Durex owner Reckitt Benckiser has been told by the UK competition regulator it must license its K-Y lubricant brand to a rival for eight years after it raised concerns that Reckitt's takeover of the business could result in higher prices for consumers.
The Competition and Markets Authority (CMA) said that the Durex and K-Y brands hold almost three-quarters of the market among mainstream retailers, which may lead to a "substantial lessening in competition" and higher prices.
The CMA's probe came after Reckitt agreed to buy the K-Y brand from America's Johnson & Johnson in March last year, in a deal reportedly believed to be worth around 400 million US dollars (£260 million) as the UK firm continued its expansion into consumer health labels.
The CMA said licensing the K-Y brand to a rival for eight years will also give this new market competitor time to develop a new brand to rival Durex. Reckitt shares fell nearly 3%.
The regulator added that the owner of Durex and K-Y has its market dominance among supermarkets and national pharmacies, where the majority of customers buy these products.
The CMA said that the holder of the eight-year licence will be expected to launch a new brand able to sell into these high street retailers.
CMA inquiry chairman Phil Evans said: "During this period the licence will give a competitor an existing platform from which it can develop a new brand to rival the Durex range."
The CMA added: "There is little evidence that other outlets, such as specialist shops and online retailers, could act as a brake on any price rises in supermarkets and national pharmacy chains."