## Facts

- In 1957, Procter & Gamble Co. (P&G), a large producer of household products, acquired the assets of Clorox Chemical Co. (Clorox), the leading U.S. manufacturer of household liquid bleach.
- The household liquid bleach industry was highly concentrated: Clorox held about 48.8% of the national market, with higher shares in some regions; two firms accounted for about 65% of sales, and six firms for almost 80%, with the remainder split among many small producers.
- Household liquid bleach was treated as a distinct product with no close substitutes, sold largely through grocery and supermarket channels.
- Because bleach was a low-priced, high-turnover product with relatively high shipping costs, competition occurred in both national and regional geographic markets.
- P&G had not previously sold household liquid bleach but had large sales and extensive advertising resources, including substantial media discounts due to its volume purchases.
- The Federal Trade Commission (FTC) alleged that replacing Clorox’s ownership with P&G’s would change competitive conditions by deterring rivals and entrants and by removing P&G as a likely entrant through internal expansion.

## Issues

1. Whether P&G’s acquisition of Clorox violated § 7 of the Clayton Act because the acquisition may substantially lessen competition or tend to create a monopoly in household liquid bleach.
2. Whether § 7 applies to a product-extension (non-horizontal) merger based on predicted future effects, including deterrence of entry and elimination of a significant potential competitor.
3. Whether post-acquisition market performance evidence should control the legality of the merger under § 7.

## Decision

- The Supreme Court unanimously reversed the court of appeals and reinstated the FTC’s divestiture order.
- The Court held the merger violated § 7 because its probable effect may substantially lessen competition in the household liquid bleach market.
- The Court accepted the FTC’s product market definition (household liquid bleach) and its approach recognizing both national and regional geographic markets.
- The Court rejected the court of appeals’ reliance on post-merger evidence of increased sales by rivals, holding § 7 targets anticompetitive tendencies in their early stages.
- The Court agreed that P&G’s size and advertising advantages could deter aggressive competition by smaller firms and discourage new entry, strengthening an oligopolistic market structure.
- The Court treated the elimination of P&G as a likely independent entrant as a cognizable competitive harm under § 7.

## Legal Principles

- § 7 of the Clayton Act requires a forward-looking assessment of whether an acquisition may substantially lessen competition; certainty or proof of actual harm is not required.
- Merger labels (horizontal, vertical, conglomerate, product-extension) do not determine legality; the controlling inquiry is the merger’s likely effect on present and future competition.
- In concentrated markets, acquisition by a firm with substantial financial and promotional resources can lessen competition by deterring rivals’ competitive responses and raising entry barriers.
- Elimination of a significant potential competitor—by acquisition rather than independent entry—can constitute a substantial lessening of competition under § 7.
- Post-acquisition evidence of market performance does not necessarily negate an otherwise unlawful merger because § 7 is aimed at preventing anticompetitive effects before they fully develop.

## Conclusion

The Court held that P&G’s acquisition of Clorox violated Clayton Act § 7 because, in a highly concentrated bleach market, the merger’s probable effect was to reduce competitive pressure by deterring rivals and entrants and by removing P&G as a major potential entrant, warranting divestiture.


F.T.C. v. Procter & Gamble Co., 386 U.S. 568 (1967)