Feb 4, 2020 - Economy & Business

Edgewell and Harry's case against the FTC merger block

Illustration: Aïda Amer/Axios

Razor-maker Harry's last May agreed to be acquired for $1.37 billion by Schick parent Edgewell and, for the next six months, there were few concerns at either company.

But, but, but: Shortly before Christmas, everything changed. "[Regulators] started asking different sorts of questions, and you could see where they were heading," says a source familiar with the situation.

  • On Jan. 16, Harry's co-CEO Jeff Raider posted a pro-merger argument via Medium, which suggests he felt the writing was on the wall.
  • On Monday, the Federal Trade Commission said it will sue to block the deal, believing that it would further strengthen a duopoly between Edgewell and market leader Procter & Gamble.
    • The FTC argues the direct-to-consumer business of Harry's and rival Dollar Shave Club did little to lower industry prices or spur innovation, but rather those things happened in 2016 when Harry's entered physical retail.
    • Read the FTC's full administrative complaint.

Sources say that Edgewell and Harry's haven't yet decided on next steps, but expectations are that they'll fight this in court. And, if so, expect them to be emboldened by the FTC's recent failure to block a merger of hydrogen peroxide companies, with a judge ruling that the agency's argument amounted to an "oversimplification."

  • The FTC's new complaint mostly ignores the impact of Dollar Shave Club, which was purchased for $1 billion in 2016 by Unilever — suggesting that its business model was already viewed as appealing before either it or Harry's moved big into physical retail.
  • Plus, it's odd to argue duopoly when a company with such major resources as Unilever is now involved. Let alone the recent, U.S. entry of South Korea's Dorco, which also supplies razors to Dollar Shave, or the continuing presence of Bic (which is working on a connected razor product, speaking to the innovation angle).
  • And don't forget about Billie, the brand focused on women, that P&G recently agreed to buy (possibly to take it off the antitrust chessboard, or perhaps as a strategic replay of the mid-1980's soda wars).

The bottom line: One possibility is that the FTC is missing the boat on direct-to-consumer. Another is that this is actually its way to test the limits of omnichannel retail, maybe as a precursor to future actions against giants like Amazon. But no matter the backstory, this one will come down to the numbers — particularly pricing — and each side thinks it has the data to prove its case.

Go deeper: FTC's move to block Harry's deal could impact ad spending

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Hawley seeks overhaul of the Federal Trade Commission

Sen. Josh Hawley, (R-Mo.). Photo: Chip Somodevilla/Getty Images.

GOP Sen. Josh Hawley's frustration with the FTC's policing of the tech industry has prompted him to propose taking the more-than-100-year-old agency off of merger reviews and turning what remains into a wing of the Justice Department.

The big picture: The FTC has been under fire from both Republicans and Democrats calling for tougher action on Big Tech; Hawley's pitch is to hand the agency's competition authority to the DOJ's antitrust division so that a reimagined FTC could hone its focus on privacy and other digital issues.

Prince Harry and Meghan Markle make first appearance since royal departure

Prince Harry, Duke of Sussex and Meghan, Duchess of Sussex depart Canada House on Jan. 07, 2020 in London, England. Photo: Chris Jackson/Getty Images

Prince Harry and Meghan Markle made their first public appearance since stepping back from their royal duties at a JPMorgan event in Miami on Thursday, reports the New York Post.

Why it matters: As part of their agreement with Buckingham Palace, Harry and Meghan agreed to forego their royal titles and stop receiving public funds — in line with the couple's announcement that they plan to become "financially independent." The BBC notes that Harry spoke at the event, but it was not confirmed whether he was paid to appear.

Global mergers are off to a slow start in 2020

Illustration: Sarah Grillo/Axios

There was only $164 billion of announced global mergers and acquisitions in January, the slowest start to a year since 2013, per Refinitiv.

Why it matters: This comes off a 2019 in which volume was down slightly from 2018, but still the fourth-largest dollar volume in history and sixth-straight year above $3 trillion.