The Procter & Gamble Company and The Gillette Company; Analysis of Agreement Containing Consent Orders to Aid Public Comment, 58411-58414 [05-20043]

Download as PDF Federal Register / Vol. 70, No. 193 / Thursday, October 6, 2005 / Notices 2. Fortune Financial Corporation, Arnold, Missouri; to become a bank holding company by acquiring 100 percent of the voting shares of FortuneBank, Arnold, Missouri (in organization). Board of Governors of the Federal Reserve System, October 3, 2005. Robert deV. Frierson, Deputy Secretary of the Board. [FR Doc. E5–5490 Filed 10–5–05; 8:45 am] BILLING CODE 6210–01–S FEDERAL RESERVE SYSTEM Formations of, Acquisitions by, and Mergers of Bank Holding Companies The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) (BHC Act), Regulation Y (12 CFR part 225), and all other applicable statutes and regulations to become a bank holding company and/or to acquire the assets or the ownership of, control of, or the power to vote shares of a bank or bank holding company and all of the banks and nonbanking companies owned by the bank holding company, including the companies listed below. The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The application also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States. Additional information on all bank holding companies may be obtained from the National Information Center Web site at http://www.ffiec.gov/nic/. Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than October 31, 2005. A. Federal Reserve Bank of St. Louis (Glenda Wilson, Community Affairs Officer) 411 Locust Street, St. Louis, Missouri 63166-2034: 1. First Banks, Inc., Hazelwood, Missouri; to acquire an additional 8.52 percent, for a total of 24.99 percent, of VerDate Aug<31>2005 19:52 Oct 05, 2005 Jkt 208001 the voting shares of Community West Bancshares, Goleta, California, and thereby indirectly acquire voting shares of Community West Bank, National Association, Goleta, California. 2. Fortune Financial Corporation, Arnold, Missouri; to become a bank holding company by acquiring 100 percent of the voting shares of FortuneBank, Arnold, Missouri (in organization). Board of Governors of the Federal Reserve System, October 3, 2005. Robert deV. Frierson, Deputy Secretary of the Board. [FR Doc. E5–5491 Filed 10–5–05; 8:45 am] BILLING CODE 6210–01–S FEDERAL TRADE COMMISSION [File No. 051 0115] The Procter & Gamble Company and The Gillette Company; Analysis of Agreement Containing Consent Orders to Aid Public Comment Federal Trade Commission. Proposed consent agreement. AGENCY: ACTION: SUMMARY: The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the draft complaint and the terms of the consent order—embodied in the consent agreement—that would settle these allegations. Comments must be received on or before October 29, 2005. ADDRESSES: Interested parties are invited to submit written comments. Comments should refer to ‘‘Procter & Gamble, et al., File No. 051 0115,’’ to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/ Office of the Secretary, Room 159–H, 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing confidential material must be filed in paper form, must be clearly labeled ‘‘Confidential,’’ and must comply with Commission Rule 4.9(c). 16 CFR 4.9(c) (2005).1 The FTC is DATES: 1 The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 58411 requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments that do not contain any nonpublic information may instead be filed in electronic form as part of or as an attachment to email messages directed to the following email box: consentagreement@ftc.gov. The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission, and will be available to the public on the FTC Web site, to the extent practicable, at http://www.ftc.gov. As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC’s privacy policy, at http://www.ftc.gov/ ftc/privacy.htm. FOR FURTHER INFORMATION CONTACT: Norman Armstrong, Jr., Bureau of Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326– 2072. SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and § 2.34 of the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for September 30, 2005), on the World Wide Web, at http:// www.ftc.gov/os/2005/09/index.htm. A paper copy can be obtained from the FTC Public Reference Room, Room 130– H, 600 Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by calling (202) 326–2222. Public comments are invited, and may be filed with the Commission in either Commission’s General Counsel, consistent with applicable law and the public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c). E:\FR\FM\06OCN1.SGM 06OCN1 58412 Federal Register / Vol. 70, No. 193 / Thursday, October 6, 2005 / Notices paper or electronic form. All comments should be filed as prescribed in the ADDRESSES section above, and must be received on or before the date specified in the DATES section. Analysis of Agreement Containing Consent Order to Aid Public Comment I. Introduction The Procter & Gamble Company (‘‘P&G’’) and The Gillette Company (‘‘Gillette’’) are both leading suppliers of consumer products worldwide. P&G proposes to acquire Gillette. The Federal Trade Commission (‘‘Commission’’) has accepted, subject to final approval, an Agreement Containing Consent Orders (‘‘Consent Agreement’’) from P&G and Gillette. The purpose of the Consent Agreement is to remedy the anticompetitive effects that would otherwise result from P&G’s proposed acquisition. Under the terms of the Consent Agreement, the parties will be required to divest: (1) Gillette’s Rembrandt at-home teeth whitening business; (2) P&G’s Crest SpinBrushTM battery-powered and rechargeable toothbrush business; and (3) Gillette’s Right Guard men’s antiperspirant/ deodorant (‘‘AP/DO’’) business. In addition, P&G is required to amend its joint venture agreement with Philips Oral Healthcare, Inc. (‘‘Philips’’) regarding the Crest Sonicare IntelliClean System (‘‘IntelliClean’’) rechargeable toothbrush. The proposed Consent Agreement has been placed on the public record for thirty (30) days to solicit comments from interested people. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the proposed Consent Agreement and the comments received, and will decide whether it should withdraw from the proposed Consent Agreement or make it final. Pursuant to an Agreement and Plan of Merger dated January 27, 2005, P&G proposes to acquire 100 percent of the voting securities of Gillette in a transaction valued at approximately $57 billion (‘‘Proposed Acquisition’’). The Commission’s Complaint alleges that the Proposed Acquisition, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, by lessening competition in the United States markets for the research, development, manufacture, distribution, and sale of at-home teeth whitening products, adult batterypowered toothbrushes, rechargeable toothbrushes, and men’s AP/DOs. VerDate Aug<31>2005 19:52 Oct 05, 2005 Jkt 208001 Consistent with the well-established approach to merger analysis, we have determined the appropriate product markets in which to analyze the likely competitive effects of the proposed merger. Staff initially examined whether the combination of the two companies’ broad array of consumer products would be likely to have anticompetitive effects, including not only increased prices in the short term but also the creation of entry barriers that could affect price and innovation in the long term. In particular, staff investigated whether the combined entity would have an increased ability to exploit its position as a so-called ‘‘category manager’’ or ‘‘category captain,’’ in order to obtain premium retailer shelf space and potentially exclude or disadvantage competitors in various broad categories, like oral care or AP/ DO. The investigation has disclosed, however, that most retailers do not look at broad categories, like oral care and AP/DO, when they decide which products to stock and sell. They generally make decisions on individual products (e.g., men’s AP/DO), that are perceived to be close substitutes within these broad categories. One supplier may be preferred for an individual product even though another supplier is preferred for other products in the broad category. Moreover, most retailers are likely to employ different category captains to assist them on a product-byproduct basis within the broad categories. We have therefore concluded that the loss of competition between the merging parties in broad categories is unlikely to cause competitive harm. We have instead focused on individual products within the broad categories. These individual product markets include at-home teeth whitening, battery-powered toothbrushes, and men’s AP/DO. The Commission has sought and obtained relief in these relevant markets. II. The Parties Headquartered in Cincinnati, Ohio, P&G is one of the largest and most diversified suppliers of consumer products in the world. In 2004, P&G had worldwide net sales of approximately $51.4 billion. With its Crest line of products, P&G is one of the leading suppliers of oral care products in the United States. The Crest family of products includes the Crest WhitestripsTM and Crest Night EffectsTM lines of at-home teeth whitening products and the Crest SpinBrushTM line of battery-powered toothbrushes. P&G is also a leading PO 00000 Frm 00043 Fmt 4703 Sfmt 4703 supplier of men’s AP/DOs under its Old Spice brand. Gillette, based in Boston, Massachusetts, is also one of the world’s leading suppliers of consumer products. Gillette had total worldwide net sales of approximately $10.5 billion in its 2004 fiscal year. Like P&G, Gillette is one of the leading suppliers of oral care products in the United States with its Oral-B and Oral-B Braun line of manual, battery-powered, and rechargeable toothbrushes, and its OralB Rembrandt and Rembrandt line of at-home teeth whitening products. Gillette is also a leading supplier of men’s AP/DOs under its Right Guard and Gillette Series brands. III. At-Home Teeth Whitening Products One of the relevant markets in which to assess the competitive effects of the Proposed Acquisition is the United States market for at-home teeth whitening products. At-home teeth whitening products whiten teeth by bleaching them with either hydrogen or carbamide peroxide. These products are typically sold over-the-counter through food, drug, club, and mass merchandise channels and are marketed to be used by the consumer at home. There are several different types of at-home teeth whitening products, including strips, gels, pens and sticks, although strip and gel products account for the vast majority of sales of at-home teeth whitening products in the United States. The United States market for at-home teeth whitening products is highly concentrated, with P&G and Gillette as the two largest suppliers in this market and the only two significant suppliers of branded strips. P&G is the market leader with its Crest Whitestrips and Crest Night Effects products, while Gillette is the second leading supplier with its Oral-B Rembrandt and Rembrandt products. Together, the parties account for over 80% of the sales in this market. The Proposed Acquisition would significantly increase concentration in the United States market for at-home teeth whitening products, leaving P&G as the dominant supplier. By eliminating competition between the two leading suppliers, the Proposed Acquisition would likely result in higher prices, reduced innovation, and fewer product choices for consumers in this market. IV. Adult Battery-Powered Toothbrushes A second relevant product market in which to assess the competitive effects of the Proposed Acquisition is the United States market for adult batterypowered toothbrushes. Adult battery- E:\FR\FM\06OCN1.SGM 06OCN1 Federal Register / Vol. 70, No. 193 / Thursday, October 6, 2005 / Notices powered toothbrushes are usually powered by AA or AAA batteries and either have oscillating or pulsating brush heads. The majority of adult battery-powered toothbrushes are sold at retail for between $5 and $8, and the batteries and brush heads can be replaced on some, but not all, products. Adult battery-powered toothbrushes are typically marketed as upgrades over manual toothbrushes and are more affordable than sophisticated rechargeable toothbrushes. The United States market for adult battery-powered toothbrushes is highly concentrated. P&G and Gillette are the two largest suppliers in this market. P&G markets its adult battery-powered products under the Crest SpinBrushTM brand name, while Gillette sells its adult battery-powered products under the Oral-B brand name. Gillette also dominates the adult high-priced manual and low-priced rechargeable toothbrush segments, which are the segments most likely to capture any switching away from adult battery-powered toothbrushes in the face of a price increase. Together, the parties account for over 85% of the sales in the United States adult battery-powered toothbrush market. The Proposed Acquisition would significantly increase concentration in the United States market for adult battery-powered toothbrush products, leaving P&G as the dominant supplier. By eliminating competition between the two leading suppliers, the Proposed Acquisition would likely result in higher prices, reduced innovation, and fewer product choices for consumers in this market. V. Rechargeable Toothbrushes A third relevant product market in which to assess the competitive effects of the Proposed Acquisition is the United States market for rechargeable toothbrushes. Rechargeable toothbrushes contain a rechargeable battery that powers high-speed oscillating, pulsating, or vibrating brush heads. They have a separate recharging unit that plugs into an electrical outlet to recharge the battery contained in the toothbrush. Brush heads for these products are almost always replaceable. Rechargeable toothbrushes typically are sold at retail for between $20 and $150, and are marketed as the premium brushing option for consumers. The United States market for rechargeable toothbrushes is highly concentrated with only two suppliers, Gillette and Philips, accounting for virtually all of the sales of these products. Gillette markets a full line of rechargeable toothbrush products under VerDate Aug<31>2005 19:52 Oct 05, 2005 Jkt 208001 the Oral-B Braun brand name, while Philips sells mostly mid-to high-end products under the Philips Sonicare brand name. Philips and P&G also have a joint venture to co-develop and comarket the IntelliClean product, the first integrated toothbrush/dentifrice product (i.e., toothbrush that self dispenses toothpaste) sold in the United States. As a result, the Proposed Acquisition would allow P&G to acquire the only significant competitor to its joint venture partner, Philips, thereby reducing P&G’s incentives to support the IntelliClean product. The agreement between Philips and P&G also contains non-compete provisions that, if the Proposed Acquisition were consummated, could harm consumers. The Proposed Acquisition would eliminate P&G’s incentive to fully support and promote the IntelliClean product and create a situation where the only two suppliers in the market are subject to non-compete provisions. Accordingly, the Proposed Acquisition would likely result in higher prices, reduced innovation, and fewer product choices for consumers in this market. VI. Men’s AP/DOs A fourth relevant product market in which to assess the competitive effects of the Proposed Acquisition is the United States market for men’s AP/DOs. An antiperspirant is a substance that is used to prevent or reduce underarm sweating. A deodorant is a substance that is used to suppress underarm odor. These ingredients are typically combined together for complete underarm protection. AP/DOs are typically gender-specific and sold in various forms, including roll-ons, traditional solids, invisible solids, gels, and aerosols. Men’s AP/DOs are unique in, among other things, their packaging, fragrances, marketing, formulations, and location on the shelf. The United States market for men’s AP/DOs is highly concentrated. P&G and Gillette are the two largest suppliers of men’s AP/DOs in the United States. P&G markets its men’s AP/DOs under the Old Spice brand name, while Gillette sells its products under the Right Guard and Gillette Series’ brand names. Combined, the Respondents account for well over 50% of the sales in this highly concentrated market. Accordingly, the Proposed Acquisition would significantly increase concentration in the United States market for men’s AP/DOs, leaving P&G as the dominant supplier. By eliminating competition between the two leading suppliers, the Proposed Acquisition would likely result in PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 58413 higher prices and fewer product choices for consumers in this market. VII. Entry Entry into the United States at-home teeth whitening, adult battery-powered toothbrush, rechargeable toothbrush, and men’s AP/DO markets is unlikely to deter or counteract the anticompetitive effects of the Proposed Acquisition. Entry into these markets is difficult and time-consuming and would require the investment of extremely high sunk costs to, among other things, develop products, provide advertising and promotional funding, establish a strong brand name, and create a distribution network. A new entrant also faces the difficult task of convincing retailers to carry their products. VIII. The Consent Agreement The Consent Agreement effectively remedies the Proposed Acquisition’s anticompetitive effects in the relevant markets discussed above. The Consent Agreement preserves competition in these markets by requiring the divestiture of: (1) The Rembrandt athome teeth whitening business to a Commission-approved acquirer; (2) the Crest SpinBrush battery-powered business to Church & Dwight Company, Inc. (‘‘Church & Dwight’’); and (3) the Right Guard business to a Commissionapproved acquirer.2 In addition, the Consent Agreement requires P&G to amend its joint venture agreement to allow Philips to independently market and sell the IntelliClean product. The divestiture of the Rembrandt business must take place within three (3) months and the Right Guard business within four (4) months after the date the order becomes final. The Commission’s goal in evaluating possible purchasers of divested assets is to ensure that the competitive environment that existed prior to the acquisition is maintained. A proposed acquirer of divested assets must not itself present competitive problems. Should the parties fail to accomplish the divestiture within the time and in the manner required by the Consent Agreement, the Commission may appoint a trustee to divest these assets. If approved, the trustee would have the exclusive power and authority to accomplish the divestiture within one year of being appointed, subject to any necessary extensions by the Commission. The Consent Agreement 2 The Rembrandt business that will be divested includes all of Gillette’s existing and future teeth whitening products. For viability reasons, the purchaser of the Right Guard business will have the option of acquiring certain manufacturing assets and/or Gillette’s Soft & Dri and Dry Idea assets. E:\FR\FM\06OCN1.SGM 06OCN1 58414 Federal Register / Vol. 70, No. 193 / Thursday, October 6, 2005 / Notices requires the parties to provide the trustee with access to information related to, among other things, the Rembrandt and Right Guard businesses as necessary to fulfill his or her obligations. The Order to Maintain Assets that is included in the Consent Agreement requires that P&G and Gillette maintain the viability of the Rembrandt and Right Guard businesses as competitive operations until the businesses are transferred to Commission-approved acquirers.3 The Commission has approved Edward Gold of PricewaterhouseCoopers as the Interim Monitor pursuant to the Consent Agreement to ensure that P&G and Gillette comply with the provisions of the Order. There are also several provisions of the Consent Agreement designed to ensure the success of the divestiture of the Crest SpinBrush business to Church & Dwight. First, the Consent Agreement requires P&G to divest its rights and assets relating to adult battery-powered toothbrushes, including all research and development data, sales and marketing materials, and intellectual property. Second, P&G will provide Church & Dwight with a license to the Crest trademark, subject to minimum protections under trademark law, for use with the SpinBrush brand name that will be acquired outright by Church & Dwight. These provisions are designed to ensure that Church & Dwight can successfully transition the Crest SpinBrush family of products to a brand name of its choosing. Third, the Consent Agreement allows, and provides incentives for, P&G to render transitional services to Church & Dwight and retailers for a period of time to ensure the continuity and competitive viability of the products. The Commission is satisfied that Church & Dwight is a well-qualified acquirer of the Crest SpinBrush business. Church & Dwight sells a variety of consumer products throughout the world, including oral care, personal care, and household products, and had total worldwide net sales of approximately $1.5 billion in 2004. The company owns several wellknown oral care brands, such as Arm & Hammer, Aim, and MentadentTM, and currently sells a variety of oral care products, including toothpaste and manual toothbrushes. Because of its existing business, Church & Dwight already has an experienced sales force that has relationships with major 3 The Order to Maintain Assets also requires that P&G and Gillette maintain the viability of the Soft & Dri and Dry Idea businesses. VerDate Aug<31>2005 19:52 Oct 05, 2005 Jkt 208001 retailers and dental professionals, thereby enabling it to be a successful acquirer of the SpinBrush assets. The Consent Agreement also requires P&G to amend its joint venture agreement with Philips regarding IntelliClean. The amended agreement, which is an attachment to the order, allows Philips to independently market and sell IntelliClean. The amended agreement also eliminates all noncompete provisions allowing both P&G and Philips to develop and sell future rechargeable toothbrush products. The purpose of this analysis is to facilitate public comment on the Consent Agreement, and is not intended to constitute an official interpretation of the proposed Decision and Order or the Order to Maintain Assets, or to modify their terms in any way. By direction of the Commission, with Chairman Majoras and Commissioner Harbour recused. Donald S. Clark, Secretary. [FR Doc. 05–20043 Filed 10–5–05; 8:45 am] BILLING CODE 6750–01–U FEDERAL TRADE COMMISSION [File No. 052 3136] Superior Mortgage Corporation; Analysis of Proposed Consent Order To Aid Public Comment Federal Trade Commission. Proposed consent agreement. AGENCY: ACTION: SUMMARY: The consent agreement in this matter settles alleged violations of Federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the draft complaint and the terms of the consent order—embodied in the consent agreement—that would settle these allegations. DATES: Comments must be received on or before October 27, 2005. ADDRESSES: Interested parties are invited to submit written comments. Comments should refer to ‘‘Superior Mortgage, File No. 052 3136,’’ to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/ Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing confidential material must be filed in paper form, must be clearly PO 00000 Frm 00045 Fmt 4703 Sfmt 4703 labeled ‘‘Confidential,’’ and must comply with Commission Rule 4.9(c). 16 CFR 4.9(c) (2005).1 The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments that do not contain any nonpublic information may instead be filed in electronic form as part of or as an attachment to e-mail messages directed to the following email box: consentagreement@ftc.gov. The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission, and will be available to the public on the FTC Web site, to the extent practicable, at http://www.ftc.gov. As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC’s privacy policy, at http://www.ftc.gov/ ftc/privacy.htm. FOR FURTHER INFORMATION CONTACT: Jessica Rich, Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326– 3224. SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and § 2.34 of the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for September 28, 2005), on the World Wide Web, at http:// 1 The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission’s General Counsel, consistent with applicable law and the public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c). E:\FR\FM\06OCN1.SGM 06OCN1

Agencies

[Federal Register Volume 70, Number 193 (Thursday, October 6, 2005)]
[Notices]
[Pages 58411-58414]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-20043]


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FEDERAL TRADE COMMISSION

[File No. 051 0115]


The Procter & Gamble Company and The Gillette Company; Analysis 
of Agreement Containing Consent Orders to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

-----------------------------------------------------------------------

SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before October 29, 2005.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Procter & Gamble, et al., File No. 051 
0115,'' to facilitate the organization of comments. A comment filed in 
paper form should include this reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room 159-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, must be clearly 
labeled ``Confidential,'' and must comply with Commission Rule 4.9(c). 
16 CFR 4.9(c) (2005).\1\ The FTC is requesting that any comment filed 
in paper form be sent by courier or overnight service, if possible, 
because U.S. postal mail in the Washington area and at the Commission 
is subject to delay due to heightened security precautions. Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form as part of or as an attachment to email messages 
directed to the following email box: consentagreement@ftc.gov.
---------------------------------------------------------------------------

    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
---------------------------------------------------------------------------

    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://
www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Norman Armstrong, Jr., Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2072.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for September 30, 2005), on the World Wide Web, at http://www.ftc.gov/
os/2005/09/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either

[[Page 58412]]

paper or electronic form. All comments should be filed as prescribed in 
the ADDRESSES section above, and must be received on or before the date 
specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

    The Procter & Gamble Company (``P&G'') and The Gillette Company 
(``Gillette'') are both leading suppliers of consumer products 
worldwide. P&G proposes to acquire Gillette. The Federal Trade 
Commission (``Commission'') has accepted, subject to final approval, an 
Agreement Containing Consent Orders (``Consent Agreement'') from P&G 
and Gillette. The purpose of the Consent Agreement is to remedy the 
anticompetitive effects that would otherwise result from P&G's proposed 
acquisition. Under the terms of the Consent Agreement, the parties will 
be required to divest: (1) Gillette's Rembrandt[reg] at-home teeth 
whitening business; (2) P&G's Crest[reg] SpinBrush\TM\ battery-powered 
and rechargeable toothbrush business; and (3) Gillette's Right 
Guard[reg] men's antiperspirant/deodorant (``AP/DO'') business. In 
addition, P&G is required to amend its joint venture agreement with 
Philips Oral Healthcare, Inc. (``Philips'') regarding the Crest[reg] 
Sonicare[reg] IntelliClean System (``IntelliClean'') rechargeable 
toothbrush.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days to solicit comments from interested people. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
proposed Consent Agreement and the comments received, and will decide 
whether it should withdraw from the proposed Consent Agreement or make 
it final.
    Pursuant to an Agreement and Plan of Merger dated January 27, 2005, 
P&G proposes to acquire 100 percent of the voting securities of 
Gillette in a transaction valued at approximately $57 billion 
(``Proposed Acquisition''). The Commission's Complaint alleges that the 
Proposed Acquisition, if consummated, would violate Section 7 of the 
Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal 
Trade Commission Act, as amended, 15 U.S.C. 45, by lessening 
competition in the United States markets for the research, development, 
manufacture, distribution, and sale of at-home teeth whitening 
products, adult battery-powered toothbrushes, rechargeable 
toothbrushes, and men's AP/DOs.
    Consistent with the well-established approach to merger analysis, 
we have determined the appropriate product markets in which to analyze 
the likely competitive effects of the proposed merger. Staff initially 
examined whether the combination of the two companies' broad array of 
consumer products would be likely to have anticompetitive effects, 
including not only increased prices in the short term but also the 
creation of entry barriers that could affect price and innovation in 
the long term. In particular, staff investigated whether the combined 
entity would have an increased ability to exploit its position as a so-
called ``category manager'' or ``category captain,'' in order to obtain 
premium retailer shelf space and potentially exclude or disadvantage 
competitors in various broad categories, like oral care or AP/DO.
    The investigation has disclosed, however, that most retailers do 
not look at broad categories, like oral care and AP/DO, when they 
decide which products to stock and sell. They generally make decisions 
on individual products (e.g., men's AP/DO), that are perceived to be 
close substitutes within these broad categories. One supplier may be 
preferred for an individual product even though another supplier is 
preferred for other products in the broad category. Moreover, most 
retailers are likely to employ different category captains to assist 
them on a product-by-product basis within the broad categories. We have 
therefore concluded that the loss of competition between the merging 
parties in broad categories is unlikely to cause competitive harm. We 
have instead focused on individual products within the broad 
categories. These individual product markets include at-home teeth 
whitening, battery-powered toothbrushes, and men's AP/DO. The 
Commission has sought and obtained relief in these relevant markets.

II. The Parties

    Headquartered in Cincinnati, Ohio, P&G is one of the largest and 
most diversified suppliers of consumer products in the world. In 2004, 
P&G had worldwide net sales of approximately $51.4 billion. With its 
Crest[supreg] line of products, P&G is one of the leading suppliers of 
oral care products in the United States. The Crest family of products 
includes the Crest[supreg] WhitestripsTM and Crest[supreg] 
Night EffectsTM lines of at-home teeth whitening products 
and the Crest[supreg] SpinBrushTM line of battery-powered 
toothbrushes. P&G is also a leading supplier of men's AP/DOs under its 
Old Spice[reg] brand.
    Gillette, based in Boston, Massachusetts, is also one of the 
world's leading suppliers of consumer products. Gillette had total 
worldwide net sales of approximately $10.5 billion in its 2004 fiscal 
year. Like P&G, Gillette is one of the leading suppliers of oral care 
products in the United States with its Oral-B[reg] and Oral-B[reg] 
Braun[reg] line of manual, battery-powered, and rechargeable 
toothbrushes, and its Oral-B[reg] Rembrandt[reg] and Rembrandt[reg] 
line of at-home teeth whitening products. Gillette is also a leading 
supplier of men's AP/DOs under its Right Guard[reg] and Gillette[reg] 
Series brands.

III. At-Home Teeth Whitening Products

    One of the relevant markets in which to assess the competitive 
effects of the Proposed Acquisition is the United States market for at-
home teeth whitening products. At-home teeth whitening products whiten 
teeth by bleaching them with either hydrogen or carbamide peroxide. 
These products are typically sold over-the-counter through food, drug, 
club, and mass merchandise channels and are marketed to be used by the 
consumer at home. There are several different types of at-home teeth 
whitening products, including strips, gels, pens and sticks, although 
strip and gel products account for the vast majority of sales of at-
home teeth whitening products in the United States.
    The United States market for at-home teeth whitening products is 
highly concentrated, with P&G and Gillette as the two largest suppliers 
in this market and the only two significant suppliers of branded 
strips. P&G is the market leader with its Crest Whitestrips[supreg] and 
Crest Night Effects[supreg] products, while Gillette is the second 
leading supplier with its Oral-B[supreg] Rembrandt[supreg] and 
Rembrandt[supreg] products. Together, the parties account for over 80% 
of the sales in this market.
    The Proposed Acquisition would significantly increase concentration 
in the United States market for at-home teeth whitening products, 
leaving P&G as the dominant supplier. By eliminating competition 
between the two leading suppliers, the Proposed Acquisition would 
likely result in higher prices, reduced innovation, and fewer product 
choices for consumers in this market.

IV. Adult Battery-Powered Toothbrushes

    A second relevant product market in which to assess the competitive 
effects of the Proposed Acquisition is the United States market for 
adult battery-powered toothbrushes. Adult battery-

[[Page 58413]]

powered toothbrushes are usually powered by AA or AAA batteries and 
either have oscillating or pulsating brush heads. The majority of adult 
battery-powered toothbrushes are sold at retail for between $5 and $8, 
and the batteries and brush heads can be replaced on some, but not all, 
products. Adult battery-powered toothbrushes are typically marketed as 
upgrades over manual toothbrushes and are more affordable than 
sophisticated rechargeable toothbrushes.
    The United States market for adult battery-powered toothbrushes is 
highly concentrated. P&G and Gillette are the two largest suppliers in 
this market. P&G markets its adult battery-powered products under the 
Crest[supreg] SpinBrushTM brand name, while Gillette sells 
its adult battery-powered products under the Oral-B[supreg] brand name. 
Gillette also dominates the adult high-priced manual and low-priced 
rechargeable toothbrush segments, which are the segments most likely to 
capture any switching away from adult battery-powered toothbrushes in 
the face of a price increase. Together, the parties account for over 
85% of the sales in the United States adult battery-powered toothbrush 
market.
    The Proposed Acquisition would significantly increase concentration 
in the United States market for adult battery-powered toothbrush 
products, leaving P&G as the dominant supplier. By eliminating 
competition between the two leading suppliers, the Proposed Acquisition 
would likely result in higher prices, reduced innovation, and fewer 
product choices for consumers in this market.

V. Rechargeable Toothbrushes

    A third relevant product market in which to assess the competitive 
effects of the Proposed Acquisition is the United States market for 
rechargeable toothbrushes. Rechargeable toothbrushes contain a 
rechargeable battery that powers high-speed oscillating, pulsating, or 
vibrating brush heads. They have a separate recharging unit that plugs 
into an electrical outlet to recharge the battery contained in the 
toothbrush. Brush heads for these products are almost always 
replaceable. Rechargeable toothbrushes typically are sold at retail for 
between $20 and $150, and are marketed as the premium brushing option 
for consumers.
    The United States market for rechargeable toothbrushes is highly 
concentrated with only two suppliers, Gillette and Philips, accounting 
for virtually all of the sales of these products. Gillette markets a 
full line of rechargeable toothbrush products under the Oral-B[supreg] 
Braun[supreg] brand name, while Philips sells mostly mid-to high-end 
products under the Philips[supreg] Sonicare[supreg] brand name. Philips 
and P&G also have a joint venture to co-develop and co-market the 
IntelliClean product, the first integrated toothbrush/dentifrice 
product (i.e., toothbrush that self dispenses toothpaste) sold in the 
United States. As a result, the Proposed Acquisition would allow P&G to 
acquire the only significant competitor to its joint venture partner, 
Philips, thereby reducing P&G's incentives to support the IntelliClean 
product. The agreement between Philips and P&G also contains non-
compete provisions that, if the Proposed Acquisition were consummated, 
could harm consumers.
    The Proposed Acquisition would eliminate P&G's incentive to fully 
support and promote the IntelliClean product and create a situation 
where the only two suppliers in the market are subject to non-compete 
provisions. Accordingly, the Proposed Acquisition would likely result 
in higher prices, reduced innovation, and fewer product choices for 
consumers in this market.

VI. Men's AP/DOs

    A fourth relevant product market in which to assess the competitive 
effects of the Proposed Acquisition is the United States market for 
men's AP/DOs. An antiperspirant is a substance that is used to prevent 
or reduce underarm sweating. A deodorant is a substance that is used to 
suppress underarm odor. These ingredients are typically combined 
together for complete underarm protection. AP/DOs are typically gender-
specific and sold in various forms, including roll-ons, traditional 
solids, invisible solids, gels, and aerosols. Men's AP/DOs are unique 
in, among other things, their packaging, fragrances, marketing, 
formulations, and location on the shelf.
    The United States market for men's AP/DOs is highly concentrated. 
P&G and Gillette are the two largest suppliers of men's AP/DOs in the 
United States. P&G markets its men's AP/DOs under the Old Spice[supreg] 
brand name, while Gillette sells its products under the Right 
Guard[supreg] and Gillette Series' brand names. Combined, the 
Respondents account for well over 50% of the sales in this highly 
concentrated market.
    Accordingly, the Proposed Acquisition would significantly increase 
concentration in the United States market for men's AP/DOs, leaving P&G 
as the dominant supplier. By eliminating competition between the two 
leading suppliers, the Proposed Acquisition would likely result in 
higher prices and fewer product choices for consumers in this market.

VII. Entry

    Entry into the United States at-home teeth whitening, adult 
battery-powered toothbrush, rechargeable toothbrush, and men's AP/DO 
markets is unlikely to deter or counteract the anticompetitive effects 
of the Proposed Acquisition. Entry into these markets is difficult and 
time-consuming and would require the investment of extremely high sunk 
costs to, among other things, develop products, provide advertising and 
promotional funding, establish a strong brand name, and create a 
distribution network. A new entrant also faces the difficult task of 
convincing retailers to carry their products.

VIII. The Consent Agreement

    The Consent Agreement effectively remedies the Proposed 
Acquisition's anticompetitive effects in the relevant markets discussed 
above. The Consent Agreement preserves competition in these markets by 
requiring the divestiture of: (1) The Rembrandt at-home teeth whitening 
business to a Commission-approved acquirer; (2) the Crest SpinBrush 
battery-powered business to Church & Dwight Company, Inc. (``Church & 
Dwight''); and (3) the Right Guard business to a Commission-approved 
acquirer.\2\ In addition, the Consent Agreement requires P&G to amend 
its joint venture agreement to allow Philips to independently market 
and sell the IntelliClean product.
---------------------------------------------------------------------------

    \2\ The Rembrandt business that will be divested includes all of 
Gillette's existing and future teeth whitening products. For 
viability reasons, the purchaser of the Right Guard business will 
have the option of acquiring certain manufacturing assets and/or 
Gillette's Soft & Dri[reg] and Dry Idea[reg] assets.
---------------------------------------------------------------------------

    The divestiture of the Rembrandt business must take place within 
three (3) months and the Right Guard business within four (4) months 
after the date the order becomes final. The Commission's goal in 
evaluating possible purchasers of divested assets is to ensure that the 
competitive environment that existed prior to the acquisition is 
maintained. A proposed acquirer of divested assets must not itself 
present competitive problems. Should the parties fail to accomplish the 
divestiture within the time and in the manner required by the Consent 
Agreement, the Commission may appoint a trustee to divest these assets. 
If approved, the trustee would have the exclusive power and authority 
to accomplish the divestiture within one year of being appointed, 
subject to any necessary extensions by the Commission. The Consent 
Agreement

[[Page 58414]]

requires the parties to provide the trustee with access to information 
related to, among other things, the Rembrandt and Right Guard 
businesses as necessary to fulfill his or her obligations.
    The Order to Maintain Assets that is included in the Consent 
Agreement requires that P&G and Gillette maintain the viability of the 
Rembrandt and Right Guard businesses as competitive operations until 
the businesses are transferred to Commission-approved acquirers.\3\ The 
Commission has approved Edward Gold of PricewaterhouseCoopers as the 
Interim Monitor pursuant to the Consent Agreement to ensure that P&G 
and Gillette comply with the provisions of the Order.
---------------------------------------------------------------------------

    \3\ The Order to Maintain Assets also requires that P&G and 
Gillette maintain the viability of the Soft & Dri and Dry Idea 
businesses.
---------------------------------------------------------------------------

    There are also several provisions of the Consent Agreement designed 
to ensure the success of the divestiture of the Crest SpinBrush 
business to Church & Dwight. First, the Consent Agreement requires P&G 
to divest its rights and assets relating to adult battery-powered 
toothbrushes, including all research and development data, sales and 
marketing materials, and intellectual property. Second, P&G will 
provide Church & Dwight with a license to the Crest trademark, subject 
to minimum protections under trademark law, for use with the SpinBrush 
brand name that will be acquired outright by Church & Dwight. These 
provisions are designed to ensure that Church & Dwight can successfully 
transition the Crest SpinBrush family of products to a brand name of 
its choosing. Third, the Consent Agreement allows, and provides 
incentives for, P&G to render transitional services to Church & Dwight 
and retailers for a period of time to ensure the continuity and 
competitive viability of the products.
    The Commission is satisfied that Church & Dwight is a well-
qualified acquirer of the Crest SpinBrush business. Church & Dwight 
sells a variety of consumer products throughout the world, including 
oral care, personal care, and household products, and had total 
worldwide net sales of approximately $1.5 billion in 2004. The company 
owns several well-known oral care brands, such as Arm & Hammer[supreg], 
Aim[supreg], and Mentadent\TM\, and currently sells a variety of oral 
care products, including toothpaste and manual toothbrushes. Because of 
its existing business, Church & Dwight already has an experienced sales 
force that has relationships with major retailers and dental 
professionals, thereby enabling it to be a successful acquirer of the 
SpinBrush assets.
    The Consent Agreement also requires P&G to amend its joint venture 
agreement with Philips regarding IntelliClean. The amended agreement, 
which is an attachment to the order, allows Philips to independently 
market and sell IntelliClean. The amended agreement also eliminates all 
non-compete provisions allowing both P&G and Philips to develop and 
sell future rechargeable toothbrush products.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and is not intended to constitute an official 
interpretation of the proposed Decision and Order or the Order to 
Maintain Assets, or to modify their terms in any way.

    By direction of the Commission, with Chairman Majoras and 
Commissioner Harbour recused.
Donald S. Clark,
Secretary.
[FR Doc. 05-20043 Filed 10-5-05; 8:45 am]
BILLING CODE 6750-01-U