Tempur Sealy and Mattress Firm Argue FTC Proceedings Are Unconstitutional in New Suit

Tempur Sealy International Inc. has initiated legal action against the Federal Trade Commission (FTC) in an attempt to halt the agency’s administrative proceedings concerning its proposed $4 billion acquisition of Mattress Firm. This lawsuit, filed on Friday in the U.S. District Court for the Southern District of Texas, marks a significant escalation in Tempur Sealy’s efforts to assert its constitutional rights against what it deems an unconstitutional proceeding.

The FTC’s lawsuit, filed in July, aims to block Tempur Sealy’s acquisition of Mattress Firm, claiming the merger would hinder competition and drive up prices for consumers. In response, the lawsuit filed by Tempur Sealy and Mattress Firm contends that the FTC’s administrative action infringes upon the companies’ private rights as guaranteed by the Constitution. They argue that, based on the recent Supreme Court ruling in SEC v. Jarkesy, the FTC should be compelled to pursue such merger challenges in an Article III court, a stance highlighted by Bloomberg Law.

“The Constitution requires more,” the lawsuit asserts, emphasizing that disputes regarding private rights, such as property and liberty, must be resolved in traditional courts. This case is one of several recent legal challenges directed at the FTC’s authority, as various companies increasingly question the constitutionality of its administrative processes. Tempur Sealy’s legal action represents at least the fourth major challenge to the FTC’s operations over the past year.

In August, Kroger Co. similarly challenged the FTC after it sought to block its acquisition of rival grocer Albertsons Cos. Other notable plaintiffs, including Cigna Group’s Express Scripts and Meta Platforms Inc., have also filed lawsuits questioning the constitutional validity of the FTC’s administrative procedures, particularly regarding the agency’s commissioners’ protections from removal. Legal experts, as noted by Bloomberg Law, suggest these challenges reflect a growing trend in which the Supreme Court is curbing the powers of federal regulatory agencies.

The Supreme Court’s recent rulings, particularly the decision to limit the Securities and Exchange Commission’s (SEC) authority to conduct in-house trials, bolsters Tempur Sealy’s argument for federal court jurisdiction. The lawsuit further claims that the FTC’s discretion in choosing between in-house proceedings and federal court violates the nondelegation doctrine, which restricts the delegation of legislative authority.

If successful, the Tempur Sealy-Mattress Firm merger would consolidate the largest mattress manufacturer with the largest specialty retailer in the U.S. Tempur Sealy insists that the merger will lead to enhanced innovation and a better buying experience for customers. CEO Scott Thompson stated, “We intend to vigorously defend our transaction in the upcoming trial in federal court, which is the proper forum to address this issue.”

Hearings on the FTC’s request for a preliminary injunction are set to commence on November 12 in the Southern District of Texas and are anticipated to last approximately two weeks. Should Tempur Sealy prevail, it aims to complete the Mattress Firm acquisition by early 2025.

The FTC’s efforts to block this merger are part of a broader strategy targeting significant corporate consolidations, including pending challenges to the Kroger-Albertsons merger and the proposed collaboration between Tapestry Inc. and Capri Holdings.

Source: Bloomberg Law