IP/05/955
Brussels, 15th July 2005
Mergers: Commission approves acquisition of
Gillette by Procter & Gamble subject to conditions
The European Commission has cleared under the EC Merger Regulation the
proposed acquisition of Gillette by Procter & Gamble, both based in the US.
The approval is conditional on the divestiture of Procter & Gamble's battery
toothbrush business. Since the merger will combine two leading global
producers of branded consumer goods, the Commission’s market
investigation focussed on potential anti-competitive effects arising from the
parties' large combined product portfolio. The market investigation has,
however, shown that even after the transaction the parties would not be in a
position to impose conditions on retailers to the detriment of the consumer.
The only remaining competition concern, in the sector of battery
toothbrushes, could be solved by the parties’ commitment to sell off Procter
& Gamble's battery toothbrush business. In the light of this commitment, the
Commission has concluded that the operation will not significantly impede
effective competition in the European Economic Area (EEA) or any
substantial part of it.
"When two major consumer product companies merge, we have to ensure that
European consumers do not suffer in terms of price competition or product ranges.
However, following our thorough investigation, and in view of the remedy offered, we
are satisfied that the merger would not harm consumers", Competition
Commissioner Neelie Kroes said.
The merger, which is still subject to approval by several other antitrust authorities
outside the EU, would create one of the world's biggest consumer goods producers
with a combined turnover of roughly € 50 billion. Procter & Gamble is well-known for
its branded products, in particular in the field of household, beauty, baby and family
care products, including "Ariel", "Pringles", "Oil of Olay", "Tampax", "Always",
"Pampers", "Fairy", "Head & Shoulders" and "Pantene". Gillette is a multinational
manufacturer of consumer products, active in blades and razors, oral care products
and batteries, using brand names such as "Gillette", "Oral B" and “Duracell”. After
the merger, the parties would own 21 brands with a turnover of more than one billion
dollars each.
The market investigation showed that the activities of both undertakings overlap to a
large extent only on the market for battery toothbrushes, where Procter & Gamble
offers products under the brand "SpinBrush", co-branded as "Blend-a-Dent", "Blenda-Med", "Blendi", "Crest" or "AZ". Gillette sells battery toothbrushes under its "Oral B"
brand. Procter & Gamble committed to divest its entire SpinBrush toothbrushes
business and to grant a licence for the co-brands used on these toothbrushes. As
the commitment covers the whole of Procter & Gamble’s battery toothbrush
business, it will remove the competition concern on the battery toothbrushes market.
Given the large number of well-known brands both parties would be able to offer
after the merger, the Commission has also carefully investigated whether the merger
would give rise to anti-competitive "conglomerate effects" (which can arise if, for
example, retailers can only stock certain brands if they also stock other brands from
the same supplier’s product range).. The inquiry focused in particular on the
possibility of competitors’ products could be unfairly excluded to the detriment of end
consumers. The extensive market investigation covered, among other things,
potential competition problems that might occur as a result of offering bundled
products, rebates or promotions. The Commission has also examined whether the
parties' involvement in the retailers' management of shelf allocation decisions
("category management") might enable them to obtain control over their customers’
shelves, thereby causing harm to competitors and consumers.
The extensive market investigation has, however, shown that anti-competitive
conglomerate effects are not likely to occur. Indeed, the parties would continue to
face significant competition from other suppliers of branded products with a
comparable product portfolio even after the merger. Furthermore, the risk of
exclusion of competitors or "portfolio effects" is considerably mitigated by the ability
and incentive of retailers to exercise countervailing buyer power. Finally, the
Commission has found no evidence of any competition harm linked with the parties’
possible increased involvement in category management, mainly because retailers
retain the ultimate control over their shelves.
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