P&G admits spies snooped on Unilever

Procter & Gamble, the US consumer goods giant, hired Vietnam war veterans to spy on Unilever in a bid to discover more about its Anglo-Dutch rival's hair products business, it emerged yesterday.

Unilever is thought to be seeking tens of millions of dollars in compensation, and is negotiating with P&G for an out-of-court settlement.

P&G used external "competitive intelligence operatives" in the US to gather information on Unilever's hair business, which includes the Salon Selectives and Finesse brands.

According to a report in Fortune, an American business magazine, the spies sifted through Unilever garbage and tried to get information from Unilever employees by posing as market analysts. One of the contractors used by P&G was The Phoenix Consulting Group, staffed by former US government intelligence officers and run by John A Nolan III, who served in the covert Phoenix Program in the Vietnam war.

P&G, which owns the Pantene and Head & Shoulders brands, admitted activities that breach its rules took place. However, it said it had not broken any laws and denied misrepresentation took place. Both companies run internal competitor intelligence units.

P&G said the espionage was a "rogue" operation and was not authorised by senior managers. It uncovered the spying in April and voluntarily brought it to Unilever's attention. P&G has fired three employees over the affair and said the information obtained had been returned. "We further assured Unilever none of the information was used or will be used in our business," the company said.

It is understood Unilever is not satisfied with the assurances and wants "safeguards". These could include third-party monitors to make sure P&G does not use the information to launch products or advertisements ahead of Unilever.