The Competition and Markets Authority (CMA) said on Tuesday it found that woollen yarn producer Danspin’s purchase of Dewsbury, West Yorkshire competitor Lawton Yarns “poses serious competition concerns for carpet manufacturers in the UK.”

The CMA said Danspin bought Lawton Yarns out of administration in May 2019, following a competitive process against other interested purchasers.

Danspin now has until November 12 to offer solutions to resolve the CMA’s concerns, otherwise the merger will be referred for an in-depth “Phase 2” investigation.

“Both companies provide yarn that is used to make woollen carpets nationally and across the world,” said the CMA.

“In the UK – one of the biggest markets for this particular carpet – Danspin and Lawton Yarns supply the majority of yarn used in its manufacturing.”

In its initial “Phase 1” investigation, the CMA has found that, as well as being the two main producers of woollen yarn prior to their merger, Danspin and Lawton Yarns were each other’s main competitors and faced little rivalry from other businesses.

“Choice for carpet manufacturers following the merger would therefore be particularly limited, as the other main competitors in this sector have a small UK presence and would not pose a healthy challenge to the merged company,” said the CMA.

“As a result, the CMA is concerned that the new, merged company could increase prices or reduce the supply of yarn to carpet manufacturers in the UK, potentially pushing prices up for people buying woollen carpet.”