S.C. Johnson & Son, Inc.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 981-0086]

S.C. Johnson & Son, Inc.; 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 April 6, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: William Baer or Steven Bernstein, FTC/

H-374, Washington, D.C. 20580. (202) 326-2932 or 326-2423.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 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 for a period of sixty (60) days. 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 January 23, 1998), on the World Wide Web, at ``http://www.ftc.gov/

os/actions/htm.'' A paper copy can be obtained from the FTC Public

Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W.,

Washington, D.C. 20580, either in person or by calling (202) 326-3627.

Public comment is invited. Such comments or views will be considered by

the Commission and will be available for inspection and 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 Proposed Consent Order To Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted, subject

to final approval, an agreement containing a proposed Consent Order

from S.C. Johnson & Son, Inc. (``S.C. Johnson''), which is designed to

remedy the anticompetitive effects resulting from S.C. Johnson's

acquisition of the home care and home food management businesses of

DowBrands Inc., DowBrands L.P. and DowBrands Canada Inc. (hereinafter

collectively

[[Page 5547]]

``DowBrands''). Under the terms of the agreement, S.C. Johnson will be

required to divest DowBrands' ``Spray `n Wash,'' ``Spray `n Starch''

and ``Glass Plus'' businesses to Reckitt & Colman, Inc. (``Reckitt &

Colman''), the U.S. wholly-owned subsidiary of the British company,

Reckitt & Colman plc. If the sale of these assets is not made to

Reckitt & Colman, S.C. Johnson will be required to divest the Spray `n

Wash, Spray `n Starch, and Glass Plus businesses, as well as DowBrands'

Urbana, Ohio manufacturing plant and DowBrands' ``Yes'' laundry

detergent, ``Vivid'' color-safe bleach, and oven cleaner businesses, to

a Commission-approved buyer.

The proposed Consent Order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

proposed Consent Order and the comments received, and will decide

whether it should withdraw from the proposed Consent Order or make

final the proposed Order.

On October 27, 1997, S.C. Johnson and DowBrands entered into Asset

Purchase Agreements under which S.C. Johnson agreed to acquire the home

care and home food management businesses of DowBrands for approximately

$1.125 billion. The proposed Complaint alleges that the acquisition, if

consummated, would violate Section 7 of the Clayton Act, as amended, 15

U.S.C. Sec. 18, and Section 5 of the Federal Trade Commission Act, as

amended, 15 U.S.C. Sec. 45, in the markets for the research,

development, manufacture and sale of soil and stain remover products

and glass cleaner products.

Soil and stain removers are products used by consumers in

conjunction with laundry detergent to remove specific and isolated

stains from clothing. S.C. Johnson, which sells ``SHOUT,'' and

DowBrands, which sells ``Spray `n Wash,'' are the two leading U.S.

suppliers of soil and stain removers. S.C. Johnson, which sells

``Windex,'' and DowBrands, which sells ``Glass Plus,'' are also the two

leading U.S. suppliers of glass cleaners, which are used by consumers

to clean glass, mirrors and other surfaces.

The soil and stain remover and glass cleaner markets are highly

concentrated, and the proposed acquisition would substantially increase

concentration in each market. In the soil and stain remover market, the

acquisition would result in an increase in the Herfindahl-Hirschmann

Index (``HHI'') of 5,646 points, which is an increase of 2,730 points

over the premerger HHI level. In the glass cleaner market, the post-

merger HHI would be 4,920 points, which is an increase of 1,180 points

over the premerger HHI level. By eliminating competition between the

top two competitors in these highly concentrated markets, the proposed

acquisition would allow S.C. Johnson to unilaterally exercise market

power in each market, thereby increasing the likelihood that: (1) Soil

and stain remover and glass cleaner customers would be forced to pay

higher prices; (2) innovation in these markets would decrease; and (3)

advertising and promotion in these markets would be reduced.

The relevant geographic market is the United States. It is unlikely

that the competition eliminated by the proposed transaction would be

replaced by foreign manufacturers of soil and stain removers and glass

cleaners. 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.

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 soil and stain remover or glass cleaner

market would need to undertake the difficult, expensive and time-

consuming process of developing a competitive product, creating brand

recognition among consumers, and establishing a viable 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 costs involved, it is not likely that new

entry into either market would occur at all, even if prices were to

increase substantially after the transaction.

The proposed Consent Order naming S.C. Johnson as respondent

effectively remedies the acquisition's anticompetitive effects in the

soil and stain remover and glass cleaner markets by requiring S.C.

Johnson to divest DowBrands' Spray `n Wash, Spray `n Starch, and Glass

Plus businesses to a third party. Pursuant to the Consent Agreement,

S.C. Johnson is required to divest these businesses to Reckitt &

Colman, no later than 10 business days from the date the Commission

accepts this Agreement for public comment. In the event S.C. Johnson

fails to divest to Reckitt & Colman, the Consent Agreement contains a

``crown jewel'' provision that requires S.C. Johnson to divest

DowBrands' Spray `n Wash, Spray `n Starch, and Glass Plus businesses,

as well as, at the acquirer's option, DowBrands' Urbana, Ohio

manufacturing plant and DowBrands' ``Yes'' laundry detergent, ``Vivid''

color-safe bleach, and oven cleaner businesses, within six months from

the date S.C. Johnson signed the Consent Agreement. If S.C. Johnson

fails to divest the crown jewel assets within this six-month time

period, the Commission may appoint a trustee to divest these assets.

In order to provide the acquirer with DowBrands' soil and stain

remover and glass cleaner products during a transition period, the

Consent Agreement requires S.C. Johnson, at the acquirer's option, to

provide to the acquirer a twelve-month supply of these products at

cost. The Order also requires S.C. Johnson to provide the Commission a

report of compliance with the divestiture provisions of the Order

within thirty (30) days following the date the Order becomes final,

every thirty (30) days thereafter until S.C. Johnson has completed the

required divestiture and every ninety (90) days thereafter until S.C.

Johnson has completed its obligations under the supply agreement.

The purpose of this analysis is to facilitate public comment on the

proposed Order, and it is not intended to constitute an official

interpretation of the agreement and proposed Order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 98-2574 Filed 2-2-98; 8:45 am]

BILLING CODE 6750-01-M