Durex owner Reckitt Benckiser (RB) is being forced to license the K-Y Jelly brand in the UK to a rival to ease competition concerns. Shares in the FTSE 100 group have plunged 2.7% to 5,960p as a result.
RB agreed to buy the global rights of the K-Y brand from a subsidiary of US rival Johnson & Johnson in March 2014 but the deal has come under intense scrutiny from the Competition and Markets Authority (CMA) amid fears of higher prices.
The watchdog concluded in its final report, published today, that the merger could lead to a “substantial lessening” in competition making customers buying these products in grocery retailers and national pharmacy chains worse off.
RB will have to license K-Y in the UK to a competitor for eight years to remedy the CMA’s concerns and allow time for the development a new brand which could rival the Durex range.
“Consumers and retailers differentiate between these two products to some extent,” said Phil Evans, chairman of the Reckitt Benckiser/K-Y brand inquiry group. “However, on balance, there is enough of an overlap in the market for personal lubricants for there to be a realistic prospect of consumers facing less competition and possibly higher prices.
“The licence will also facilitate that new brand in gaining access to supermarkets and national pharmacy chains to protect competition.”
K-Y and Durex hold almost three-quarters of the market share in grocers and national pharmacies, where the majority of customers buy these products. The CMA added that, historically, smaller scale suppliers have had little success getting access to the shelves in these larger shops.
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