[Federal Register Volume 64, Number 230 (Wednesday, December 1, 1999)]
[Notices]
[Pages 67271-67273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31183]


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FEDERAL TRADE COMMISSION

[File No. 991 0306]


Reckitt & Coleman plc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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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 that accompanies the consent agreement 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 January 10, 2000.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania. Ave., NW, Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: Richard Parker or Michael Antalics, 
FTC/H-374, 600 Pennsylvania, Ave., NW, Washington, D.C. 20580. (202) 
326-2574 or 326-3821.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's 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. 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 November 24, 1999), on the 
World Wide Web, at ``http://www.ftc.gov/os/actions97.htm.'' A paper 
copy can be obtained from the FTC Public Reference Room, Room H-130, 
600 Pennsylvania Avenue, NW., Washington, D.C. 20580, either in person 
or by calling (202) 326-3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania. Ave., NW., 
Washington, D.C. 20580. Two paper copies of each comment should be 
filed, and should be accompanied, if possible, by a 3\1/2\ inch 
diskette containing an electronic copy of the comment. Such comments or 
views will be considered by the Commission and will be available for 
inspection and

[[Page 67272]]

copying at its principal office in accordance with Section 
4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Analysis of Agreement Containing Consent Order To Aid Public 
Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') from Reckitt & Colman plc (``Reckitt & Colman''), which is 
designed to remedy the anticompetitive effects resulting from Reckitt & 
Colman's acquisition of the voting securities of Benckiser N.V. from 
NRV Vermogensverwaltung GmbH (``Vermogensverwaltung''). Under the terms 
of the Decision & Order, Reckitt & Colman will be required to divest 
Benckiser's Scrub Free and Delicare businesses 
to Church & Dwight Co., Inc. (``Church & Dwight'') after the date upon 
which the Commission preliminarily accepts the Consent Agreement. 
Church & Dwight produces a number of household products under the Arm & 
Hammer brand name.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for reception of comments from interested persons. 
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 
final the Decision & Order.
    On July 27, 1999, Reckitt & Colman and entities controlled by 
Vermogensverwaltung entered into a Merger Agreement under which Reckitt 
& Colman agreed to purchase all of the voting securities of Benckiser 
N.V. for approximately $2.7 billion. The Commission's Complaint alleges 
that the merger, 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, in the markets for the 
research, development, formulation, manufacture, marketing and sale of 
hard surface bathroom cleaners and fine fabric wash products.
    Hard surface bathroom cleaners are products specially formulated, 
sold and used by consumers to remove built-up soils and stains from 
bathroom surfaces. Reckitt & Colman, which sells Lysol, and 
Benckiser, which sells Scrub Free, are two significant U.S. 
suppliers of hard surface bathroom cleaners. Fine fabric wash products 
are specially formulated, sold and used by consumers to launder fine 
fabrics such as silks, woolens or other delicate fabrics. Reckitt & 
Colman, which sells Woolite, and Benckiser, which sells 
Delicare, are the two largest suppliers of fine fabric wash 
products.
    The United States is the relevant geographic area in which to 
evaluate the effects of the proposed acquisition of Benckiser by 
Reckitt & Colman. It is unlikely that the competition eliminated by the 
proposed transaction would be replaced by foreign manufacturers of hard 
surface bathroom cleaners and fine fabric wash products. Foreign 
manufacturers of these products are unable to compete effectively in 
the U.S. because they lack the necessary brand recognition among U.S. 
consumers and face substantial transportation costs, which make 
importing their products into the U.S. uneconomical.
    The hard surface bathroom cleaner and fine fabric wash markets are 
highly concentrated in the United States, and the proposed acquisition 
would substantially increase concentration in each market. In the hard 
surface bathroom cleaner market, the acquisition would result in an 
increase in the Herfindahl-Hirschman Index (``HHI'') to approximately 
2300 points, which is an increase of about 500 points over the 
premerger HHI level. In the fine fabric wash market, the post-merger 
HHI would be approximately 8500 points, which is an increase of about 
700 points over the premerger HHI level.
    By eliminating competition between these competitors in these 
highly concentrated markets, the proposed acquisition could allow 
Reckitt & Colman unilaterally to exercise market power or could 
facilitate coordinated interaction among the remaining competitors in 
the hard surface bathroom cleaner market, and could allow Reckitt & 
Colman unilaterally to exercise market power in the fine fabric wash 
market, thereby increasing the likelihood that consumers of hard 
surface bathroom cleaners and fine fabric wash products would be forded 
to pay higher prices.
    In addition, new entry would not deter or counteract the 
anticompetitive effects likely to flow from the proposed transaction. A 
new entrant into either the hard surface bathroom cleaner or fine 
fabric wash market would need to undertake the difficult, expensive and 
time-consuming process of developing a competitive product, creating 
brand recognition among U.S. consumers, and establishing a viable 
retail distribution network. Because of the difficulty of accomplishing 
these tasks new entry into either market could not be accomplished in a 
timely manner. Moreover, because of the high sunk costs involved, it is 
not likely that new entry into either market would occur at all, even 
in response to a small, nontransitory increase in price in either 
market after the transaction. Similarly, entry through brand name 
product line extension is not likely. Large, vertically integrated 
manufacturers of household cleaners are set up for high volume 
production and not for the production of small or individual stock 
keeping units for niche markets.
    The Consent Agreement effectively remedies the acquisition's 
anticompetitive effects in the hard surface bathroom cleaner and fine 
fabric wash markets by requiring Reckitt & Colman to divest Benckiser's 
Scrub Free and Delicare businesses to a third 
party. These assets include all Scrub Free and 
Delicare trademarks and related intellectual property, trade 
secrets, technical and manufacturing know-how, and customer and vendor 
lists and information. Pursuant to the Consent Agreement,the Benckiser 
businesses must be divested to Church & Dwight after the Commission 
accepts this Consent Agreement for public comment, but on or before the 
date that Reckitt & Colman acquires Benckiser. Church & Dwight is a 
well established, financially viable company that offers value priced 
consumer cleaning products under established brands including Arm & 
Hammer, Parsons, Brillo and Sno 
Bol. In order to ensure an orderly transition, Reckitt & 
Colman will provide Church & Dwight with short-term integration 
assistance, including production planning and order and billing 
processing. In the event that these businesses are not divested to 
Church & Dwight, the Decision & Order contains a provision that 
requires Reckitt & Colman to divest Benckiser's Scrub Free 
and Delicare businesses to an alternative acquirer approved 
by the Commission within ninety (90) days of the date the Decision & 
Order becomes final. At the alternative acquirer's option, additional 
related assets may be divested including fixtures, machines, buildings, 
structures, vehicles, real property, or other tangible assets used in 
the research, development, formulation, manufacture, sale, or 
distribution of these businesses.
    In the event that the Benckiser Scrub Free and 
Delicare businesses are not divested to Church & Dwight or to 
an alternative acquirer within 90 days of the date the Commission's 
Decision & Order becomes final, the Decision & Order provides that the 
Commission may appoint a trustee to divest these assets, and, at the 
purchaser's option, to

[[Page 67273]]

divest additional related assets to a Commission-approved purchaser.
    The Order also requires Reckitt & Colman to provide to the 
Commission a report of compliance with the divestiture provisions of 
the Decision & Order within thirty (30) days following the date the 
Decision & Order becomes final, every thirty (30) days thereafter until 
Reckitt & Colman has completed the required divestiture, and every 
ninety (90) days thereafter until Reckitt & Colman has completed its 
divestiture obligations under the Order.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement and it is not intended to constitute an official 
interpretation of the Consent Agreement or to modify its terms in any 
way.

    By direction of the Commission.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 99-31183 Filed 11-30-99; 8:45 am]
BILLING CODE 6750-01-M