The spymasters were Procter & Gamble — the American makers of Wash & Go, Head & Shoulders, Pantene and Vidal Sassoon — a company with a reputation bordering on the paranoid. Their target was the Anglo-Dutch cosmetic giant Unilever, whose executives are now locked in negotiations demanding “tens of millions” of dollars in compensation for the dirty tricks.

The corporate espionage, which included what Americans call “dumpster diving” — foraging in rubbish bins — was uncovered by P&G’s own senior executives. The company sacked three employees and, in an attempt to reduce the amount of damages claimed by Unilever, went to their rivals to confess.

The Americans have handed over 80 documents containing extensive information about Unilever’s marketing strategy for its hair-care business over the next two years.

The spies employed by P&G included Phoenix Consulting Group of Alabama, whose chairman, John Nolan, and fellow founders took part in the Vietnam War’s Phoenix program. Phoenix was an intelligence-gathering exercise mounted by the CIA against suspected Vietcong supporters, an episode notorious for its alleged brutality, according to critics.

P&G has admitted that the rogue operators engaged in activities that “violated our strict business guidelines regarding our business policies”.

The campaign was launched in the last six months of last year when P&G established a secret arm to its own competitive intelligence unit. Known internally as “the ranch”, the operation used safe houses, secret bank accounts and a web of information sources.

P&G believes that it never broke the law, although Unilever notes that local law in Chicago prohibits trespass on private property and stealing from rubbish bins. “Everyone does competitive intelligence work but we were shocked at the levels to which they went,” a Unilever spokesman said.

The huge embarrassment for P&G’s chairman, John Pepper, will have been compounded by his well-publicized interest in “competitive intelligence”. In a recent speech in Montreal, he praised his own company’s Competitive Intelligence unit.

Few watchers of the company will be surprised at the scandal. “Proctoids”, as P&G’s staff are known, have gone to huge lengths to protect the firm’s secrecy. A previous P&G boss pursued Alecia Swasy, a Wall Street Journal reporter, with police surveillance and Grand Jury subpoenas after she published articles not to his liking.

The journalist got her revenge, publicizing a book about P&G recounting its bizarre practices, such as shadowing staff on aircraft to ensure that they did not gossip about company business.

P&G’s latest espionage campaign is thought to have been launched as the two companies competed in the auction for Clairol, the hair-coloring brand, which was then being sold. Senior executives in P&G realize that the material obtained was too detailed and sensitive for normal intelligence gathering. In March, Mr Pepper called Niall FitzGerald, chief executive of Unilever, and admitted what had happened. Last Tuesday Mr Pepper flew to London with an offer to settle the matter.

Yesterday’s legal wrangling is believed to have focused on remedies to ensure that P&G is unable to use any of the information obtained in a way that could damage Unilever’s business. Unilever wants key personnel in P&G’s hair-care business to be transferred to other departments to prevent the Americans exploiting their ill-gotten secrets. It also wants an independent arbitrator appointed who would scrutinize P&G’s marketing plans and cry foul should it attempt, for example, to scupper a Unilever product launch with a copycat or discount campaign.

The raid on Unilever’s dustbins is only the latest act in the long-running soap opera between the two titans of the bathroom and sink. P&G, makers of the washing powder Ariel, and Unilever, which makes Persil, have been slugging it out across the globe since the Second World War.

Bold soap powder, sold by Procter & Gamble, was ruled by an Argentine judge in 1999 to resemble too closely Unilever’s Skip and Ala brands. Persil Performance Tablets brought the rivals to the Court of Appeal in 1999 in a row over whether the product broke a P&G patent.

Oil of Olay scored a victory for P&G in Canada, where a 1996 advertisement cheekily said: “Compared to a leading beauty bar, Olay holds more moisture in your skin.” Unilever fought for the honor of its Dove soap bar, Canada’s favorite, but a judge threw the claim out.

Copyright 2001 Times Newspapers Ltd

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