Maytag said that the letter ignores fundamental competitive realities of the appliance industry.

In a letter to the Assistant Attorney General for Antitrust, Senator Tom Harkin (D-IA) (above) and Congressman Leonard Boswell (D-IA) called on the U.S. Department of Justice (DOJ) to prevent Whirlpool’s acquisition of Maytag

Maytag Corporation said that it was disappointed to learn that U.S. Sen. Tom Harkin (D - Iowa) and U.S. Rep. Leonard Boswell (D - Iowa) had sent a letter to the Justice Department expressing concern about the competitive effects of Whirlpool Corporation's proposed merger with Maytag. See copy of the letter

Maytag said that the letter ignores fundamental competitive realities of the appliance industry. The four largest U.S. retailers now control over 65 percent of U.S. appliance sales, and, as a result, exert tremendous pressure on appliance suppliers to be competitive on price and features. Moreover, foreign competitors like LG, Samsung, Haier and Bosch-Siemens, with strong consumer brands, are expanding rapidly at these and other retail outlets.

Maytag added that the transaction will result in significant efficiencies that will make the combined firm better able to compete with growing foreign competition, as well as with its traditional rivals -- GE, Frigidaire and Sears' Kenmore brand of products. Maytag also noted that the market shares contained in the letter are significantly overstated.

Through their letter, it is obvious that Sen. Harkin and Rep. Boswell are concerned about job loss in Iowa. However, it is important to note that whether or not a transaction occurs, the tough environment in which appliance industry manufacturers operate will continue to impact employment levels at facilities that are not cost competitive.

Text of letter

January 12, 2006

Honorable Thomas O. Barnett Assistant Attorney General for Antitrust Department of Justice 950 Pennsylvania Avenue, NW Washington, DC 20530

Dear Assistant Attorney General Barnett:

We are writing concerning the proposed acquisition of Maytag by Whirlpool. We are very troubled by this proposed arrangement which would greatly increase the market share of the combined company in certain areas. For that reason, we believe that the Department should prevent this acquisition.

According to the 1992 joint FTC-Justice guidelines for horizontal mergers, we believe it is clear that the appliance industry is indeed a highly concentrated one that would become drastically more concentrated, according to the Herfindahl-Hirshman Index, as a result of the Whirlpool acquisition. The increase in concentration is far beyond the level that the guidelines presume would likely create enhanced market power or facilitate its exercise.

Whirlpool is already the largest producer in the market. With the acquisition of Maytag, the combined company would hold almost 50 percent of the market share. This market concentration becomes even more extreme when the other two major appliance manufacturers, GE and Electrolux, are considered. If the Whirlpool acquisition is approved, the newly combined company, GE and Electrolux would together control about 90 percent of the market share.

And, this is an industry that has undergone a number of substantial mergers in recent years. Maytag acquired Magic Chef, Jenn-Air and Amana. Whirlpool acquired Kitchen-Aid, and Electrolux acquired Frigidaire. At some point, the concentration becomes to extreme for an orderly competitive market. We believe the pending acquisition of Maytag by Whirlpool goes beyond that barrier particularly in the area of washers and dryers.

What is most important is the specific market for particular goods that people actually buy. In the laundry segment, a Whirlpool – Maytag Company would control an excessively dominant 70 percent of the market. It is hard to see how that type of dominance does not place excessive market control into the hands of one company.

Even with the large share of this market that is sold at retail by large chain stores, this concentration is extreme. Clearly, a combined Whirlpool would be in a position to create real difficulties for competitors. The increase in concentration is far beyond the level that the guidelines presume would likely create enhanced market power or facilitate its exercise.

While we are seeing some movement of foreign firms into this area such as LG and Samsung, their market share is very small. The current domestic players are working to sharply lower costs including off-shoring jobs to lower costs. It is not at all clear that the foreign firms will be able to effectively compete and may in fact decide to maximize their efforts in their home markets.

We recommend that the Justice Department prevent the acquisition of Maytag by Whirlpool. If that is not done, at the very least the Department should require that Whirlpool divest the washer and dryer portions of Maytag to a viable purchaser who will have the financial capability and desire to continue to operate that business.

We appreciate your consideration of our concerns. Sincerely, Tom Harkin United States Senator Leonard Boswell United States Representative