Graco, Inc. has settled Federal Trade Commission charges that it violated the antitrust laws by buying Gusmer Corp. in 2005 and GlasCraft, Inc. in 2008, its two closest competitors in the North American market for fast set equipment (FSE) used by contractors to apply polyurethane foams and polyurea coatings.
The consent order settling the FTC’s charges is designed to restore competition to the FSE market that was lost as a result of Graco’s acquisitions.
Graco was represented by John Graubert and John Nields of Covington & Burling in Washington, D.C.
The consent order incorporates a private litigation settlement between Graco and Polyurethane Machinery Corp. (Gama/PMC) that requires Graco to license certain technology to Gama/PMC.
The consent order also contains provisions that provide Gama/PMC and other competitors easier access to distributors, so they can distribute competing FSE products effectively in the North American market.
“Although Graco was not required to report the Gusmer and GCI transactions under the HSR reporting requirements, those acquisitions eliminated virtually all of its competition in the fast set equipment market,” said Richard Feinstein, Director of the FTC’s Bureau of Competition. “The clear result was higher prices and diminished choices for consumers.”
Graco is a publicly traded company headquartered in Minneapolis, Minnesota.
The company, which entered the FSE market in 2002, sells FSE almost exclusively to third-party distributors that act as middlemen between Graco and the product’s end users.
Approximately 550 distributors currently sell Graco FSE in the United States. Before Graco’s acquisitions of Gusmer and GCI, FSE distributors typically carried products from multiple manufacturers.
The FTC’s complaint alleges that the acquisitions eliminated head-to-head competition among Graco, Gusmer, and GCI, leaving the market almost entirely in Graco’s hands.
After the acquisitions, Graco raised prices for its FSE products, reduced product options, reduced innovation, and raised barriers to entry for firms seeking to compete with Graco, by taking steps to ensure that its distributors would distribute only Graco’s products.