Procter and Gamble will settle out of court after admitting to spying on Unilever. External contractors broke P&G’s ethical guidelines on corporate espionage by rifling through Unilever’s trash and pretending to be market analysts in order to gain confidential information. The settlement will cost P&G around $10 million, but the savings to P&G’s reputation will be far higher. The company spends $3.6 billion a year on advertising, after all.

No wonder that Procter and Gamble (P&G) doesn’t want a court case over the Unilever corporate espionage scandal – after all, it would rather not have any publicity to start with. The consumer goods giant admitted breaking its ethical guidelines in April, but only to Unilever. P&G has been undergoing difficult talks with Unilever since then, to establish an amicable solution or go to court. In the end, the quick and private route won through. Neither party will disclose the size of the settlement, but reports suggest that it will be around $10 million.

P&G, which makes Head & Shoulders, Vidal Sassoon and Pantene hair products, allegedly hired private detectives who went through Unilever’s rubbish to find out competitive business information. P&G is thought to have obtained around 80 pages of sensitive business plans from this operation, on ranges such as Organics and Salon Selectives. It is also claimed that P&G paid people to pretend to be market analysts and obtain confidential details.

The US firm has since fired three people associated with the debacle, and has been forced to conduct a third-party audit to guarantee it did not change any of its development or marketing plans after receiving the information.

Corporate espionage is an ethical minefield. P&G did not break any laws in this incident, but it could easily be viewed as anti-competitive. Part of the benefit of hiring outside contractors for such operations is the ability to disassociate the organization from the activity.

As one of the largest consumer goods companies in the world, P&G has a heavy investment in its own corporate image and, while it tried to keep the incident private, these things regularly leak to the press. The organization went out of its way to present an appropriate, ethical image, firing people and even going so far as to tell Unilever. At a mere $10 million (compared with a $3.6 billion annual advertising spend), the payout is a small price to preserve P&G’s reputation.

(c) 2001 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.