Tempur Sealy’s $4 Billion Merger: Assessing the Impact of Vertical Integration on Market Competition

Yoomin Kim

In the realm of corporate strategy, mergers and acquisitions are often touted as vehicles for growth, efficiency, and expansion. However, these transactions frequently spark fierce debate over their implications on market competition and consumer welfare. The proposed merger between Tempur Sealy and Mattress Firm is a case in point. The Federal Trade Commission (FTC) has raised serious concerns about the anticompetitive effects of this merger, questioning whether this consolidation could ultimately harm consumers and the mattress market. At the heart of this legal battle lies a fundamental question: Can vertical integration––the connection of multiple stages of the supply chain––create an unfair competitive advantage, or is it a smart business move that benefits all? As this legal dispute progresses, it casts a spotlight on the broader debate surrounding the role of antitrust enforcement in regulating mergers and acquisitions that shape the competitive landscape of markets.

After over thirty-five years of partnership in the retail sector, mattress manufacturer Tempur Sealy announced a definitive agreement on May 9, 2023, to acquire mattress retailer Mattress Firm [1] for approximately four billion dollars. [2] In a press release, Tempur Sealy CEO Scott Thompson claimed that the merger would create a powerful global presence, encompassing three thousand retail stores, thirty ecommerce platforms, seventy-one manufacturing facilities, and four state-of-the-art research and development centers worldwide. This acquisition would fulfill Tempur Sealy’s strategic objectives to develop the highest-quality bedding products, enhance brand visibility through compelling marketing initiatives, optimize a diverse omnichannel distribution platform, and accelerate earnings per share growth.

Particularly notable in Tempur Sealy’s declaration is the claim that the “acquisition will make Tempur Sealy more competitive by bringing [the company] closer to consumers,” [3] which raises significant legal implications in light of the FTC’s scrutiny. While Tempur Sealy affirmed its intention to cooperate with the FTC to facilitate the acquisition, the FTC’s decision to bring the matter to court underscores its concerns regarding the potential suppression of market competition. [4] As the world’s largest bedding manufacturer, Tempur Sealy International, Inc. sought to vertically integrate the largest mattress specialty retailer in the United States—Mattress Firm Group, Inc. Following the announcement of the acquisition, Tempur Sealy entered into supply agreements with six other mattress manufacturers, further complicating the regulatory landscape. [5]

On July 2 of last year, the FTC unanimously voted to challenge Tempur Sealy’s proposed acquisition of Mattress Firm, issuing an administrative complaint and filing a lawsuit in a federal court. [6] The Commission argued that the acquisition would give Tempur Sealy “less incentive to compete on price, quality, and innovation.” [7] Competition lies at the heart of the issue, as the proposed vertical integration would substantially increase Tempur Sealy’s influence across multiple stages of the mattress supply chain—encompassing manufacturing, supply, and retail operations. While Tempur Sealy aims to meet consumers’ needs, expand growth opportunities, and streamline operations, the FTC contends that the merger poses significant anti-competitive risks. [8] The Commission views the consolidation as an attempt to kneecap competition and dominate the mattress market, potentially resulting in hampered innovation, lost jobs in the American manufacturing sector, and restricted access to retail channels for mattress suppliers. On the consumer side, consequences may include higher prices for an essential consumer good, and decreased product quality and choice. [9]

Under the FTC’s enforcement authority, the Commission typically issues administrative or judicial complaints when it has “reason to believe” that the law is being violated. [10] The FTC operates in areas of public interest, particularly the enforcement of consumer protection and antitrust laws. The issuance of an administrative complaint in July 2024 marked the beginning of a proceeding to be tried in a formal hearing before an administrative law judge. [11]

The FTC was established in 1914 under the Federal Trade Commission Act to combat the negative impacts of monopolies and trusts, i.e., conglomerates of business interests wielding significant market power. [12] Designed as a bipartisan, independent agency of the U.S. government, the FTC was created by Congress under the Wilson administration during the Progressive Era to enforce and strengthen federal regulations. [13] Its stated mission is to “protect consumers and promote competition,” ensuring a more equitable and transparent marketplace. [14] 

The FTC enforces over seventy federal consumer protection and antitrust laws. [15] Within these, the Federal Trade Commission Act, the Sherman Antitrust Act, and the Clayton Act are the three primary anti-competitive antitrust laws enforced. [16] These antitrust laws are intended to “protect trade and commerce against unlawful restraints and monopolies.” [17]

The Sherman Antitrust Act of 1890 is a foundational piece of U.S. antitrust law that primarily focuses on anticompetitive practices and restraints on trade. [18] However, it is somewhat broad in its treatment of mergers and acquisitions, and only in the first two sections does it prohibit any contracts, combinations, conspiracies, or monopolization used to circumscribe commerce. Furthermore, it does not directly regulate mergers and acquisitions. [19]

The Federal Trade Commission Act of 1914 decrees that unfair methods of competition affecting commerce and “unfair or deceptive acts or practices in or affecting commerce” are also unlawful. [20] The FTC is thereby empowered to prevent individuals, partnerships, and corporations from engaging in such illegal acts. The act defines “unfair or deceptive acts or practices” as acts by the parties mentioned above that either cause or are likely to cause reasonably foreseeable injury within the U.S. or involve material conduct occurring in the country. [21] In its enforcement of the law, the Commission possesses investigative and enforcement powers, including the ability to issue cease and desist orders, consent decrees, monetary penalties, and injunctions. The FTC works alongside the Department of Justice to scrutinize and challenge monopolistic behavior, mergers that may substantially reduce competition, and other practices that harm consumers or limit competition. [22] In this way, the FTC Act delineates the enforcement mechanisms of legal statutes in the Sherman Act. 

The Clayton Act of 1914 addresses anticompetitive practices not covered in the Sherman Antitrust Act. While the Sherman Act made it illegal to restrain trade or to attempt to create monopolies, the Clayton Act specifically addresses practices that could lead to anticompetitive behavior or that reduce competition in the marketplace. [23] Section 7’s prohibition of mergers and acquisitions that would likely substantially lessen competition or tend to create monopolies is one of the three main components of the act. [24] The law applies to mergers and acquisitions in all industries, including horizontal mergers (between direct competitors), vertical mergers (between companies at different stages of production), and conglomerate mergers (between firms in unrelated industries). [25]

The history of FTC enforcement has proved inconsistent; commissioners have exercised discretion in how vigorously they have chosen to enforce certain aspects of antitrust legislation, often making determinations predicated on their particular economic and political ideologies, as well as the priorities of the administrations they have served. From 2021 to 2025, legal scholar Lina Khan served as chair of the FTC, appointed by former President Joe Biden. [26] Khan, recognized for her rapid ascent as the youngest FTC chair in history, has built a reputation as a vocal critic of monopolistic business practices. [27] She first gained widespread attention for her 2017 article “Amazon’s Antitrust Paradox.” [28]

Under her leadership, the FTC expanded antitrust regulation and enforcement significantly. [29] Nevertheless, her tenure produced mixed results, with initial anticipation about her policies being tempered by a string of losses in court. [30] As such, Khan’s authority at the agency came under scrutiny: a recent staff report from the Republican majority on the House Committee on Oversight and Accountability accused her of “trampling on the due process rights of regulated parties, upending the rule of law, and violating ethics standards she is bound to uphold.” [31]

The FTC’s enforcement of Tempur Sealy’s merger fits squarely within Khan’s broader regulatory objectives and her aggressive approach to antitrust enforcement. Her strategy of pursuing nontraditional cases aims to achieve a broader deterrence effect for companies considering mergers; however, this approach risks more frequent losses in court. Under Khan’s leadership, the FTC has had a mixed record, losing high-profile merger challenges, including F.T.C. v. Microsoft [32] and F.T.C. v. Meta, [33] while successfully blocking mergers in Illumina v. F.T.C. [34] and F.T.C. v. Kroger. [35]

As part of the FTC’s review of proposed mergers and acquisitions, the Bureau of Competition’s lawyers and economists review the guiding documents of the companies involved and analyze market dynamics to determine the potential impacts on consumers. [36] Considering the key documents and presentations provided by Tempur Sealy regarding its proposed merger, the intended purpose appears to be the elimination of competition in the mattress market, which would negatively impact consumers and competing companies. [37]

The FTC quoted key Tempur Sealy documents referring to Mattress Firm as a “kingmaker” due to its expertise and scale of operations. [38] Further, the FTC questioned Tempur Sealy’s proven history of making exclusionary deals to block rivals, such as when it made multiple contracts with retailers to prevent them from selling competing mattress manufacturers’ brands. [39] Attacking the potential fixes proposed by Tempur Sealy and Mattress Firm, the FTC claimed that these solutions were insufficient to mitigate harm to competitors. The “hodgepodge” of solutions offered by Tempur Sealy included disposing of several stores and preserving space for rival suppliers in Mattress Firm stores. [40]

The antitrust theory enforced by the FTC in this case is “foreclosure”—situations where companies restrict or limit competition in a way that prevents other companies from competing effectively in a market, either totally or partially. Foreclosure often occurs with mergers, when companies gain the ability to block access to essential resources, distribution channels, or markets for competitors, thereby making it difficult for them to compete. [41] However, according to legal experts, such arguments do not always prevail in court. [42] Judge Charles Eskridge, ruling against the FTC in the Tempur Sealy case, cited U.S. v. Microsoft when he averred that “vertical integration ‘virtually never poses a threat to competition when undertaken unilaterally and in competitive markets.’” [43]

The court ruled in favor of Tempur Sealy on two material points: 1) the FTC failed to prove a relevant antitrust market, and 2) the FTC also failed to offer sufficient support for its vertical theory of harm against competitors. [44] First, the FTC asserted that the relevant market was that of “premium mattresses” priced above two thousand dollars. However, the court found that this price point was arbitrary and that consumers typically shop across multiple price points, concluding that the FTC’s narrow definition of “premium mattresses” failed to constitute a specific market. [45] Second, the court accepted Tempur Sealy’s argument that the merger would eliminate double marginalization (EDM)—a merger between two companies at different stages of the supply chain (such as a manufacturer and a retailer) that eliminates the extra markups or profit margins that each would typically add when selling to the next company in the chain. [46] The court concluded that the merger would neither harm consumers nor reduce competition in the premium mattress market. [47]

The FTC’s loss in FTC v. Tempur Sealy adds to a string of losses for the government in vertical-merger cases in recent years, including U.S. v. AT&T, in 2018; [48] U.S. v. UnitedHealth Group, in 2022; [49] and F.T.C. v. Microsoft in 2023. [50] Khan’s administration forced the divestiture  of part of Illumina Inc. [51] in Illumina, Inc. v. F.T.C. [52] and pressured NVIDIA/Arm and Lockheed Martin/Aerojet Rocketdyne [53] to abandon their vertical deals in 2022. This case reaffirmed the legal principle that vertical integration rarely impedes competition—an idea that the FTC under Khan had not subscribed to. F.T.C. v. Tempur Sealy validates this widely held view. On February 5, 2025, the merger officially went through. [54]

Two weeks after finalizing its acquisition of Mattress Firm on February 5, Tempur Sealy rebranded itself as Somnigroup. [55] While the market-wide impacts of the merger remain too distant to determine at the present moment, FTC v. Tempur-Sealy has reaffirmed the traditional view of vertical integration’s non-competitive nature and represents a significant turn from the aggressive enforcement practices of Lina Khan’s FTC.

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1. Tempur Sealy International, Inc. and Mattress Firm, Inc., Agreement and Plan of Merger, May 9, 2023, between Tempur Sealy International, Inc. and Mattress Firm, Inc. (May 9, 2023), https://www.sec.gov/Archives/edgar/data/1206264/000120626423000125/a21agreementandplanofmerger.htm.

2. Federal Trade Commission, “FTC Moves to Block Tempur Sealy’s Acquisition of Mattress Firm,” news release, July 2, 2024.

3. “Leading Global Bedding Company Tempur Sealy to Acquire Mattress Firm, the Nation’s Largest Mattress Specialty Retailer,” Tempur Sealy International, Inc., news release, May 9, 2023, https://www.prnewswire.com/news-releases/leading-global-bedding-company-tempur-sealy-to-acquire-mattress-firm-the-nations-largest-mattress-specialty-retailer-301819387.html.

4. Complaint, In re Tempur Sealy Int’l, Inc., Fed. Trade Comm’n Docket No. 9433 (July 2, 2024).

5. Complaint, In re Tempur Sealy.

6. Complaint at 36–37, In re Tempur Sealy.

7. Complaint, In re Tempur Sealy.

8. Complaint at 37, In re Tempur Sealy.

9. “A Brief Overview of the Federal Trade Commission's Investigative, Law Enforcement, and Rulemaking Authority,” Federal Trade Commission, updated May 2021, https://www.ftc.gov/about-ftc/mission/enforcement-authority.

10. Complaint, In re Tempur Sealy.

11. Charles Wesley Dunn, “The Federal Trade Commission Act (Section 5)” (lecture, American Specialty Manufacturers’ Association, Minneapolis, MN, September 26, 1923), 3–4, https://llmc-com.ezproxy.bu.edu/Services/Download.asmx/VolumePdfByPages2?sessionId=4cixwg4sszpucdr2rnxzfmo2&longID=09902.0001.001&startPage=1&endPage=16&addWatermark=true&f=09902-0001-001_7829.pdf.

12. Dunn, “Federal Trade Commission Act,” 2–3.

13. “About the FTC,” The Federal Trade Commission, accessed February 23, 2025, https://www.ftc.gov/about-ftc. 

14. “Enforcement,” The Federal Trade Commission, accessed February 23, 2025, https://www.ftc.gov/enforcement.

15. “The Antitrust Laws,” The Federal Trade Commission, accessed February 23, 2025, https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/antitrust-laws.

16. Sherman Act, Pub. L. No. 61-442, 26 Stat. 209 (1890).

17. Sherman Act, 26 Stat. at 209.

18. Sherman Act, 26 Stat. at 209.

19. Federal Trade Commission Act, Pub. L. No. 63-203, 38 Stat. 717 (1914).

20. Federal Trade Commission Act, 26 Stat. at 717.

21. “Federal Trade Commission and Justice Department Seek to Strengthen Enforcement Against Illegal Mergers,” Federal Trade Commission, news release, January 18, 2022, https://www.ftc.gov/news-events/news/press-releases/2022/01/federal-trade-commission-justice-department-seek-strengthen-enforcement-against-illegal-mergers.

22. Clayton Act, Pub. L. No. 63-213, 38 Stat. 730 (1914).

23. Clayton Act §7, 38 Stat. at 730 (1914).

24. Robert H. Lande, John M. Newman, and Rebecca Kelly Slaughter, “The Forgotten Anti-Monopoly Law: The Second Half of Clayton Act Section 7,” Texas Law Review 103, no. 4 (March 2025): 792–794, https://texaslawreview.org/wp-content/uploads/2025/03/Lande.Printer.pdf.

25. “Lina M. Khan,” The Federal Trade Commission, accessed February 23, 2025, https://www.ftc.gov/about-ftc/commissioners-staff/lina-m-khan.

26. Sheelah Kolhatkar, “Lina Khan’s Battle to Rein In Big Tech,” New Yorker, November 29, 2021, https://www.newyorker.com/magazine/2021/12/06/lina-khans-battle-to-rein-in-big-tech.

27. Kolhatkar, “Lina Khan’s Battle.”

28. Federal Trade Commission, “Hart-Scott-Rodino Annual Report: Fiscal Year 1976,” December 21, 2023, corrected September 2024, https://www.ftc.gov/system/files/ftc_gov/pdf/fy2022hsrreportcorrected.pdf, 2.

29. Cecilia Kang, “F.T.C.’s Court Loss Raises Fresh Questions About Its Chair’s Strategy,” New York Times, July 11, 2023, https://www.nytimes.com/2023/07/11/technology/lina-khan-ftc-strategy.html.

30. Staff of H.R. Comm. on Oversight and Accountability, 118th Cong., “The Federal Trade Commission Under Chair Lina Khan: Undue Biden-Harris White House Influence and Sweeping Destruction of Agency Norms,” October 31, 2024, https://oversight.house.gov/wp-content/uploads/2024/10/HCOA-Majority-Staff-Report-FTC-Investigation.pdf, 4.

31. Federal Trade Commission v. Microsoft, No. 23-7010 (D.C. Cir. 2023).

32. U.S. Federal Trade Commission v. Meta Platforms., No. 23-7010 (D.C. Cir. 2023).

33. Illumina, Inc. v. Federal Trade Commission, No. 23-123 (9th Cir. 2023).

34. Federal Trade Commission v. Kroger., No. 23-245 (D.D.C. 2023).

35. “Premerger Notification and the Merger Review Process,” Federal Trade Commission, accessed April 10, 2025, https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/mergers/premerger-notification-merger-review-process.

36. Complaint at 5, In re Tempur Sealy.

37. F.T.C. v. Tempur Sealy International, Inc. and Mattress Firm Group Inc., No. 4:24-cv-02508, slip op. at 74 (S.D. Texas February 4, 2025) (denying motion for preliminary injunction), ECF No. 511.

38. Complaint at 6, In re Tempur Sealy.

39. Complaint at 40, In re Tempur Sealy.

40. U.S. Department of Justice and Federal Trade Commission, “Vertical Merger Guidelines,” June 30, 2020, https://www.ftc.gov/system/files/documents/reports/us-department-justice-federal-trade-commission-vertical-merger-guidelines/vertical_merger_guidelines_6-30-20.pdf.

41. “Vertical Mergers and Input Foreclosure Lessons from the AT&T/Time Warner Case,” Review of Industrial Organizations 59: 311–314, https://doi.org/10.1007/s11151-021-09826-x.

42. Tempur Sealy, slip op. at 24 (S.D. Texas February 4, 2025).

43. Tempur Sealy, slip op. at 111–115 (S.D. Texas February 4, 2025).

44. Tempur Sealy, slip op. at 30–49 (S.D. Texas February 4, 2025).

45. Tempur Sealy, slip op. at 80–86 (S.D. Texas February 4, 2025).

46. Tempur Sealy, slip. op. (S.D. Texas February 4, 2025).

47. United States v. AT&T, 916 F.3d 1029 (D.C. Cir. 2019). 

48. United States v. UnitedHealth Group, No. 1:22-cv-00481 (D.D.C. September 21, 2022). 

49. Federal Trade Commission v. Microsoft, No. 23-cv-02880-JSC (D.C. Cir. July 10, 2023) (denying motion for preliminary injunction), ECF No. 203. 

50. “Statement Regarding Illumina’s Decision to Divest Grail,” Federal Trade Commission, news release, December 18, 2023, https://www.ftc.gov/news-events/news/press-releases/2023/12/statement-regarding-illuminas-decision-divest-grail.

51. Illumina v. Federal Trade Commission, No. 23-123 (9th Cir. December 15, 2023).

52. Robert Wall, “Nvidia, SoftBank Call Off Blockbuster Arm Deal,” Wall Street Journal, February 9, 2022, https://www.wsj.com/articles/nvidia-softbank-call-off-blockbuster-arm-deal-11644297283.

53. Doug Cameron and Brent Kendall, “Lockheed Martin Scraps Aerojet Rocketdyne Deal,” Wall Street Journal, February 13, 2022, https://www.wsj.com/articles/lockheed-martin-scraps-aerojet-rocketdyne-deal-11644800824.

54. “Tempur Sealy and Mattress Firm Defeat FTC Preliminary Injunction in $5 Billion Deal,” Cleary Gottlieb, February 6, 2025, https://www.clearygottlieb.com/news-and-insights/news-listing/tempur-sealy-and-mattress-firm-defeat-ftc-preliminary-injunction-in-5-billion-deal.

55. “Tempur Sealy Completes Name Change to Somnigroup International,” Somnigroup, news release, February 18, 2025, https://somnigroup.com/newsroom/news-details/2025/Tempur-Sealy-Completes-Name-Change-to-Somnigroup-International/default.aspx.