In January 2005, the Procter & Gamble Company (P&G) announced that it signed a deal to buy 100% of the shares of the Gillette Company. The transaction was valued at approximately $57 billion making it the largest acquisition in P&G history. “This combination (…), at a time when they are both operating from a position of strength, is a unique opportunity. Gillette and P&G have similar cultures and complementary core strength in branding, innovation, scale and go-tomarket capabilities, making it a terrific fit,” said P&G chairman and chief executive A.G. Lafley. Since the proposed acquisition was to be creating the world’s largest consumer-products company with more than 140,000 employees and annual sales of $60 billion, pushing European rival Unilever into second place, competition agencies like the European Commission (EC) and the Federal Trade Commission (FTC) notified the deal. 1 The complaint was that the concentration creates or strengthens a dominant position, especially in overlapping markets of both firms and therefore anticompetitive effects like increasing prices would appear. [...]
Table of Contents
- Introduction
- Largest Transaction in Procter & Gamble's History
- Goal and Approach of This Study
- Acquisition Analysis for the European Market
- The Relevant EU Merger Legislation and Guidelines
- The Parties of the Acquisition and Their Operations
- The Relevant Markets
- The Markets Prior to the Merger
- Assessment of the Market Structures Post Merger
- Concentration/ Market Shares of the Combined Company in the Relevant Markets
- Entry
- Potential Conglomerate Effects
- The Decision of the European Commission
- The Acquisition treated by the FTC for the U.S. Markets
- Conclusion
Objectives and Key Themes
This study analyzes the Procter & Gamble (P&G) acquisition of Gillette, focusing on its competitive impact, particularly within the European market. The analysis prioritizes the European Commission's (EC) decision-making process, given its approval of the merger and P&G's strategic emphasis on Western European growth. The study also briefly examines the Federal Trade Commission's (FTC) approach in the U.S. market for comparative purposes.
- Competitive impact of the merger in relevant markets
- Analysis of EU merger legislation and guidelines
- Assessment of market structures post-merger, including market share and entry barriers
- Comparison of EC and FTC decisions
- P&G's strategic goals and growth strategies in Western Europe
Chapter Summaries
Introduction: This chapter introduces the P&G acquisition of Gillette, highlighting its significance as the largest acquisition in P&G's history, valued at approximately $57 billion. It underscores the creation of the world's largest consumer-products company, triggering scrutiny from competition agencies like the EC and FTC due to concerns about potential anti-competitive effects resulting from increased market concentration. The chapter outlines the study's goal: to analyze the acquisition's impact on competition, concentrating primarily on the European market due to the EC's initial approval and P&G's strategic focus on Western European growth. The FTC's U.S. market treatment will also be briefly addressed for comparative purposes.
Acquisition Analysis for the European Market: This chapter delves into the EC's assessment of the P&G-Gillette merger. It begins by outlining the relevant EU merger legislation, specifically Council Regulation (EC) No 139/2004, and its application to the acquisition. The analysis examines the market definition, considering overlapping product markets where both companies competed (such as toothbrushes, oral care products, and shaving products). The chapter also assesses the market structures post-merger, analyzing concentration levels using metrics such as the Herfindahl-Hirschmann Index (HHI) and evaluating potential barriers to entry for new competitors. The chapter concludes with a discussion of the EC's decision regarding the merger's compatibility with the common market, highlighting the rationale behind their approval.
The Acquisition treated by the FTC for the U.S. Markets: This chapter provides a concise comparison of the FTC's treatment of the P&G-Gillette merger in the U.S. markets, contrasting their approach and outcome with the EC's decision in the European market. This section briefly describes the FTC's findings and conclusions regarding potential anti-competitive effects of the merger within the U.S. context. The comparison allows for a broader understanding of the regulatory landscape surrounding this major acquisition.
Keywords
Procter & Gamble, Gillette, merger, acquisition, European Commission, Federal Trade Commission, competition policy, antitrust, market concentration, horizontal merger, market share, Herfindahl-Hirschmann Index (HHI), barriers to entry, consumer goods, branding, innovation, strategic growth, Western Europe, EU merger regulation.
Frequently Asked Questions: Analysis of the Procter & Gamble Acquisition of Gillette
What is the main topic of this study?
This study analyzes the Procter & Gamble (P&G) acquisition of Gillette, focusing on its competitive impact, particularly in the European and U.S. markets. It examines the decisions of the European Commission (EC) and the Federal Trade Commission (FTC) regarding the merger.
What is the significance of the P&G-Gillette acquisition?
The acquisition was the largest in P&G's history, valued at approximately $57 billion, creating the world's largest consumer-products company. This significant size triggered scrutiny from competition agencies due to concerns about potential anti-competitive effects.
Why does the study focus on the European market?
The study prioritizes the European market because the EC approved the merger, and P&G strategically emphasized Western European growth. The U.S. market (FTC's approach) is also briefly examined for comparative purposes.
What key themes are explored in the study?
Key themes include the competitive impact of the merger, analysis of EU merger legislation and guidelines, assessment of post-merger market structures (market share and entry barriers), comparison of EC and FTC decisions, and P&G's strategic goals in Western Europe.
What aspects of the European Commission's decision-making process are analyzed?
The analysis examines the relevant EU merger legislation (Council Regulation (EC) No 139/2004), market definition (overlapping product markets like toothbrushes and shaving products), post-merger market structures (using metrics like the Herfindahl-Hirschmann Index), and the rationale behind the EC's approval.
How does the study compare the EC and FTC approaches?
The study provides a comparison of the EC and FTC's treatments of the merger, contrasting their approaches, findings, and conclusions regarding potential anti-competitive effects in the European and U.S. markets respectively.
What are the key words associated with this study?
Key words include Procter & Gamble, Gillette, merger, acquisition, European Commission, Federal Trade Commission, competition policy, antitrust, market concentration, horizontal merger, market share, Herfindahl-Hirschmann Index (HHI), barriers to entry, consumer goods, branding, innovation, strategic growth, Western Europe, and EU merger regulation.
What is covered in the "Acquisition Analysis for the European Market" chapter?
This chapter details the EC's assessment, including relevant EU merger legislation, market definition, analysis of post-merger market structures (concentration levels and entry barriers), and the EC's final decision.
What is discussed in the chapter summarizing the FTC's treatment of the acquisition in the U.S. market?
This chapter offers a concise comparison of the FTC's approach and outcome with the EC's decision. It briefly describes the FTC's findings and conclusions regarding potential anti-competitive effects in the U.S. context.
- Quote paper
- Andreas Penzkofer (Author), 2006, The Procter & Gamble Acquisition of Gillette, Munich, GRIN Verlag, https://www.grin.com/document/67268
