- On September 30, the Federal Trade Commission conditionally approved The Procter & Gamble Company’s (“P&G”) $57 billion acquisition of rival consumer products manufacturer The Gillette Company (“Gillette”), provided the companies divest a variety of overlapping assets ranging from toothbrushes to antiperspirant/deodorant (“AP/DO”) to ensure continued competition following the transaction. Under a consent agreement with the FTC, P&G and Gillette will be required to divest 1) Gillette’s Rembrandt at-home teeth whitening business; 2) P&G’s Crest SpinBrush battery-powered and rechargeable toothbrush business; and 3) Gillette’s Right Guard men’s AP/DO business. In addition, P&G must amend its joint venture agreement with Philips Oral Health Care, Inc. (“Philips”) regarding the Crest Sonicare IntelliClean System rechargeable toothbrush.
According to the complaint, P&G’s acquisition of Gillette would be anticompetitive and in violation of Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended. The FTC contends that the deal would lessen competition in the United States markets for at-home teeth whitening products, adult battery-powered toothbrushes, rechargeable toothbrushes, and men’s AP/DOs. The transaction as proposed would likely lead to increased prices for these products. The complaint also states that entry by a new competitor into each of the relevant markets is unlikely to deter the alleged anticompetitive impact of the transaction, as such entry would be difficult, time consuming, and costly.
The consent agreement is designed to remedy the allegedly illegal anticompetitive impact of P&G’s acquisition of Gillette. It requires the companies to divest the Rembrandt business within three months and the Right Guard business within four months after the order becomes final. The buyer of each asset must be approved by the Commission, and if the companies cannot divest the businesses within the time required, the FTC may appoint a trustee to complete the divestitures. The consent agreement contains a separate order to maintain assets that requires P&G and Gillette to maintain the viability of the Rembrandt and Right Guard businesses as competitive assets until they are transferred to Commission-approved buyers. The FTC has approved Edward Gold of PricewaterhouseCoopers as the Interim Monitor to ensure the company’s compliance with the consent agreement. The consent agreement contains several provisions to ensure the successful divestiture of the Crest SpinBrush business to Church & Dwight, Co., Inc., the Commission-approved buyer of these assets. First, it requires P&G to divest the rights and assets relating to adult battery-powered and rechargeable toothbrushes, including research and development data, sales and marketing materials, and intellectual property. Second, P&G will provide Church & Dwight with a transitional license to the Crest trademark to use with the SpinBrush name. These provisions will ensure that Church & Dwight is able to transition the Crest SpinBrush family of products to a brand it chooses. Third, the agreement requires P&G to provide services to Church & Dwight for several months to ensure the continued viability of SpinBrush products. Finally, the agreement requires P&G to amend its joint venture agreement with Philips regarding IntelliClean. The amended agreement allows Philips independently to market and sell IntelliClean and eliminates all non-compete provisions, allowing both P&G and Philips to develop and sell rechargeable toothbrush products in the future.
The European Commission (“EC”), Canada, and Mexico also reviewed this proposed merger. Throughout the course of their respective investigations, the FTC and the staff of the EC Competition Directorate, the Canadian Competition Bureau, and the Mexican Federal Competition Commission consulted and cooperated with each other under the terms of the respective cooperation agreements with each jurisdiction and 2002 U.S.-EC Best Practices on Cooperation in Merger Investigations.
The Commission vote to approve the complaint, consent order, order to maintain assets, and interim monitor agreement was 2-0-2, with Chairman Deborah Platt Majoras and Commissioner Pamela Jones Harbour recused.
- On September 27, the Federal Trade Commission and the U.S. Department of Justice Antitrust Division announced an expedited antitrust procedure and guidance for collaborations of businesses working to rebuild communities affected by Hurricanes Katrina and Rita. Under the expedited procedure for proposed business conduct relating to the aftermath of Hurricanes Katrina and Rita, the agencies will state their enforcement intentions within five business days of receiving the proposal. The FTC and DOJ already have programs in place to provide guidance to businesses concerned about the legality of proposed conduct under the antitrust laws. The FTC’s “Staff Advisory Opinion” procedure and DOJ’s “Business Review Letter” procedure allow any firm, individual, or group of firms or individuals to submit a proposed business plan or activity to the agencies and to receive a statement whether the agencies will challenge the activity under the antitrust laws. That process typically entails at least a 90-day review period prior to the issuance of the agency’s guidance.
Under the expedited procedure, an applicant would have to provide the FTC or DOJ by fax, e-mail, or letter a written description of the proposal, including the parties that would be involved in the effort or activity and the name and contact information of a person from whom the agencies could obtain additional information. This expedited procedure is for use solely for post-hurricane relief efforts and may be invoked at the option of the requestor in lieu of the agencies’ standard procedures for handling requests for advice.
- On September 26, the Commission announced that a Connecticut-based hedge fund manager who failed to report several large stock purchases before they were made, as required by the Hart-Scott-Rodino (“HSR”) Premerger Notification Act, will pay a $350,000 civil penalty to settle Federal Trade Commission charges. According to the complaint filed in federal district court by the United States Department of Justice at the request of the Commission, Scott Sacane, manager of the Durus Life Sciences Master Fund, failed to make four required premerger notification filings. His failure to do so violated the HSR Act for each transaction.
In 1999, Mr. Sacane created what is commonly referred to as a hedge fund, which was composed of the Durus Life Sciences Master Fund Ltd. and a domestic and an international feeder fund. In transactions made between February 2003 and June 2003, Sacane acquired more than 50 percent of Aksys Ltd. (“Aksys”) on behalf of the master fund, crossing two HSR pre-merger filing thresholds. During the same period, Mr. Sacane bought more than $100 million of stock in Esperion Therapeutics, Inc., (“Esperion”) on behalf of the master fund, also crossing two HSR thresholds. No premerger filings were made prior to crossing any of the four thresholds.
The complaint charged that in not filing each of the four HSR premerger notifications, Mr. Sacane failed to comply with the waiting period requirements related to the acquisitions of Aksys and Esperion shares. The shares were acquired on behalf of the master fund. Because of the fund’s structure, under the HSR Act, both the managing entity of the master fund and the domestic feeder fund were required to make filings. As the parent of the managing entity, Mr. Sacane was required to file premerger filings on his own behalf, but he failed to do so. Based on its determination of the culpability of the parties in this case, the Commission recommended seeking penalties only against Mr. Sacane. In settling the complaint, Mr. Sacane has agreed to pay a civil penalty of $350,000.
- On September 23, following a public comment period, the Commission approved the issuance of a final consent order in the matter concerning Novartis AG’s recent acquisition of Eon Labs, Inc. The Commission vote to approve the final consent order was 4-0.
- On September 16, the Commission approved a petition seeking approval of three proposed divestitures required under the FTC’s order regarding Valero L.P.’s (“Valero”) recent acquisition of Kaneb Services LLC (“Kaneb”). Under the terms of the consent order, Valero and Kaneb are required to divest: 1) the West Pipeline System; 2) the Philadelphia Area Terminals; and 3) the San Francisco Bay Terminals, as those terms are defined in the order, to Commission-approved purchasers. Through their petition, Valero and Kaneb requested FTC approval to divest all three assets to Pacific Energy Group LLC, or one of its wholly owned subsidiaries, per a July 1, 2005, purchase agreement between the relevant companies. The Commission has now approved each of the proposed divestitures. The Commission vote approving the divestitures was 3-0-1, with Chairman Deborah Platt Majoras recused.
- On September 13, the Federal Trade Commission and the Department of Justice’s Antitrust Division announced that they will host a joint workshop entitled “Competition Policy and the Real Estate Industry.” Prompted by the substantial changes in the real estate brokerage marketplace and consumers’ interest in a competitive real estate brokerage industry, the workshop will cover such topics as new and innovative brokerage business models, multiple listing services, and the implications of state-imposed minimum-service requirements. The event, which is open to the public and the press, will be held on October 25, 2005, at the FTC’s Satellite Building Conference Center located at 601 New Jersey Avenue, N.W., Washington, D.C.
- On September 7 and September 21, the FTC’s Associate General Counsel for Energy, John Seesel, testified on behalf of the FTC before the U.S. House of Representatives’ Committee on Energy and Commerce and the U.S. Senate’s Committee on Commerce, Science, and Transportation respectively. Mr. Seesel detailed the FTC’s varied initiatives to protect competitive markets in the production, distribution, and sale of gasoline, and discussed in detail an important Commission study issued earlier this year on the factors affecting gas prices nationwide. In addition, Mr. Seesel testified that in 2004, the FTC staff published a study reviewing mergers and structural changes in the U.S. petroleum industry. The study also provided an overview of antitrust enforcement actions the Commission has taken since 1981 – including 19 complaints filed against larger petroleum mergers. Also, the FTC actively monitors wholesale and retail prices of gasoline and diesel, Mr. Seesel stated, to protect consumers by identifying unusual movements in prices both at the wholesale and retail levels and investigating their causes when appropriate.
Mr. Seesel’s testimony addressed two areas of concern. It first reviewed the basic tools the FTC uses to promote competition in the petroleum industry, including challenging potentially anticompetitive mergers, prosecuting nonmerger antitrust violations, monitoring industry conduct to detect possible anticompetitive behavior, and researching developments in the petroleum sector. Next, it reviewed what the Commission has learned from its conferences and research, as well as its review of recent gasoline price changes. The testimony also provided a detailed explanation of the Commission’s recent report on the factors affecting the price of gasoline – a topic of even more relevance to consumers in the wake of price increases following Hurricane Katrina. The report analyzed the factors, including supply, demand, and competition, as well as federal, state, and local regulations, that drive gasoline prices, so policy-makers can evaluate and choose strategies likely to succeed in addressing high gasoline prices.
Finally, the testimony stressed: 1) the worldwide supply, demand, and competition for crude oil are the most important factors in the national average prices of gasoline in the United States, and 2) that gasoline supply, demand, and competition produced relatively low and stable prices from 1984 until 2004, despite substantial increases in U.S. gasoline consumption. It also discussed local regulations that may have an impact on retail gasoline prices, as well as how the development of hypermarkets – large retailers of general merchandise and grocery items, such as Wal-Mart and Safeway – has affected what consumers pay at the gas pump.