Tempur Sealy's proposed $4 billion acquisition of Mattress Firm is getting challenged by the Federal Trade Commission, the antitrust agency announced on Tuesday.

The FTC unanimously voted to go to federal court to stop the country's biggest mattress maker from merging with the largest bedding retailer, saying the combined company would have "the ability and incentive to suppress competition and raise prices for mattresses for millions of consumers." 

Tempur Sealy has shown it plans to curtail competitors' access to Mattress Firm's nationwide network of stores, significantly impairing their ability to compete, the FTC said. Those predominantly American manufacturers employ thousands and would likely have to close factories and lay off workers if the deal announced were to go through, the FTC stated. 

"Through emails, presentations and other deal documents, Tempur Sealy has made it abundantly clear that its acquisition of Mattress Firm is intended to kneecap competitors and dominate the market," Henry Liu, Director of the FTC's Bureau of Competition, said in a statement.

Tempur Sealy dismissed the FTC's concerns in a statement, saying "we continue to believe the combination of Tempur Sealy and Mattress Firm will unlock incremental benefits for all stakeholders, particularly consumers." 

Lexington, Kentucky-based Tempur Sealy said it believes the merger, announced in May of 2023, will survive the FTC's court challenge, allowing the transaction to close late this year or in early 2025. 

Tempur Sealy bedding products are sold online at more than 700 company-owned stores worldwide, while Mattress Firm, owned by South African retailer Steinhoff International, operates more than 2,400 stores in 49 U.S. states. 

"Mattress Firm is disappointed with the decision of the FTC and continues to believe that the transaction with Tempur Sealy will be beneficial to consumers and employees as well as the overall bedding and furniture industry," the company said in an emailed statement. 

"We will continue to offer the curated, comprehensive and diverse assortment that is a core element of our business, featuring both Tempur Sealy and non-Tempur Sealy branded products, and Tempur Sealy has already engaged with numerous of our suppliers on post-merger supply agreements," Mattress Firm added.

The FTC lawsuit would have the antitrust agency challenging a vertical merger — deals involving companies that do not directly compete with each other but operate in the same supply chain. 

Kate Gibson

Kate Gibson is a reporter for CBS MoneyWatch in New York, where she covers business and consumer finance.