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0510115

UNITED STATES OF AMERICA

BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS: Deborah Platt Majoras, Chairman

Thomas B. Leary

Pamela Jones Harbour

Jon Leibowitz

__________________________________________

)

In the Matter of )

)

THE PROCTER & GAMBLE )

COMPANY, a corporation; )

)

and ) Docket No. C-4151

)

and THE GILLETTE COMPANY, )

a corporation. )

)

__________________________________________)

COMPLAINT

Pursuant to the Clayton Act and the Federal Trade Commission Act, and its authority

thereunder, the Federal Trade Commission (“Commission”), having reason to believe that

Respondent The Procter & Gamble Company (“Procter & Gamble”), a corporation subject to the

jurisdiction of the Commission, has agreed to acquire Respondent The Gillette Company

(“Gillette”), a corporation subject to the jurisdiction of the Commission, in violation of 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, and it appearing to the Commission that a proceeding in

respect thereof would be in the public interest, hereby issues its Complaint, stating its charges as

follows:

I. RESPONDENT PROCTER & GAMBLE

1. Respondent Procter & Gamble is a corporation organized, existing and doing

business under the laws of Ohio with its office and principal place of business located at One

Procter & Gamble Plaza, Cincinnati, Ohio, 45202.
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2. Respondent Procter & Gamble, among other things, is engaged in the research,

development, manufacture, distribution, and sale of consumer products, including at-home teeth

whitening products, adult battery-powered toothbrushes, and men’s antiperspirants/deodorants.

3. Respondent Procter & Gamble had worldwide net sales of approximately $51.4

billion in its 2004 fiscal year.

4. Respondent Procter & Gamble is, and at all times relevant herein has been,

engaged in commerce, as “commerce” is defined in Section 1 of the Clayton Act, as amended, 15

U.S.C. §12, and is a corporation whose business is in or affects commerce, as “commerce” is

defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 44.

II. RESPONDENT GILLETTE

5. Respondent Gillette is a corporation organized, existing, and doing business under

the laws of Delaware with its office and principal place of business located at the Prudential

Tower Building, Suite 4800, Boston, Massachusetts, 02199.

6. Respondent Gillette, among other things, is engaged in the research, development,

manufacture, distribution, and sale of consumer products, including at-home teeth whitening

products, adult battery-powered toothbrushes, rechargeable toothbrushes, and

antiperspirants/deodorants.

7. Respondent Gillette had worldwide net sales of approximately $10.5 billion in its

2004 fiscal year.

8. Respondent Gillette is, and at all times herein has been, engaged in commerce, as

“commerce” is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. § 12, and is a

corporation whose business is in or affects commerce, as “commerce” is defined in Section 4 of

the Federal Trade Commission Act, as amended, 15 U.S.C. § 44.

III. THE PROPOSED ACQUISITION

9. Pursuant to an Agreement and Plan of Merger dated January 27, 2005,

Respondent Procter & Gamble proposed to acquire 100 percent of the voting securities of

Respondent Gillette for approximately $57 billion (the “Acquisition”). 

IV. THE RELEVANT MARKETS

10. For the purposes of this Complaint, the relevant lines of commerce in which to

analyze the effects of the Acquisition are the research, development, manufacture, distribution,

and sale of: (a) at-home teeth whitening products; (b) adult-battery powered toothbrushes; (c)

rechargeable toothbrushes; and (d) men’s antiperspirants/deodorants.
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11. 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 consumers at

home. There are several different types of at-home teeth whitening products, including

whitestrips, gels, pens and sticks. Whitestrips and gel products account for the vast majority of

sales of at-home teeth whitening products in the United States. 

12. Adult battery-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 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, while at the same time more affordable than sophisticated

rechargeable toothbrushes. 

13. Rechargeable toothbrushes contain a rechargeable battery that powers high-speed

oscillating, pulsating, or vibrating brush heads. They have a separate recharging unit that needs

to be plugged into an electrical outlet to recharge the battery contained in the toothbrush. Brush

heads for these products are almost always replaceable. Rechargeable toothbrushes typically

range in price from $20 to $150, and are marketed as the premium brushing option for

consumers.

14. Antiperspirants/deodorants are applied under the arms to enhance personal

hygiene, and are typically combined together for complete under-arm protection. 

Antiperspirants/deodorants are sold to specific gender-based segments in various forms,

including roll-ons, traditional solids, invisible solids, gels, and aerosols. Men’s

antiperspirants/deodorants are unique in, among other things, their branding, packaging,

fragrances, marketing, strength, and location on the shelf. 

15. For the purposes of this Complaint, the United States is the relevant geographic

area in which to analyze the effects of the Acquisition in each of the relevant lines of commerce.

V. THE STRUCTURE OF THE RELEVANT MARKETS

16. The relevant market for the manufacture, distribution, and sale of at-home teeth

whitening products in the United States is highly concentrated whether measured by the

Herfindahl-Hirschman Index (“HHI”) or two- or four-firm concentration ratios. Respondents

Procter & Gamble and Gillette are the two largest suppliers of at-home teeth whitening products

in the United States and are the only significant suppliers of branded at-home teeth whitening

strips. Procter & Gamble 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, they account for over 80% of the sales in this highly

concentrated market. Accordingly, the Acquisition would significantly increase the

concentration level in the United States market for at-home teeth whitening products, leaving
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Procter & Gamble as the dominant supplier. Respondents are actual competitors in this relevant

market.

17. The relevant market for the research, development, manufacture, distribution, and

sale of adult battery-powered toothbrushes in the United States is highly concentrated whether

measured by HHI or two- or four-firm concentration ratios. Respondents Procter & Gamble and

Gillette are the two largest suppliers of adult battery-powered toothbrushes in the United States. 

Procter & Gamble 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. Together, Respondents account for over 85% of this highly concentrated market. 

Accordingly, the Acquisition would significantly increase the concentration level in the United

States market for adult battery-powered toothbrushes, leaving Procter & Gamble as the dominant

supplier. Respondents are actual competitors in this relevant market.

18. The relevant market for the research, development, manufacture, distribution, and

sale of rechargeable toothbrushes in the United States is highly concentrated whether measured

by HHI or two- or four-firm concentration ratios. Respondent Gillette and Philips Oral Health

Care, Inc. (“Philips”) are the only significant suppliers of rechargeable toothbrushes in the United

States. Gillette markets a full line of rechargeable toothbrush products (i.e., low-end to high-end)

under the Oral-B® Braun® brand name, while Philips sells mostly mid to high-end products

under the Philips® Sonicare® brand name. Respondent Procter & Gamble and Philips are joint

venture partners in the development and marketing of the Crest® Sonicare® IntelliClean System

(“IntelliClean”), the first integrated toothbrush/dentifrice product (i.e., toothbrush that self

dispenses toothpaste) sold in the United States. Pursuant to the Acquisition, Respondent Procter

& Gamble would acquire the only significant competitor to its joint venture partner, Philips. 

19. The relevant market for the research, development, manufacture, distribution, and

sale of men’s antiperspirants/deodorants in the United States is highly concentrated whether

measured by the HHI or two- or four-firm concentration ratios. Respondents are the two largest

suppliers of men’s antiperspirants/deodorants in the United States. Procter & Gamble markets its

men’s antiperspirants/deodorants under the Old Spice® brand name, while Gillette sells its

products under the Right Guard® and Gillette Series® brand names. Together, Respondents

account for over 50% of the sales in this highly concentrated market. Accordingly, the

Acquisition would significantly increase the concentration level in the United States market for

men’s antiperspirants/deodorants, leaving Procter & Gamble as the dominant supplier. 

Respondents are actual competitors in this relevant market.

VI. ENTRY CONDITIONS

20. Entry into any relevant line of commerce would not be timely, likely, or sufficient

to deter or counteract the anticompetitive effects of the Acquisition set forth in Paragraph 21

below. Entry into any of these markets would require the investment of extremely high sunk

costs to, among other things, develop products, establish a brand name, and provide promotional
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funding and advertising to support the product(s), which would be difficult to justify given the

market structure in the affected markets. Additionally, patents and other intellectual property

create significant barriers to entry in the at-home teeth whitening, adult battery-powered, and

rechargeable toothbrush markets. Even if a new entrant were willing to take on such

investments, it would also face the difficult task of convincing retailers to carry its products. As

a result, new entry into any of these markets sufficient to achieve a significant market impact

within two years is unlikely.

VII. EFFECTS OF THE ACQUISITION

21. The effects of the Acquisition, if consummated, may be to substantially lessen

competition and to tend to create a monopoly in the relevant markets in violation of Section 7 of

the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC Act, as amended, 15

U.S.C. § 45, in the following ways, among others:

a. by eliminating actual, direct, and substantial competition between

Respondents Procter & Gamble and Gillette for the research, development,

manufacture, distribution, and sale of at-home teeth whitening products, adult

battery-powered toothbrushes, and men’s antiperspirants/deodorants in the United

States;

b. by reducing the merged entity’s incentives to adequately support and

promote the IntelliClean product and joint venture;

c. by increasing the ability of the merged entity to unilaterally raise prices of

at-home teeth whitening products, adult battery-powered toothbrushes, and men’s

antiperspirants/deodorants in the United States; and

d. by reducing the merged entity’s incentives to improve service or product

quality for at-home teeth whitening products, adult battery-powered toothbrushes,

rechargeable toothbrushes, and men’s antiperspirants/deodorants in the United

States.
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VII. VIOLATIONS CHARGED

22. The Acquisition described in Paragraph 9 constitutes a violation of Section 5 of

the FTC Act, as amended, 15 U.S.C. § 45.

23. The Acquisition described in Paragraph 9, if consummated, would constitute a

violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC

Act, as amended, 15 U.S.C. § 45.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this

twenty-ninth day of September, 2005, issues its Complaint against said Respondent.

By the Commission, Chairman Majoras and Commissioner Harbour recused. 

Donald S. Clark

Secretary

SEAL: