CADE approves with restrictions the acquisition of the brands Olla, Jontex and Lovetex by Reckit Benckiser

On the judgement session of September 14 2016, the Administrative Council for Economic Defense – CADE authorized the acquisition of the brands Olla, Jontex and Lovetex, which belonged to Hypermarcas until then, by Reckit Benckiser (Merger nº 08700.003462/2016-79). As a condition for the approval of the transaction by the antitrust authority, the acquirer committed to the  divestment the K-Y brand in Brazil. 

 The markets involved in the acquisition are the ones of male condoms and intimacy lubricants. After the transaction, Reckitt will hold the main brands of the two products – Reckitt is currently the owner of Durex and K-Y, raising competition concerns. 

According to the Reporting Commissioner of the case, Mr. Paulo Burnier, the critical point of this transaction is the high concentration in the market of lubricants, with the merger between K-Y (leader of the market) Jontex and Olla. This is combined with the barriers to the entry of new competitors in both markets, mainly due to the importance of the brands in this sector and to the strong correlation between the markets of male condoms and lubricants, especially in the combined use of the distribution channels for sales and in the strategies of business marketing.

 According to the Commissioner, Jontex, Olla and Durex are large brands of male condoms and their relevance on the market is passed on to the others products that carry their names, including lubricants.

 “The advertising pieces of these brands usually included both products that are being analysed, showing them with the same visual identity and suggesting complementarity between them”, clarified the Reporting Commissioner. 

Remedies

In order to remedy the competition concerns related to the establishment  of a large portfolio for Reckitt in the market, the company  signed a Merger Control Agreement (ACC in its acronym in Portuguese), in which it is set the sale of K-Y brand in Brazil to an economic operator with necessary conditions to compete with the new company. The deadline for assets divestiture is confidential.

The divestiture was proposed to CADE by the parts involved in the transaction. According to the authority, the remedy is sufficient to solve the identified problems.

“The fact that K-Y is the leader of the market eliminates the competition concerns observed in the market of lubricants, as well as in the market of male condoms, since, within the latter, they derived from the effects of a player’s portfolio with relevant presence in both markets”, explained the Reporting Commissioner.