FTC Sues to Block Edgewell’s Acquisition of DTC Shaving Brand Harry’s

The Federal Trade Commission has filed a lawsuit to block Edgewell Personal Care’s acquisition of Harry’s—nine months after the merger was first announced. As it stands, the FTC has set a trial date for June 30, 2020. In a statement, the regulatory agency described the acquisition as a deal that “would eliminate one of the most important competitive forces in the shaving industry.” The deal, originally worth $1.37 billion in May 2019, was a landmark one, arriving three years after Unilever acquired Dollar Shave Club for $1 billion. “Harry’s is a uniquely disruptive competitor in the wet shave market, and it has forced its rivals to offer lower prices, and more options, to consumers across the country,” said Daniel Francis, deputy director of the FTC’s Bureau of Competition, in a statement. “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. Edgewell’s effort to short-circuit competition by buying up its newer rival promises serious harm to consumers.” The FTC’s statement further says Edgewell, which owns Schick, and P&G, the owner of Gillette, operated “as a comfortable duopoly characterized by annual price increases that were not driven by changes in costs or demand.” Part of Harry’s—and several other DTC shaving brands in the space—competitive edge included selling razors and other shaving-adjacent products at a lower cost than the major brands. On Feb. 3, the FTC posted the complaint stating numerous reasons why the organization is suing to block the acquisition. In the complaint, the FTC cites Harry’s entrance into Target and Walmart stores as a way the brand made the wet shaving industry competitive, with P&G reducing prices in its portfolio of razors and Edgewell introducing promotions and discounts for its razors. Additionally, the compliant stated Flamingo’s 2018 introduction to the female wet shaving market (and eventual rollout in Target stores in February 2019) meant more competition. The complaint also details various ways the acquisition would harm the market and consumers, such as by “eliminating competition between important head-to-head competitors” as well as stating how difficult it is to enter the wet shaving market. “More importantly, Harry’s was the first to place its product in brick-and-mortar, where it exploited a large gap in product offerings to reach a scale that allowed it to disrupt the industry giants," the complaint states. "Any new entrant would lack Harry’s early-mover advantage in the now-mature DTC space and on the now-crowded shelves of brick-and-mortar retailers.” In a rebuttal statement, Edgewell and Harry's both responded to the FTC's move. "We continue to believe the combination of our two companies would bring together complementary capabilities for the benefit of all stakeholders, including customers," said Rod Little, president and CEO of Edgewell. "We will review the FTC's decision and respond in due course." The co-founders of Harry's, Jeff Raider and Andy Katz-Mayfield, also responded, stating, "We are disappointed that the FTC is attempting to block our combination with Edgewell and are evaluating the best path forward. 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 news comes at a time when the direct-to-consumer industry is facing numerous headwinds, with various venture capital firms cooling down investment rounds in these brands. For many DTC brands, acquisition by major companies can serve as a lifeline or a chance to expand internationally. Acquisitions have already started this year as well; P&G acquired Billie, a women’s DTC shaving brand, in early January. Editor's note: This story has been updated with additional information from the FTC's complaint after it was posted.