WASHINGTON — The Justice Department said Friday it will require Unilever and Alberto-Culver Co. to divest two hair care brands before Unilever can move forward with its $3.7 billion cash acquisition of Alberto-Culver, the Illinois-based owner of such brands as Nexxus, V05 and St. Ives.

This story first appeared in the May 9, 2011 issue of WWD. Subscribe Today.

The department’s antitrust division filed a civil lawsuit in U.S. District Court here on Friday to block the proposed acquisition between three Unilever entities — Unilever NV, Unilever plc and Conopco Inc. — and Alberto-Culver. But at the same time, the agency filed a proposed settlement that, with court approval, would resolve the competitive concerns alleged in the lawsuit.

Federal officials said they have reached a settlement with both personal care product giants that must be approved by a federal court. Under the proposed settlement, the companies must divest Alberto-Culver’s Alberto VO5 brand and Unilever’s Rave brand, as well as related assets.

Without divestiture, the Justice Department said the acquisition would run afoul of antitrust laws because it would “substantially lessen competition in three product markets — value shampoo, value conditioner and hairspray” that are sold at retail, typically for less than $2 a bottle.

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“Without the divestitures required by the department, consumers would have paid higher prices for value shampoo and conditioner and for hairspray sold in retail stores,” said Christine Varney, assistant attorney general in charge of Justice’s Antitrust Division.

According to the complaint, the acquisition would “eliminate significant head-to-head competition between the merging parties” for low-price shampoo, conditioner and hairspray.

The Justice Department said in the complaint that the deal would reduce the number of “significant competitors” in the “value” shampoo and conditioner markets from three to two and hand Unilever control of 90 percent of those markets. In the hairspray market, the agency charged that Unilever’s post-merger share would be about 46 percent. The combined markets would result in a “highly concentrated market,” the agency said.

There will be a 60-day public comment period regarding the proposed settlement. At the end of the comment period, the court may enter the settlement “upon a finding that it is in the public interest.”

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