his team has been debating antitrust issues with the Justice Department for several months.

Prices won’t go up after the deal, Simms said, given the bargaining power of Electrolux’s major retail customers. Together, Best Buy, Sears, Lowe’s, Home Depot and HHGregg account for over 80 percent of all appliance sales, Simms said.

Looking ahead, companies can try to reach a settlement even after a lawsuit, as American Airlines and US Airways did when the department sued to bar their merger in 2013.

“As always, in any transaction where the parties are rational, we would be perfectly willing to come to some acceptable accommodation with the division. We’ve had those discussions, and so far they’ve been unsuccessful,” Simms said.

‘This deal is in trouble’

A deal won’t be feasible, though, unless both sides are willing to make major concessions, such as brand divestitures, said Ray Groth, managing director at investment firm Axum and an adjunct professor at Duke University’s Fuqua School of Business.

But usually by the time a lawsuit is filed, Groth said, it’s indicative that negotiations have failed.

“If I were a betting man, I’d say this deal is in trouble,” Groth said, adding later that the current administration has been “fairly successful” in recent antitrust lawsuits. Earlier this year, for example, Comcast called off its planned purchase of Time Warner Cable after government opposition.

Electrolux agreed in September to acquire GE’s Louisville, Ky.-based appliances unit, and completing the sale as planned would give Electrolux control of about 40 percent of the U.S. appliance market, according to 2013 data from research firm IBISWorld. Electrolux and industry leader Whirlpool together would have more than three-quarters of sales, the data show.

The deal would put the Swedish company on par with Michigan-based Whirlpool in the U.S. The sale would add GE appliances, with brands such as Hotpoint, to an Electrolux lineup that includes AEG stoves and Frigidaire refrigerators.

In its statement Wednesday, Electrolux said it finds the Justice Department’s opposition of the GE deal to be “wholly inconsistent” with its 2006 decision to approve Whirlpool’s acquisition of Iowa-based Maytag, a home and commercial appliance manufacturer.

Citing a 2011 case study of prices of Maytag and Whirlpool products, Andrew Chin, an associate professor who teaches antitrust law at the University of North Carolina School of Law, noted there was a “significant increase in prices post merger” that could be attributable to the merger.

“The consolidation process has to stop at some point, and given the retrospective evidence, the stopping point in this major home appliance industry perhaps should have even been reached even before the Maytag-Whirlpool merger,” Chin said.

GE wants deal

Pushback from the federal government isn’t the only headache for Electrolux, which employs about 925 people in Charlotte. The company said in June that it cut less than 1 percent of its North American workforce as it looks to boost earnings, and in April its North American CEO Jack Truong resigned.

In a separate statement, GE said that along with Electrolux, it plans to “vigorously defend the proposed acquisition as pro-competitive and pro-consumer.”

“Our goal remains to close the deal this year,” the company said. “GE continues to believe that GE Appliances’ customers, consumers and employees will benefit from Electrolux’s commitment to the appliance business and its ability to compete with global competitors.” Bloomberg News and staff writer Rick Rothacker contributed.