Federal Trade Commission v. Procter & Gamble Company

PETITIONER: Federal Trade Commission
RESPONDENT: Procter & Gamble Company
LOCATION: Smith County Jail

DOCKET NO.: 342
DECIDED BY: Warren Court (1965-1967)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 386 US 568 (1967)
ARGUED: Feb 13, 1967
DECIDED: Apr 10, 1967

Facts of the case

Question

Media for Federal Trade Commission v. Procter & Gamble Company

Audio Transcription for Oral Argument - February 13, 1967 in Federal Trade Commission v. Procter & Gamble Company

Earl Warren:

No. 342, Federal Trade Commission, Petitioner, versus Procter & Gamble Company.

Thurgood Marshall:

Mr. Chief Justice.

Earl Warren:

Mr. Solicitor General.

Thurgood Marshall:

May it please the Court.

This case is here on writ of certiorari to the United States Court of Appeals for the Sixth Circuit.

In that Court, the Court of Appeals of the Sixth Circuit set aside the Federal Trade Commission's order that Procter & Gamble divest itself of assets from the Clorox Chemical Company, the nation's largest bleach manufacturer, which it had acquired through a merger.

At the time of the merger in 1959 Procter & Gamble was among the nation's 50 largest manufacturing corporations.

It's sales in 1957 were an excess of $1 billion.

Procter & Gamble is a large diversified manufacturer of low price rapid turnover household products sold primarily through grocery, drug, and department stores.

Its annual sales of soaps and detergents in Kansas alone, products very similar to bleach were more than $500 million in 1957, for example.

Procter's principal products are marketing to housewives largely by what is called “pre-selling.”

By pre-selling it's understood to mean that through advertising and other sales promotions.Data in 1957, Procter was the largest advertiser in the country, spending more than $80 million on advertising and an additional $47 million in promotions.

Expenditures on advertising substantially greater than the total sales of the two leading bleach producers, Clorox and Purex.

Between 1946 and 1962, product's net sales increased by more than 400% which shows recent rapid growth in its product sales, and this also showed a rapid diversification into new product lines closely related to its existing lines.

Procter's president justified that approximately 70% of Procter's household product volume came from products not even in existence in 1946.

The more narrow period between 1952 and 1957, Procter's sales rose some 40%.

A substantial part of that growth was due to the introduction of new brands and product lines in which product -- Procter has not previously been selling.

Now, as to the Clorox Company, in 1957, the Clorox Chemical Company was engaged almost exclusively in the manufacture and sale of household liquid bleach.

With 13 plants located throughout the country, Clorox was the only truly nationwide manufacturer and seller of liquid bleach.

It accounted for 48.8% of the nation's total annual sales of household liquid bleach, and in some regional markets, Clorox's sale was even higher.

For example, the mid-Atlantic States where Clorox had 72% of all the sales of liquid bleach.

Now, what is liquid bleach?

Household liquid bleach is used principally as a whitener in the cleansing of clothes, cleaning of clothes and also it's used as a germicide and disinfectant at times.

All major brands of liquid bleach are chemically identical, a solution of five-and-one-quarter percent sodium high chloride in water.

Bleach is easily manufactured and its manufacture involves no patents and no trade secrets, and it's a concentrated industry.

The bleach industry, despite the lack of technological barriers to entry remains highly concentrated.

Two firms, Clorox with 48.8% of national sales and the Purex Company with 15.7% accounted in 1959 for about 65% of the total sales of household liquid bleach.

Six firms indeed accounted for 80% of all of the sales.

The remaining 20% is scattered among some 200 other producers, most of which are quite small.

Concentration is even greater on a local or regional basis.