Breakingviews: U.S. regulator deal policy is death by 1,000 cuts

U.S. regulators are out for blood. The Federal Trade Commission on Monday sued to stop America’s second largest razor purveyor Edgewell Personal Care from buying upstart Harry’s for $1.4 billion. The lawsuit to block the deal may have broader implications and underscores how unpredictable Washington’s merger policies have become.

The FTC claims a tie-up between the maker of Schick shavers and its fellow disruptor will limit competition. Proctor & Gamble, the owner of Gillette, and Edgewell were the No. 1 and No. 2 sellers of blades in the United States a few years ago with 48% and 13.7% share respectively, according to Bernstein.

Direct-to-consumer brands like Harry’s have been dulling their leads. Last summer Procter & Gamble took an $8 billion write-down on its Gillette business, in part because companies like Dollar Shave Club have undercut prices and stolen market share. But like many startups, Harry’s isn’t profitable. Edgewell would likely look to hike prices after it bought the brand, which has the indirect effect of helping P&G’s position, too.

The “disruptor” factor is a consideration for regulators, to be sure. As other startup segments – food delivery, scooter companies – seek to merge, the balance between pricing, profits, and the seemingly endless appetite for venture capitalists to lose money with the small chance of putting established operators out of business suggests that a rethink of the merger rules is deserving.

In the interim, though, Washington’s rhyme and reason is unclear. T-Mobile US and Sprint got the nod from the Federal Communication Commission and the Department of Justice for their $26 billion deal even though the number of mobile carriers in the United States would be reduced to three from four. It blessed Amazon.com’s purchase of grocer Whole Foods Market. Though it was under the previous administration, Unilever’s 2016 grab for e-commerce startup Dollar Shave Club for around $1 billion sailed through regulatory approval.

The FTC and the DOJ also recently rolled out new rules about vertical integration, or deals between a company and its supplier. Last week the Wall Street Journal reported antitrust regulators were probing a possible merger between bankrupt Dean Foods and partner Dairy Farmers of America.

The decision to block Edgewell may foretell trouble for other transactions on the docket. Google is awaiting the green light to buy fitness tracker Fitbit. Companies may try to make guesses about Washington’s M&A policies. In the meantime, it for could be death by 1,000 cuts.

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