101 0215 

UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION 

COMMISSIONERS: Edith Ramirez, Chairwoman 

 Julie Brill 

 Maureen K. Ohlhausen 

 Joshua D. Wright 

 

 

 ) 

In the Matter of ) 

 ) Docket No. C-4399 

 ) 

GRACO INC., ) 

 a corporation. ) 

 ) 

 ) 

 

COMPLAINT 

The Federal Trade Commission (“Commission”), pursuant to the provisions of the Federal 

Trade Commission Act and of the Clayton Act, and by virtue of the authority vested in it by 

said Acts, having reason to believe that Respondent Graco Inc. (“Graco”) entered into 

agreements pursuant to which Graco acquired, respectively, all of the voting securities of 

Gusmer Corp. (“Gusmer”), and all of the voting securities of GlasCraft, Inc. (“GlasCraft”), 

and that each acquisition violated Section 5 of the Federal Trade Commission Act, as 

amended, 15 U.S.C. § 45, and Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and 

it appearing to the Commission that a proceeding by it in respect thereof would be in the 

public interest, hereby issues its complaint, stating its charges as follows: 

I. STATEMENT OF THE CASE 

1. Graco acquired its only significant competitors in the manufacture and sale of fast-set 

equipment in North America: Gusmer and GlasCraft. 

2. Fast-set equipment combines and applies various reactive chemicals that form 

polyurethane foams or polyurea coatings. The essential components of a complete fastset equipment system are: (1) the proportioner, which controls the ratio, temperature, and 

flow of the chemicals; (2) heated hoses, which independently maintain the fast-set 

chemicals at proper temperature; and (3) the spray gun, which is specially designed to 

mix and to dispense polyurethane foams and polyurea coatings. A manufacturer that 

produces or supplies a complete system of fast-set equipment is generally considered to 

be a full-line manufacturer. 
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3. The vast majority of end-users of fast-set equipment are contractors or contracting firms 

that use the equipment to apply polyurethane foams to insulate commercial and 

residential buildings, and to apply polyurea coatings to protect structures such as bridges, 

holding tanks, pipelines, and marine hulls. 

4. Prior to the acquisitions, Gusmer, GlasCraft, and Graco competed aggressively on price, 

innovation, service, and quality. Each company responded to the others’ innovations and 

prices with its own improvements and discounts. Prior to the acquisitions, the three 

companies were the only domestic full-line manufacturers of fast-set equipment, and at 

the time of each acquisition, Gusmer and GlasCraft were Graco’s closest competitors in 

the relevant market. 

5. These acquisitions have led to higher prices and fewer choices, and enabled Graco to 

raise barriers to entry that inhibited entry and expansion by potential competitors. 

6. Fast-set equipment manufacturers sell their products almost exclusively through a 

specialized, third-party distribution channel, which consists of distributors acting as 

intermediaries between the manufacturer and the end user. Fast-set equipment 

manufacturers do not sell competitively significant quantities of equipment directly to 

end-users. 

7. Fast-set equipment distributors meet end-user demand for a convenient and nearby source 

of expertise, spare parts, and repair services. A robust network of third-party fast-set 

equipment distributors is necessary for any manufacturer to compete meaningfully in the 

relevant market. 

8. Before Graco’s acquisitions, fast-set equipment distributors historically carried multiple 

manufacturers’ brands. Graco’s actions after the acquisitions resulted in higher prices 

and fewer product choices, and these actions created an opportunity for new entry and 

expansion in the relevant market. 

9. Following Graco’s acquisition of GlasCraft, Graco initiated several strategies that 

reduced any prospective entrant’s access to distribution resources required for success in 

the market. These strategies included raising distributors’ discount and inventory 

thresholds, thereby reducing distributors’ ability to carry the products of new entrants, 

and threatening distributors with termination or other retaliation should they agree to 

carry the products of competing manufacturers. Given distributors’ reliance on Graco 

post-acquisition, these actions further heightened barriers to entry in the relevant market. 

10. In 2007 former Gusmer owners and employees, operating through PMC, Garraf 

Maquinaria S.A., and Gama Machinery USA, Inc. (now Polyurethane Machinery Corp.) 

(“Gama/PMC”) sought to enter the relevant market. Graco initiated a lawsuit in federal 

district court (“the Gama/PMC litigation”) alleging, among other things, theft of trade 

secrets and breach of contract. The uncertainty of the outcome of the litigation has kept 

some distributors from purchasing fast-set equipment from Gama/PMC. 
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II. RESPONDENT GRACO 

11. Graco is a for-profit corporation, existing and doing business under and by virtue of the 

laws of the state of Minnesota, with its office and principal place of business located at 

88 11th Avenue Northeast, Minneapolis, Minnesota 55413. Graco manufactures and 

sells a full line of fast-set equipment throughout North America and the world. 

III. GUSMER 

12. Prior to its acquisition by Respondent in 2005, Gusmer was the largest and most 

significant competitor engaged in the manufacture and sale of a full line of fast-set 

equipment throughout North America and the world, with its principal place of business 

located in Lakewood, New Jersey. 

IV. GLASCRAFT 

13. At the time of its acquisition by Respondent in 2008, GlasCraft was the only competitor 

other than Graco engaged in the manufacture and sale of a full line of fast-set equipment 

throughout North America and the world, with its principal place of business located in 

Indianapolis, Indiana. 

V. JURISDICTION 

14. Respondent is, and at all relevant times has been, engaged in commerce as “commerce” is 

defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. § 12, and is a corporation 

whose business is in or affects commerce as “commerce” is defined in Section 4 of the 

Federal Trade Commission Act, as amended, 15 U.S.C. § 44. 

15. The acquisition of Gusmer by Graco constitutes an acquisition subject to Section 7 of the 

Clayton Act, 15 U.S.C. § 18. 

16. The acquisition of GlasCraft by Graco constitutes an acquisition subject to Section 7 of 

the Clayton Act, 15 U.S.C. § 18. 

VI. THE ACQUISITIONS 

17. In February 2005, Graco acquired Gusmer and its foreign counterparts from PMC Global, 

Inc. (“PMC”) for $65 million. The transaction was not reportable under the Hart-ScottRodino Act, 15 U.S.C. § 18a. The acquisition increased Graco’s share of the North 

American fast-set equipment market to over 65%. The acquisition left GlasCraft as 

Graco’s only significant North American competitor. Following the acquisition of 

Gusmer, Graco closed Gusmer’s fast-set equipment manufacturing facilities. 
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18. In February 2008, Graco acquired GlasCraft for $35 million. The transaction was not 

reportable under the Hart-Scott-Rodino Act, 15 U.S.C. § 18a. The acquisition raised 

Graco’s market share above 90% and removed Graco’s last significant North American 

competitor. Following the acquisition of GlasCraft, Graco closed GlasCraft’s fast-set 

equipment manufacturing facilities. 

VII. THE RELEVANT PRODUCT MARKET 

19. For purposes of this Complaint, the relevant line of commerce within which to analyze 

the effects of the transactions is the market for the manufacture and sale of fast-set 

equipment for use by contractors. 

VIII. THE RELEVANT GEOGRAPHIC MARKET 

20. For purposes of this Complaint, the relevant geographic market within which to analyze 

the competitive effects of the transactions is North America. 

IX. MARKET STRUCTURE 

21. The market for fast-set equipment is highly concentrated. Prior to the acquisitions, 

Gusmer, Graco, and GlasCraft were the only significant suppliers of fast-set equipment in 

North America. Therefore, the cumulative effect of such acquisitions was that Graco 

acquired between a 90% and 95% share of the fast-set equipment market in North 

America. 

X. CONDITIONS OF ENTRY AND EXPANSION 

22. Entry into the relevant market has not been, and would not be, timely, likely, or sufficient 

in magnitude, character, and scope to deter or counteract the anticompetitive effects of 

the acquisitions. No significant entry has occurred since Graco’s entry in 2002. 

23. There are significant entry barriers to the relevant market, which include, inter alia, brand 

reputation, installed base, and the difficulty in finding adequate third-party distribution. 

24. The most significant entry barrier is the need for specialized third-party distribution. A 

fast-set equipment distributor needs to possess the technical expertise to teach contractors 

to operate and maintain such equipment properly in accordance with the specifications 

established by equipment manufacturers and various chemical manufacturers. Through 

its acquisitions, Graco has become the only remaining full-line manufacturer of fast-set 

equipment, giving it substantial control of the established fast-set equipment distribution 

channel in North America. Graco’s increasing of discount and inventory thresholds, 

Graco’s threatening of distributors with termination or other retaliation should they agree 

to carry the products of competing manufacturers, and uncertainties resulting from the 

Gama/PMC litigation, all have substantially reduced prospective competitors’ access to 
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customers in the relevant market, substantially reducing the likelihood of successful entry 

and the disciplining of Graco’s prices. 

25. Given all of the above, following Graco’s 2008 acquisition of Glascraft, only one 

competitor, Gama/PMC, has held a market share of as much as five percent, and it is 

unlikely to expand substantially due to the unavailability of effective distribution. 

26. Other prospective entrants have also failed to gain any meaningful market share in the 

North American fast-set equipment market. These would-be competitors participate at 

the fringes of the market. Most do not offer full lines of fast-set equipment, but rather 

individual proportioners or guns. Together, they comprise significantly less than 5% of 

the relevant market. Without access to the specialized distribution channels, these 

prospective entrants are not likely to expand beyond being fringe competitors. 

XI. EFFECTS OF THE ACQUISITIONS 

27. Graco’s acquisitions of Gusmer and GlasCraft substantially lessened competition and 

tended to create a monopoly in the relevant market in violation of Section 7 of the 

Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC Act, as amended, 15 

U.S.C. § 45. 

28. Specifically, the acquisitions have: 

a. Eliminated actual, direct, and substantial competition among Graco, Gusmer, and 

GlasCraft in the relevant market; 

b. Permitted Graco to increase prices, reduce product options and offerings, and 

reduce innovation; 

c. Permitted Graco to increase barriers to entry and expansion by foreclosing access 

to established fast-set equipment distributors; 

d. Substantially increased the level of concentration in the relevant market; and 

e. Allowed Graco to exercise market power unilaterally in the relevant market. 

29. In particular, the loss of competition from Gusmer and GlasCraft has given Graco the 

ability to raise barriers to entry and exclude prospective competitors from the North 

American fast-set equipment market. Graco became the sole supplier for the only 

significant fast-set equipment distribution channel in North America and the only 

authorized source of spare parts for its existing installed base. Consequently, Graco has 

been able to prevent its distributors from carrying the products of competing 

manufacturers. 

30. The significant anticompetitive effects of Graco’s acquisitions are not offset by any 

efficiencies realized by the acquisitions. 
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XII. VIOLATIONS CHARGED 

COUNT I – ILLEGAL ACQUISITION 

31. The allegations of Paragraphs 1 through 30 are incorporated by reference as though fully 

set forth. 

32. Graco’s acquisition of Gusmer substantially lessened competition and tended to create a 

monopoly in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and 

Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. 

COUNT II – ILLEGAL ACQUISITION 

33. The allegations of Paragraphs 1 through 30 are incorporated by reference as though fully 

set forth. 

34. Graco’s acquisition of GlasCraft substantially lessened competition and tended to create a 

monopoly in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and 

Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. 

 WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on 

this seventeenth day of April, 2013, issues its complaint against Respondent. 

By the Commission. 

 Donald S. Clark 

 Secretary 

SEAL: