WASHINGTON (CN) — The Federal Trade Commission is headed to court to block a merger that could drive up the cost of shaving razors in stores across the country.
The commission’s Bureau of Competition followed up a Sunday administrative complaint with a federal lawsuit Tuesday in Washington, alleging that Edgewell Personal Care Company, the parent company of Schick razor brand, would illegally harm competition with its plan to buy its key competitor Harry’s Inc. for $1.37 billion.
Based in New York, Harry’s entered the market as a low-cost alternative in a market dominated Edgewell and the 50 brand-name razors like Gillette Venus that belong to the Procter and Gamble empire.
“The proposed acquisition would neutralize ‘one of the most successful challenger brands ever built,’ eliminating head-to-head competition between Harry’s and Edgewell, and removing the independent competitor that disrupted Edgewell and P&G’s longstanding and stable duopoly,” the complaint states.
First launched online with direct-to-consumer sales, Harry’s hit Target and Walmart stores in 2016, sharpening its competitive edge in the market with prices several dollars below products offered by Edgewell and P&G.
Harry’s women’s brand, Flamingo, launched in 2018. Edgewell signed on to the merger in May 2019.
“Any aspiring de novo entrant seeking to follow in Harry’s footsteps faces a much steeper path to scale than the one that Harry’s trod,” the complaint states. “Harry’s identified and exploited a market opportunity in the form of a previously unmet demand for a quality, no-frills system razor at a value price point.”
Daniel Francis, deputy director of the FTC’s Bureau of Competition, said Harry’s is a unique competitor challenging both Edgewell and P&G to offer lower prices.
“The Harry’s and Flamingo brands represent a significant and growing competitive threat to the two firms that have dominated the wet shaving market for decades,” Francis said in a press release. “Edgewell’s effort to short-circuit competition by buying up its newer rival promises serious harm to consumers.”
The commission voted unanimously to issue the administrative complaint and to seek a temporary block on the merger as the suit advances. A copy of the court complaint is not yet available.
Jeff Raider and Andy Katz-Mayfield, co-founders and co-CEOs of Harry’s, called the FTC’s interference disappointing.
“We believe strongly that the combined company will deliver exceptional brands and products at a great value and are determined to bring those benefits to consumers,” the duo said in a statement.
Edgewell President and CEO Rod Little said the FTC decision is under review.
“We continue to believe the combination of our two companies would bring together complementary capabilities for the benefit of all stakeholders, including customers,” Little said in a statement.