By Ted Mann And Kris Hudson 

If General Electric Co. sells its appliance business to rival Electrolux AB, will home builders and property managers have to pay more for stove tops? The Justice Department says they will, but home builders aren't as sure.

Bill Justus, vice president of supply chain for David Weekley Homes, the country's largest private builder, said that while consumers generally suffer when competition narrows, this situation is different.

"Since Electrolux has a very small share of the builder channel business, their acquisition of GE Appliances does very little to affect overall competition," Mr. Justus said.

Co-Chief Executive Dale Francescon of Denver-based builder Century Communities agrees, saying that only GE and Whirlpool compete for his business while Electrolux is "somewhat of a nonissue."

"Whether GE or Electrolux owns the current GE appliance business isn't something that creates much concern for us at all," said Mr. Francescon.

Those views contrast with the Justice Department's take on the $4 billion U.S. market for stove tops and ovens. In its suit to block the $3.3 billion sale, the government argues that having three sizable competitors allows builders to pit them against each another to drive lower prices.

If the acquisition were to go ahead, the government says a duopoly would be created that would lead to higher prices--first to such commercial customers as home builders, property managers and the government, and later to retail customers.

According to the government, citing industry data, GE is the second largest seller of ranges and ovens in the U.S. with roughly 28% market share by value, after leader Whirlpool and well ahead of third-place Electrolux. The three companies, it says, account for more than 90% of the annual sales of such major cooking appliances as ranges, wall-mounted ovens and cooktops.

Some builders agree with the government's position that fewer options will erode their negotiating power. "Competition always benefits the consumer," said Kira Sterling, chief marketing officer at Toll Brothers Inc., a $3.9 billion publicly traded builder. "Consolidation limits competition."

Antitrust expert Erik Gordon, an assistant professor at the University of Michigan's Ross School of Business, warns that reducing the number of major competitors in any market from three to two triggers a more substantial change than when there are three or more rivals in a market.

"When you go from three to two, the nature of competition changes qualitatively," Mr. Gordon said. With only two dominant competitors, companies are less likely to aggressively battle on pricing, leaving customers with fewer options, he said.

The regulatory headwinds for the deal came as a surprise to many. When reporting its quarterly earnings in April, Electrolux said the deal was on track for completion this year, and it increased its estimate for cost synergies by another $50 million.

The sale is a key part of GE's strategy to focus on high-tech infrastructure operations. The company had been trying to unload its appliance operation for years. And finally, with an improving U.S. economy and strengthening home sales, it found an interested buyer in Electrolux last fall.

The Swedish company wants to expand in North America, where it is not only third in the market but also feeling the heat from such newer entrants as Samsung Electronics Inc. North America accounted for roughly a third of Electrolux's global sales last year and adding the GE business would vault it into the No. 2 spot in the U.S.

Despite the regulatory objection, Electrolux is standing firm, saying it will vigorously defend the deal. Electrolux CEO Keith McLoughlin said he would fight for the deal to go through, without any major divestitures of divisions, including stove tops. "The transaction from a GE standpoint and from our standpoint is it's the appliance business or not, " Mr. McLoughlin said Thursday.

Now the company may have to persuade a court that swallowing a bigger rival won't unfairly tilt the power in stove tops sales toward the manufacturers.

Joe Sims, an attorney at Jones Day representing Electrolux, notes that Whirlpool's 2006 purchase of Maytag didn't lead to price increases. He also says federal authorities have understated the power wielded by commercial customers. "The retailers and the builders are plenty capable of taking care of themselves here," Mr. Sims said.

Meanwhile, builders sound sanguine about the possible combination.

Pat Hamill, CEO of Denver-based Oakwood Homes, said that roughly 90% of 1,200 homes he plans to build this year will be equipped with GE appliances. After talking with GE sales representatives, he believes that Whirlpool and its KitchenAid brand is enough to keep them in check

"They know that if they slip up a little bit, Whirlpool-KitchenAid is on their heels," he said.

Write to Ted Mann at ted.mann@wsj.com and Kris Hudson at kris.hudson@wsj.com

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