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NZ watchdog rejects lubricants merger

10858500_10152549411163161_6563763984087351522_nThe New Zealand Commerce Commission has declined an application from Reckitt Benckiser Group, owners of Durex, to purchase Johnson & Johnson’s K-Y brand and product assets.

The Commission said it was 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.

Commission chairman, Dr Mark Berry, said that 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.

Durex and K-Y are the leading personal lubricant brands in New Zealand and enjoy strong customer loyalty.

“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,” Berry said.

“We also aren’t convinced that any of the other brands stocked in supermarkets or pharmacies, such as Ansell, Sylk or FlowMotion, would be able to replace the competition lost between Durex and K-Y. 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, as the personal lubricant category is small and does not drive foot-traffic through the supermarkets,” Berry said.

“In our view, we could not exclude the real chance that as a result of this merger Durex and K-Y’s wholesale prices would increase.”

The Commission did not have concerns about competition in the adult and online retail markets, where there is greater variety of lubricant brands available to consumers.

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