Reckitt & Coleman plc.; Analysis To Aid Public Comment

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

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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

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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