ANALYSIS OF AGREEMENT CONTAINING CONSENT ORDERS

TO AID PUBLIC COMMENT

In the Matter of The Procter & Gamble Company and The Gillette Company,

File No. 051-0115

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 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. 
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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® 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 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 Oral-B® 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
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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 battery-powered toothbrushes. 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

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 batterypowered 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 highpriced 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
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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® 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 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® 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

higher prices and fewer product choices for consumers in this market.
1 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.

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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.1 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

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
2 The Order to Maintain Assets also requires that P&G and Gillette maintain the viability

of the Soft & Dri and Dry Idea businesses.

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competitive operations until the businesses are transferred to Commission-approved acquirers.2

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 well-known 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

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.