FTC Clears $2.7 Billion Acquisition of Benckiser N.V. by Reckitt & Colman

The Federal Trade Commission has accepted a proposed consent agreement that would allow Reckitt & Colman plc to acquire all of the voting securities of Benckiser N.V. from NRV Vermogenswerwaltung GmbH, while ensuring that competition in two highly concentrated household cleaning product markets is maintained. Under the proposed agreement, Benckiser's Scrub Free® and Delicare® businesses would be divested to Church & Dwight, Inc. Church & Dwight also produces household cleaning products, selling items under the Arm & Hammer® brand name. Reckitt & Colman's proposed acquisition of Benckiser, which was announced last July, is valued at approximately $2.7 billion.

"The companies involved in this transaction are the nationwide leaders in the markets for two cleaning products used in millions of households every day," FTC's Bureau of Competition Director Richard Parker said. "By requiring these divestitures, consumers will be served through continued competition, increased innovation, and lower prices when purchasing products in these highly concentrated markets."

Reckitt & Colman and Benckiser are two of the nation's leading companies involved in the research, development, formulation, manufacture, marketing and sale of hard surface bathroom cleaners and are the leading producers of the nation's fine fabric wash products.

Hard surface bathroom cleaners are products specially formulated, sold and used by customers to remove built-up soil and stains from bathroom surfaces. In this market, Reckitt & Colman produces Lysol®, and Benckiser makes and sells Scrub Free®. Fine fabric wash products are specifically developed, sold and used by customers to launder fine fabrics such as silks, woolens or other delicate fabrics. Reckitt & Colman sells Woolite®, the dominant product in this market, and Benckiser sells Delicare®, the leading competitive alternative.

According to the Commission's complaint, the markets for hard surface bathroom cleaners and fine fabric wash products are highly concentrated, and the proposed acquisition would increase the concentration in each market. The complaint alleges that it is unlikely that the competition eliminated by the transaction would be replaced by foreign manufacturers. Overseas producers would be unable to effectively bring their products into the U.S. market because they lack brand acceptance among consumers and would face substantial transportation costs, making imports uneconomical.

In addition, according to the Commission's complaint, by eliminating competition between these two companies, Reckitt & Colman's acquisition of Benckiser would enable it to exercise unilateral market power in both product markets and would increase the likelihood of collusion between Reckitt & Colman and the remaining competition in the hard surface bathroom cleaner market. Further, according to the complaint, the entry of new companies into the market would not deter or counteract the likely anticompetitive effects resulting from the transaction, as these companies would need to spend much time and money developing a competitive product, creating brand recognition and establishing a viable retail distribution network. Because of the time and high sunk costs involved, the complaint contends that new entry into either market is not likely to occur in response to a small price increase in either hard surface bathroom cleaners or fine fabric wash products after the transaction.

Under the terms of the proposed consent agreement, the anticompetitive effects of the acquisition would be avoided by the divestiture of Benckiser's Scrub Free® and Delicare® businesses to a third party. These assets would include all Scrub Free® and Delicare® trademarks and related intellectual property, trade secrets, technical manufacturing know-how, and customer and vendor lists and information. To meet this requirement, the businesses would be divested to Church & Dwight after the Commission accepts the consent agreement for public comment, but before Reckitt & Colman acquires Benckiser. To help ensure an orderly transition, Reckitt & Colman would be required to provide Church & Dwight with short-term integration assistance, including production planning, and order and billing processing. If the businesses are not divested to Church & Dwight, the order would require that Scrub Free® and Delicare® be divested to another acquirer within 90 days of the date the order becomes final. After 90 days, if a divestiture to either Church & Dwight or an alternate acquirer has not occurred, the Commission could appoint a trustee to divest these assets to a Commission-approved purchaser and, at the purchaser's option, to divest such other related assets as the Commission approves.

The proposed order also contains record-keeping provisions to ensure compliance by the companies involved.

A summary of the proposed consent agreement will be published in the Federal Register shortly.

The agreement will be subject to public comment until January 10, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

The Commission vote to accept the proposed consent agreement was 4-0, with Commissioner Thomas B. Leary not participating.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000 per day.

Copies of the complaint, proposed consent agreement, and an analysis of the proposed consent order to aid public comment, are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 991-0306)