UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLUMBIA 

)

FEDERAL TRADE COMMISSION, ) 

 ) 

 Plaintiff, ) 

v. ) 1:11-CV-02239-RLW 

 ) 

GRACO INC., ) PUBLIC VERSION 

 ) 

ILLINOIS TOOL WORKS INC., and ) 

 ) 

ITW FINISHING LLC, ) 

 ) 

 Defendants. ) 

 ) 

PLAINTIFF FEDERAL TRADE COMMISSION’S 

MEMORANDUM IN SUPPORT OF MOTION FOR TEMPORARY 

RESTRAINING ORDER AND PRELIMINARY INJUNCTION 
ii

TABLE OF CONTENTS 

INTRODUCTION ............................................................................................1 

STATEMENT OF FACTS ..................................................................................6 

I. Industrial Liquid Finishing Equipment ............................................................6 

II. The Importance of Distribution: ..........................................8 

III. Graco and ITW Compete Closely and Fiercely Today ........................................11 

IV. The Proposed Acquisition .........................................................................17 

ARGUMENT ................................................................................................18 

I. The FTC Will Likely Succeed on the Merits ...................................................20 

A. The Proposed Acquisition is Presumptively Unlawful in North American Markets ...21 

1. Relevant Markets ...........................................................................21 

a. The Manufacture and Sale of Liquid Finishing Pumps for Industrial Use Is a 

Relevant Product Market .................................................................24 

b. The Manufacture and Sale of Liquid Finishing Applicators (Spray Guns) for 

Industrial Use Is a Relevant Product Market ..........................................26 

c. The Manufacture and Sale of Plural Component Liquid Finishing Equipment 

(Proportioners) for Industrial Use Is a Relevant Product Market ...................27 

d. The Manufacture and Sale of Circulation Pumps for Paint Systems in Automotive 

Assembly Plants Is a Relevant Product Market .......................................28 

e. The Manufacture and Sale of Industrial Liquid Finishing Equipment for Resale is 

a Relevant Product Market ...............................................................29 

2. North America is a Relevant Geographic Market .......................................31 

3. Graco’s Acquisition of ITW Would Significantly Increase Market 

Concentration.................................................................................32
iii

B. A Competitive Effects Analysis Raises More “Serious, Substantial” Questions .......36 

1. The Proposed Acquisition Would Likely Result in Significant Anticompetitive 

Effects in the Relevant Industrial Liquid Finishing Equipment Markets ............37 

2. The Proposed Acquisition Would Result in a Merger-to-Monopoly for Circulation 

Pumps for Paint Circulation Systems in Automotive Assembly Plants .............39 

3. Repositioning and Entry Are Unlikely to Constrain Anticompetitive Effects ......41 

4. Efficiencies Cannot Save the Acquisition ...............................................43 

II. The Equities Heavily Favor a Preliminary Injunction .........................................44 

CONCLUSION .............................................................................................44 
iv

TABLE OF AUTHORITIES

CASES 

* Brown Shoe Co. v. United States, 370 U.S. 294 (1962) ...................................................................20, 23 

FTC v. Beatrice Foods Co., 587 F.2d 1225 (D.C. Cir. 1978) ................................................................2, 19 

* FTC v. CCC Holdings, Inc., 605 F. Supp. 2d 26 (D.D.C. 2009) .................................................... passim

FTC v. Cardinal Health, Inc., 12 F. Supp. 2d 34 (D.D.C. 1998) ........................................................36, 42 

FTC v. Coca-Cola Co., 641 F. Supp. 1128 (D.D.C. 1986),

vacated as moot, 829 F.2d 191 (D.C. Cir. 1987) .......................................................................................29 

FTC v. Dean Foods Co., 384 U.S. 597 (1966) ..........................................................................................44 

FTC v. Elders Grain, Inc., 868 F.2d 901 (7th Cir. 1989) ................................................................5, 36, 44 

FTC v. Food Town Stores, Inc., 539 F.2d 1339 (4th Cir. 1976) ......................................................2, 18, 19 

* FTC v. H.J. Heinz Co., 246 F.3d 708 (D.C. Cir. 2001) ................................................................. passim

FTC v. Indiana Fed’n of Dentists, 476 U.S. 447 (1986) .......................................................................... 22 

FTC v. PPG Indus., Inc., 798 F.2d 1500 (D.C. Cir. 1986) ....................................................................... 32 

FTC v. ProMedica Health System, Inc., No. 3:11 CV 47, 2011 WL 1219281 

(N.D. Ohio Mar. 29, 2011) ........................................................................................................................44

* FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997) .............................................................20, 31, 42 

FTC v. Swedish Match N. Am., Inc., 131 F. Supp. 2d 151 (D.D.C. 2000) ....................................21, 37, 39 

FTC v. Univ. Health, Inc., 938 F.2d 1206 (11th Cir. 1991) .......................................................................20 

* FTC v. Whole Foods Mkt., Inc., 548 F.3d 1028 (D.C. Cir. 2008) .................................................. passim

Hosp. Corp. of Am. v. FTC, 807 F.2d 1381 (7th Cir. 1986) ......................................................................36 

Morgenstern v. Wilson, 29 F.3d 1291 (8th Cir. 1994) ...............................................................................31 

Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320 (1961)...................................................................31 

United States v. Baker Hughes, Inc., 908 F.2d 981 (D.C. Cir. 1990) ................................................ passim
v

United States v. Citizens & S. Nat’l Bank, 422 U.S. 86 (1975) ...........................................................20, 36 

United States v. El Paso Natural Gas Co., 376 U.S. 651 (1964) ..............................................................21 

United States v. H&R Block, Inc., No. 11-00948, 2011 U.S. Dist. LEXIS 130219 

 (D.D.C. Nov. 10, 2011).............................................................................................................................38

United States v. Marine Bancorporation, Inc., 418 U.S. 602 (1974) ........................................................21 

United States v. Phila. Nat’l Bank, 374 U.S. 321 (1963) ..............................................................20, 31, 32 

STATUTES

Clayton Act § 7, 15 U.S.C. § 18 (2008) ...........................................................................................1, 20, 21 

Clayton Act § 11, 15 U.S.C. § 21 (2008) .................................................................................................... 1 

FTC Act § 5, 15 U.S.C. § 45 (2007) ........................................................................................................... 1 

FTC Act § 13(b), 15 U.S.C. § 53(b) (2007) .......................................................................................1, 2, 18 

OTHER AUTHORITIES

Phillip E. Areeda, ET AL., Antitrust Law: An Analysis of Antitrust Principles

and Their Application (3d ed. 2004 & Supp. 2011) ............................................................................22, 37 

H.R. Rep. No. 94-1373 (1976), as reprinted in 1976 U.S.C.C.A.N. 2637 .................................................44 

U.S. Department of Justice & Federal Trade Commission, Horizontal Merger

Guidelines (Aug. 19, 2010), available at

http://www.ftc.gov/os/2010/08/100819hmg.pdf .....................................................4, 22, 31, 32, 37, 42, 43 

U.S. Department of Justice and Federal Trade Commission, 

Commentary on the Horizontal Merger Guidelines (2006), available at 

http://www.ftc.gov/os/2006/03/CommentaryontheHorizontalMergerGuidelinesMarch2006.pdf ......22, 38 
UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLUMBIA 

)

FEDERAL TRADE COMMISSION, ) 

 ) 

 Plaintiff, ) 

v. ) 1:11-CV-02239-RLW 

 ) 

GRACO INC., ) PUBLIC VERSION

 ) 

ILLINOIS TOOL WORKS INC., and ) 

 ) 

ITW FINISHING LLC, ) 

 ) 

 Defendants. ) 

 ) 

PLAINTIFF FEDERAL TRADE COMMISSION’S 

MEMORANDUM IN SUPPORT OF ITS MOTION FOR A TEMPORARY 

RESTRAINING ORDER AND PRELIMINARY INJUNCTION 

Pursuant to 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b) 

(2007), Plaintiff Federal Trade Commission (“FTC” or “Commission”) petitions the Court to 

enjoin Graco Inc. (“Graco”) from acquiring the interests and assets of ITW Finishing LLC 

(“ITW”) from Illinois Tool Works, pending a full Commission hearing on the competitive merits 

of the acquisition under Sections 7 and 11 of the Clayton Act, 15 U.S.C. §§ 18, 21 (2008), and 

Section 5 of the FTC Act, 15 U.S.C. § 45 (2007). Without relief from this Court, Graco may 

acquire ITW any time after December 17, 2011. 

INTRODUCTION

 Graco’s acquisition of its largest close competitor, ITW, threatens to combine the two 

largest manufacturers of industrial liquid finishing equipment sold in North America into an 

industry giant. Other manufacturers are far smaller in scale and suffer from poorer access to and 

support from independent distributors a necessary ingredient of successful competition in this 
2

industry.

 Graco’s dominance will hurt its 

customers and North American industrial end users through reduced discounts and innovation.

The FTC has initiated administrative litigation on the merits of this case, and trial will begin on 

May 15, 2012. The sole issue before this Court is whether to preserve the status quo pending the 

administrative trial. 

 A preliminary injunction clearly is in the public interest under Section 13(b) of the FTC 

Act, 15 U.S.C. § 53(b) (2007). In addition to the strong public interest in the effective 

enforcement of the nation’s antitrust laws, see FTC v. Whole Foods Mkt., Inc., 548 F.3d 1028, 

1035 (D.C. Cir. 2008) (Brown, J.) (citing FTC v. H.J. Heinz Co., 246 F.3d 708, 726 (D.C. Cir. 

2001)); FTC v. Food Town Stores, Inc., 539 F.2d 1339, 1343 (4th Cir. 1976) (“The equities to be 

weighed are not . . . the usual equities in private litigation. . . .”), the evidence raises “‘questions 

going to the merits so serious, substantial, difficult and doubtful as to make them fair ground for 

thorough investigation, study, deliberation and determination by the FTC in the first instance and 

ultimately by the Court of Appeals.’” Heinz, 246 F.3d at 714-15 (quoting FTC v. Beatrice Foods 

Co., 587 F.2d 1225, 1229 (D.C. Cir. 1978)).

1

 Graco and ITW compete

1
3

closely and aggressively against each other on price and product offerings. Graco and ITW more 

frequently win business from each other than from anyone else. They give discounts to 

distributors for carrying and promoting their products, and they grant additional price breaks to 

beat each other’s prices. Both firms hold distinct advantages over their rivals, including broader 

product lines, wider brand acceptance, larger installed bases of end users, and a ubiquitous, 

mostly shared distributor network capable of reaching virtually every industrial end user in North 

America. 

2

Graco and ITW together dominate the sale of industrial liquid finishing equipment in 

North America. 

 Other fringe players sell far less in North America and cannot keep Graco in check 

post-acquisition, due to their relatively weaker distribution and niche products designed for 

specific end uses. As measured by the Herfindahl-Hirschman Index (“HHI”), the acquisition 

significantly increases concentration in an already highly-concentrated industry, resulting in a 

post-acquisition HHI of over 4400 and an increase in HHI of approximately 2000. The 

2

3
4

thresholds embraced in case law and in the U.S. Department of Justice and Federal Trade 

Commission Horizontal Merger Guidelines (rev. 2010) (“Merger Guidelines”) demonstrate that 

Graco’s acquisition is presumptively anticompetitive. Defendants’ ordinary-course business 

documents, witness testimony, and evidence of these firms’ competitive sales efforts confirm 

what should already be apparent the acquisition will likely hurt competition and North 

American industrial end users by eliminating Graco’s largest close rival and further 

consolidating an already highly-concentrated industry.

 The same story is true regarding specific types of industrial liquid finishing equipment

pumps, spray guns, and plural component equipment (proportioners), which constitute the main 

categories of products in this industry. Graco and ITW compete closely in pumps, spray guns, 

and proportioners. The acquisition increases market concentration for each product type, to a 

degree ranging from (or more) to essentially a merger-to-monopoly in circulation pumps 

used in automotive assembly plants. While Graco’s and ITW’s sales and shares within each 

product type differ somewhat, competition is fundamentally the same for each product and 

across them all, in terms of the importance of product reliability, strong brand reputation, and a 

loyal installed base of end users tied to local, high-quality distribution.

If past is prologue, new entry or repositioning by current firms will not deter Graco from 

dominating the industry post-acquisition. Graco and ITW have long enjoyed extraordinarily 

high market shares and margins, 

 Exel and smaller firms lack the requisite strong 

4
5

distribution to deter post-acquisition competitive injury.5

 The inability of firms to enter and gain 

traction in the industry, despite stable and attractive margins, demonstrates that high barriers 

make entry or repositioning unlikely, even if Graco raises prices post-acquisition. This explains 

why numerous Graco and ITW distributors will not stand up to Graco post-acquisition. These 

distributors see no option but to accept any post-merger Graco price increase and pass it on to 

their customers. 

Defendants have not shown how the acquisition will create substantial cognizable 

benefits to counter the weighty presumption in favor of injunctive relief. See Whole Foods, 548 

F.3d at 1035 (Brown, J.) (citing Heinz, 246 F.3d at 727; FTC v. Elders Grain, Inc., 868 F.2d 901, 

903 (7th Cir. 1989)). To the contrary, Graco plans to operate the businesses separately 

post-acquisition.

 Because these synergies are also speculative and likely could be 

achieved even without this acquisition, no equities overcome the presumption in favor of 

injunctive relief. See FTC v. CCC Holdings Inc., 605 F. Supp. 2d 26, 76-77 (D.D.C. 2009) 

(“The uncertainty of the public benefit of innovative products is too long in coming and too 

uncertain in result to hold much weight against the FTC’s interest in enforcing the antitrust 

laws.”).

5
6

STATEMENT OF FACTS 

I. Industrial Liquid Finishing Equipment 

Industrial end users purchase liquid finishing equipment to spray a finish or coating on all 

kinds of consumer and industrial goods, everything from automobiles and home appliances to 

wood cabinets and golf clubs. Almost every surface requires a finish, for aesthetic value, surface 

protection, or other purposes. The traits provided by the finish are often the reasons why a 

customer chooses one finished product over another.

From the equipment end user’s standpoint, a range of problems can arise if finishing 

equipment does not work well. A poor paint job harms the appearance and performance of a 

manufactured good, risking loss of sales and reputational harm to the seller far beyond the cost 

of finishing the product.6

 Poor finishing equipment may lead to higher operating costs, in terms 

of energy use, wasted paint, and maintenance expenses.7 In continuous process manufacturing, 

the complete or partial failure of finishing equipment could even force production to shut down.8

Industrial end users thus look for reliable, proven finishing equipment and demand local service 

that is available whenever a problem arises, day or night. 

Industrial liquid finishing equipment differs from other types of equipment and from 

finishing equipment sold to other types of customers. Powder coating systems, for example, 

involve the spraying of a dry-mix material to a surface, which is then cured by applying heat. 

Typically, powder coating systems and liquid finishing systems do not compete. Powder coating 

6

7

8
7

requires different equipment, is suitable for different end use applications, yields different quality 

finishes, and is sold through its own distribution channel.9

Moreover, liquid finishing equipment for industrial use generally differs from spray 

equipment sold to contractors and retail consumers. Industrial users require durable and reliable 

finishing equipment capable of repeated or continuous use in a factory environment.10 Industrial 

users evaluate the efficiency of their finishing equipment in terms of energy costs and wasted 

paint. Few contractors and retail consumers want, or would be willing to pay for, the high 

performance needed in industrial equipment, and separate channels and products exist for retail 

and contractor sales.11

Industrial liquid finishing equipment includes specialized pumps to move the liquid and 

specialized spray guns to apply the liquid to the surface to be finished. In some systems, plural 

component equipment (proportioners) blend paint with catalysts or other liquids before 

application. Other parts and accessories including tanks, conveyor belts, filters, booths, ovens, 

and tubing tie the components together into a complete paint system. Depending on the needs 

of the end user, industrial liquid finishing equipment can be integrated into an engineered paint 

system or sold as individual equipment components. As durable goods, the sale of industrial 

liquid finishing components or systems leads to significant future business for parts and service.

9

10

11
8

II. The Importance of Distribution:

Industrial liquid finishing equipment manufacturers rely on independent distributors to 

provide the local sales, service, support, and training required by finishing equipment end users. 

Distribution is critical to industrial liquid finishing equipment manufacturers and distinguishes 

one manufacturer from another. 

2

Industrial liquid finishing equipment manufacturers sell the overwhelming majority of 

their equipment to distributors, who resell to industrial end users.13 Although some industrial 

liquid finishing equipment manufacturers occasionally sell directly to end users, these tend to be 

sales of engineered systems rather than the standard out-of-the-box components that constitute 

the overwhelming majority of sales in this market.14 No large manufacturer of industrial liquid 

finishing equipment uses direct sales as its primary or preferred method of distribution,15 and 

Graco itself makes no sales directly to end users. Because distributors provide local sales and 

support, equipment manufacturers do not need the internal resources to support their equipment 

in each of the thousands of industrial end users’ facilities.16 By carrying other types of 

equipment and products, distributors can provide “one-stop shopping” to end users.17

12

13

14

15

16

17
9

End users look to distributors to provide an entire liquid finishing solution a bundle of 

goods and services to meet their finishing needs.

8

 Distributors are, in effect, value-added 

resellers. Beyond simply selling components, distributors also offer a “total value proposition” 

to end users, which includes 

19

After a distributor sells equipment to an end user, the distributor can expect additional business 

for spare and replacement parts and accessories. Selling and servicing the installed base of end 

users is often a major portion of a distributor’s business.20

21

Distributors must be finishing specialists. Sellers of other industrial products often lack 

the specialized product knowledge and technical expertise that industrial liquid finishing end 

users require.22

18

19

20

21

22
10

All industrial liquid finishing equipment distributors are not the same. They vary widely 

in size, number of employees, technical sophistication and specialization, geographic reach, and 

financial wherewithal to sell and support industrial liquid finishing manufacturers’ products.25

26 Ultimately, the pool of strong, quality distributors is limited.27

28

23

24

25

26

27

28
11

III. Graco and ITW Compete Closely and Fiercely Today 

Vigorous competition exists today between the two largest industrial liquid finishing 

equipment manufacturers, Graco and ITW. 

33 If faced with a post-merger price increase by Graco, these distributors would 

not stand up to Graco and would have no alternative but to try to raise their own prices.

29

30

31

32

33
12

Graco and ITW fully appreciate their competitive closeness. 

5

Graco and ITW compete vigorously for distributors’ focus on selling their respective 

brands of spray guns, pumps, and proportioners to end users.36 Graco and ITW do this, in part, 

by offering financial incentives to distributors, such as volume-based discounts and rebates.

Graco and ITW offer distributors larger discounts as distributors sell greater volumes.37 Graco 

34

35

36

37
13

and ITW also offer special promotions, which give distributors additional rewards for selling 

particular products.38

Graco and ITW compete directly against each other by offering special one-time 

discounts to their distributors to help win end-user business, whether for pumps, spray guns, or 

proportioners.39

41

Graco and ITW develop and improve new pumps, new spray guns, and new 

proportioners, often to match offerings of the other firm. 

38

39

40

41

42
14

43 Pump competition provides 

but one example, 

45

Even more telling evidence of close competition between Graco and ITW comes from 

both firms’ attempts to win competitive sales. 

43

44

45

46

47
15

After the acquisition, Graco’s customers would have no effective recourse to curb the 

loss of this competition. 

.

49

0

 Graco knows its marketplace. 

 For distributors, 

access to Graco’s and ITW’s products and participation in their discount programs create strong 

incentives for distributors to push Graco or ITW products and enhance distributors’ reluctance to 

48

49

50

51
16

carry or promote other equipment brands. Because few distributors would jeopardize their 

relationship with Graco (and their sales to the Graco installed base) by promoting other brands, 

distributors would have no effective defense to higher prices or lower discounts from Graco 

post-acquisition. Furthermore, because Graco and ITW both tie their discount levels to the 

distributors’ commitments to carry certain inventory levels, purchase demonstration equipment, 

and participate in product training, distributors could lose these investments if they lost access to 

Graco and ITW products.52

53

In fact, Graco already wields tremendous influence over the competing brands its 

distributors carry today.

55 In some product categories, Graco requires its 

distributors to promote Graco products ahead of other brands in order to earn its maximum 

discounts.56

52

53

54

55

56
17

57

59 Fear of Graco’s reaction in terms 

of jeopardizing access to Graco products and maintaining discounts significantly discourages 

distributors from switching to rival brands.60

Taken together, the overwhelming evidence tells a consistent and compelling story. By 

this acquisition, Graco will free itself of marketplace pressure from its largest competitor, ITW. 

Distributors of pumps, spray guns, and proportioners and their industrial customers will have 

little choice but to accept higher prices and reduced innovation.

IV. The Proposed Acquisition 

In April 2011, the parties announced Graco’s proposed $650 million acquisition of 

ITW

57

58

59

60
18

2

After an investigation, the Commission found reason to believe that the acquisition would 

violate the Clayton and FTC Acts and, on December 15, 2011, the Commission voted to initiate 

an adjudicative proceeding to determine the legality of the acquisition. The Commission also 

authorized FTC staff to file a complaint in this Court under Section 13(b) of the FTC Act, 

seeking a temporary restraining order and a preliminary injunction to preserve the status quo 

pending a full hearing on the merits in the administrative proceeding. Unless this Court grants 

the Commission’s motion, Defendants will consummate the proposed transaction before the 

resolution of the Commission’s administrative trial. This will make it difficult, if not impossible, 

to reestablish completely the competitive status quo ante, should the Commission find the 

acquisition unlawful.

ARGUMENT 

Section 13(b) of the FTC Act provides that the Court may grant the FTC’s motion for a 

preliminary injunction if, upon “weighing the equities and considering the Commission’s 

likelihood of ultimate success, such action would be in the public interest.” 15 U.S.C. § 53(b); 

see also Food Town Stores, 539 F.2d at 1344 (Section 13(b) prescribes as standards for 

injunctive relief “(1) the likelihood of success, and (2) a balancing of public equities.”). The 

61

62
19

“only purpose of a proceeding under [Section 13(b)] is to preserve the status quo until FTC can 

perform its function.” Food Town Stores, 539 F.2d at 1342; accord Whole Foods, 548 F.3d at 

1035 (Brown, J.), 1050 (Tatel, J., concurring). 

The FTC Act codifies a public interest standard meant to make injunctive relief more 

readily available for the FTC “an expert agency acting on the public’s behalf” than for 

private litigants. Whole Foods, 548 F.3d at 1042 (Tatel, J., concurring); CCC Holdings, 605 F. 

Supp. 2d at 36 n.11 (“[P]recedents irrefutably teach that in this [Section 13(b)] context 

‘likelihood of success on the merits’ has a less substantial meaning than in other preliminary 

injunction cases. Heinz not only emphasized this point but Whole Foods makes it clear that 

Heinz remains good law.”). The “traditional equity standard which the common law applies to 

private litigants” does not apply to FTC actions under Section 13(b). Food Town Stores, 539 

F.2d at 1343.

The Court must balance the FTC’s likelihood of success and the equities on a sliding 

scale as an acquisition’s demonstrated risk to competition increases, Defendants must present 

stronger evidence of “particularly strong equities” that favor allowing their acquisition to be 

consummated immediately. See Whole Foods, 548 F.3d at 1041 (Brown, J.) (the “FTC need 

only show a likelihood of success sufficient, using the sliding scale, to balance any equities that 

might weigh against the injunction”). 

The only question before this Court is whether the FTC has raised issues “‘so serious, 

substantial, difficult and doubtful as to make them fair ground for thorough investigation, study, 

deliberation and determination by the FTC in the first instance and ultimately by [a] Court of 

Appeals.’” Heinz, 246 F.3d at 714-15 (quoting Beatrice Foods, 587 F.2d at 1229). 
20

I. The FTC Will Likely Succeed on the Merits 

Section 7 of the Clayton Act bars mergers or acquisitions “the effect of [which] may be 

substantially to lessen competition, or to tend to create a monopoly” in “any line of commerce or 

. . . activity affecting commerce in any section of the country.” 15 U.S.C. § 18. “‘Congress used 

the words ‘may be substantially to lessen competition,’ to indicate that its concern was with 

probabilities, not certainties.’” Heinz, 246 F.3d at 713 (quoting Brown Shoe, 370 U.S. at 323).

The Clayton Act thus addresses possibilities, meaning that the FTC “need not prove to a 

certainty that the merger will have an anticompetitive effect” but instead “need only show that 

there is a ‘reasonable probability’ that the challenged transaction will substantially impair 

competition.” FTC v. Staples, Inc., 970 F. Supp. 1066, 1072 (D.D.C. 1997) (quoting FTC v. 

Univ. Health Inc., 938 F.2d 1206, 1218 (11th Cir. 1991)). 

In assessing whether the FTC raises “serious, substantial” questions, courts may follow 

the same approach used to evaluate the merits of a Section 7 claim. In the Section 13(b) context, 

courts have relied on the burden-shifting framework set forth in United States v. Baker Hughes, 

Inc., 908 F.2d 981, 982-83 (D.C. Cir. 1990), to guide the likelihood of success analysis. See

CCC Holdings, 605 F. Supp. 2d at 36-37. The FTC bears the burden of demonstrating that the 

proposed merger would lead to “undue concentration in the market.” Baker Hughes, 908 F.2d at 

982. By showing that a transaction will lead to undue concentration in a properly defined 

relevant market, the government establishes a presumption that the transaction will substantially 

lessen competition. Id. (citing United States v. Citizens & S. Nat’l Bank, 422 U.S. 86, 120-22 

(1975); United States v. Phila. Nat’l Bank, 374 U.S. 321, 363 (1963)). The burden then shifts to 

Defendants to rebut the presumption of illegality. Id. This Court need not resolve the merits of 

Defendants’ rebuttal case, however. It need only assess whether the FTC has raised “serious, 
21

substantial” questions. See Whole Foods, 548 F.3d at 1035 (Brown, J.) (“In any case, a district 

court must not require the FTC to prove the merits” in a Section 13(b) “preliminary injunction 

proceeding.”). 

A. The Proposed Acquisition is Presumptively Unlawful in North American Markets 

 The evidence raises “serious, substantial, difficult and doubtful” questions. Graco and 

ITW both wield large indeed, the largest shares in industrial liquid finishing pumps, spray 

guns, and proportioners. Graco admits that 

63 As simply a matter of size, post-acquisition, 

Graco will dominate the industry and wield more than four times the share of its next closest 

(and last remaining) significant competitor, with smaller firms relegated to the competitive 

fringe. This alone warrants the preliminary injunction. See, e.g., Heinz, 246 F.3d at 725 

(significant increase in concentration can pose a “substantial question” that warrants entry of a 

preliminary injunction). 

1. Relevant Markets 

Under Section 7 of the Clayton Act, courts assess a transaction’s probable competitive 

effects within a “line of commerce,” or relevant product market, and a “section of the country,” 

or relevant geographic market. 15 U.S.C. § 18; see United States v. Marine Bancorporation, 

Inc., 418 U.S. 602, 618-23 (1974); FTC v. Swedish Match, 131 F. Supp. 2d 151, 156 (D.D.C. 

2000). But see Whole Foods, 548 F.3d at 1036 (Brown, J.) (noting “this analytical structure does 

not exhaust the possible ways to prove a § 7 violation”) (citing United States v. El Paso Natural 

Gas Co., 376 U.S. 651, 660 (1964)). Market definition assists in distinguishing close 

63
22

competitive products from those that are more distant, bringing into focus the principal question: 

Does the acquisition significantly reduce competition between close competitors? 4 P. Areeda & 

H. Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 913a 

(3d ed. 2004 & Supp. 2011).

Yet market definition is not an end in itself. See Whole Foods, 548 F.3d at 1036 n.1.

Rather, defining relevant markets helps identify and illuminate the acquisition’s potential for 

creating anticompetitive effects. See 2B P. Areeda & H. Hovenkamp, Antitrust Law: An 

Analysis of Antitrust Principles and Their Application, ¶ 531a (3d ed. 2004 & Supp. 2011); 

Whole Foods, 548 F.3d at 1036-37 (Brown, J.) (“[A] district court’s assessment of the FTC’s 

chances will not depend, in every case, on a threshold matter of market definition.”); see also 

FTC v. Indiana Fed’n of Dentists, 476 U.S. 447, 460-61 (1986) (“Since the purpose of the 

inquiries into market definition and market power is to determine whether an arrangement has 

the potential for genuine adverse effects on competition, ‘proof of actual detrimental effects, 

such as a reduction of output,’ can obviate the need for an inquiry into market power, which is 

but a ‘surrogate for detrimental effects.’” (citing 7 P. Areeda & H. Hovenkamp, Antitrust Law: 

An Analysis of Antitrust Principles and Their Applications ¶ 1511a at 429 (1986)). As the 

recently revised Merger Guidelines advise, “[e]vidence of competitive effects can inform market 

definition, just as market definition can be informative regarding competitive effects.” Merger 

Guidelines § 4; see also U.S. Department of Justice and Federal Trade Commission, 

Commentary on the Horizontal Merger Guidelines (2006) at 10 (“Evidence pertaining more 

directly to a merger’s actual or likely competitive effects also may be useful in determining the 

relevant market in which effects are likely.”). The evidence from Defendants’ business 
23

documents, testimony, and customers establishing that they are substantial head-to-head 

competitors also helps identify relevant markets. See Merger Guidelines § 2.1.4.

The practical realities of this industry justify the focus on anticompetitive effects in 

identifying adversely-affected markets. Equipment manufacturers offer a dizzying array of 

industrial liquid finishing pumps, spray guns, and proportioners, and related pieces and parts, in a 

variety of configurations. End users rely on these components in a seemingly infinite number of 

potential industrial applications, each of which has its own exacting equipment needs. This 

implies that a myriad dozens, perhaps hundreds of highly-specific pump, spray gun, and 

proportioner markets may exist. Each such market could be exceptionally small in size. 

Fundamentally, however, all of the potential narrow markets share the same competitive 

dynamics that raise serious, substantial competitive questions about this acquisition. In 

dominating overall industrial liquid finishing equipment sales for resale, Graco and ITW 

dominate sales for pumps, spray guns, and proportioners and compete closely against each other 

in each category. The importance of distribution, brand reputation, and the loyalty of the 

installed base of end users characterizes all of these markets. In this highly differentiated 

product space with highly idiosyncratic demand specific to each end user, precise identification 

of every small affected market would be, as Brown Shoe warned, both “impractical” and 

“unwarranted,” 370 U.S. at 328, particularly when the threat of anticompetitive harm looms so 

large. Neither the law nor common sense compels the Court to ignore the forest for the trees. To 

consider only excessively narrow markets “does not aid in analyzing the effects of this merger,” 

Brown Shoe, 370 U.S. at 327, and would trivialize the significant threat to competition Graco’s 

acquisition of ITW poses. 
24

Moreover, given the substantial degree to which Graco and ITW win sales from each 

other, Graco’s and ITW’s dominance in pumps, spray guns, and proportioners means they must 

dominate narrower markets as well. If Graco and ITW did not compete in most if not all of the 

narrower markets that might exist, the evidence would not show substantial competitive 

displacement, discounting, and head-to-head competition between the two firms that appears 

throughout their business documents. Graco and ITW could not compete so closely and 

aggressively and maintain such dominant market shares without dominating potential smaller 

markets as well, regardless of how finely they may be defined. 

a. The Manufacture and Sale of Liquid Finishing Pumps for Industrial Use Is a 

Relevant Product Market 

Specialized pumps move and circulate finishing liquids at a controlled pressure, flow 

rate, and temperature. A liquid finishing system may use multiple pumps of different designs, 

depending on the requirements of the painting system. Liquid finishing pumps encompass a 

variety of technologies, operate at different pressures and flow rates, and utilize different 

propulsion power (electric, hydraulic, pneumatic).64 The required performance characteristics 

for a specific finishing application dictate the appropriate pump.65 As with other industrial liquid 

finishing equipment, end users select pumps based on cost and performance considerations, 

including pump capacity, shear (material degradation), and cost of ownership.66 Brand 

64

65

66
25

reputation and prior experience with the brand are also major factors for end users when 

selecting a pump.67

While these considerations suggest a great many small finishing pump markets (and a 

specific type of pump market is further alleged below), the boundaries of a pump market may be 

blurry and difficult to draw. A single pump model could serve a variety of end uses, just as an 

end use may be satisfied by a variety of different pump models and designs.68 A value-added 

distributor can design or engineer systems using the same pump in a variety of ways, which can 

broaden and obscure the boundaries of a pump market.69 And because industrial end users buy 

finishing equipment from distributors, manufacturers generally could not charge different prices 

for the same pump sold to different end use applications, which poses additional complications 

for defining markets too narrowly. 

Most importantly, because each pump market would share the same inherent market 

characteristics, there is no need to separately identify the narrowest possibly markets. In all 

pump markets, brand reputation, end user loyalty, and quality distribution are the hallmarks of 

competition. 

70

From a product development standpoint, Graco and ITW develop pumps with wide potential 

67

68

69

70
26

uses that distributors can market and sell to a variety of end users.71 And they do so in 

competition with each other, 

72 Indeed, no firm could compete for distribution successfully with just one pump, 

simply because most distributors would find it unprofitable to carry just a single product by a 

manufacturer.73

b. The Manufacture and Sale of Liquid Finishing Applicators (Spray Guns) for 

Industrial Use Is a Relevant Product Market 

Spray guns apply paint and other liquid coatings to a surface.74 When selecting a spray 

gun, end users take into account factors such as the surface they are coating, the paint or material 

they are spraying, the desired quality and consistency of finish, the amount of wasted liquid or 

overspray, regulatory requirements, ergonomics, gun weight, and the preferences of the 

individual in the plant holding the gun.75 Other types of equipment are not interchangeable with 

industrial liquid finishing spray guns.

71

72

73

74

75
27

While these factors may suggest a number of very small spray gun markets,76 as with 

pumps, defining every affected spray gun market would be impractical and unwarranted. Such 

fine distinctions do not help assess the anticompetitive effects of the acquisition. Even different 

models of the same type of spray gun might not be substitutes, as each model may be designed 

for different end uses and operate at different pressures.77 Nonetheless, regardless of their 

specific product attributes, all spray guns perform the same basic function and share the same 

competitive dynamics. Manufacturers sell most spray guns to distributors, and distributors resell 

those spray guns to end users familiar with the brand’s reputation and performance history, along 

with the same value-added services they provide to end users of pumps. 

c. The Manufacture and Sale of Plural Component Liquid Finishing Equipment 

(Proportioners) for Industrial Use Is a Relevant Product Market 

Plural component equipment (sometimes referred to as proportioners) mix paint with 

catalysts and other liquids in precise ratios before spraying the product. Manual spray gun 

systems usually use manual proportioners, which are operated by an individual regulating the 

flow rate. Robotic or other automated systems use automatic proportioners with the flow rate 

regulated by a computer. Manual or automatic proportioners come in low-end, medium-end, and 

high-end segments, each one increasing in complexity, capability, and price. A basic low-end 

76

77
28

plural component unit can mix a single color,78 while more sophisticated proportioners can 

handle multiple colors and catalysts and offer some flexibility in configuration and control.79

End users choose between equipment based on the technical specifications required for their 

specific application, as well as brand reputation, ease of maintenance, and past experiences with 

the brand.80

d. The Manufacture and Sale of Circulation Pumps for Paint Systems in Automotive 

Assembly Plants Is a Relevant Product Market 

Circulation pumps move paint and other coating materials from tanks to various points 

along an assembly line, where the coating is applied to the surfaces of parts under assembly.81 In 

the highly-sophisticated paint systems found in automotive assembly plants, circulation pumps 

must meet exacting performance requirements. These pumps must operate continuously, safely, 

and reliably to propel the paint at a specified flow rate and pressure, and they must not jeopardize 

the quality and consistency of the finish by exposing the paint or coating material to excessive 

heat or agitation.82 New advances in paint and coating materials create additional challenges.83

In this application, a poorly-performing pump could lead to higher costs and poor or inconsistent 

finish quality a particularly critical concern for automotive manufacturers, who place enormous 

78

79

80

81

82

83
29

value in the finished appearance of their products.84 As a result, automotive manufacturers 

require extensive testing before approving of a pump in this use.85 Circulation pumps comprise 

the largest single equipment expense on the paint circulation system, and while system designs 

vary, a typical paint circulation system requires anywhere from circulation pumps.86

Consequently, although many different pump designs exist, very few pumps are suitable for this 

application, and an increase in the prices of these pumps would not cause automotive 

manufacturers to switch to other designs.

e. The Manufacture and Sale of Industrial Liquid Finishing Equipment for Resale is a 

Relevant Product Market 

Industrial liquid finishing equipment manufacturers rely on independent distributors to 

sell and market their products to end users.87 The two firms aggressively compete to win 

“mindshare” from these distributors.88 To reach the most end users and ultimately sell more of 

their products, manufacturers compete to sell to the best, most capable liquid finishing 

distributors.89 See, e.g., FTC v. Coca-Cola Co., 641 F. Supp. 1128, 1135 (D.D.C. 1986) (“Given 

the importance of effective distribution, [soft drink] concentrate companies naturally seek to 

84

85

86

87

88

89
30

market their products through bottlers with the greatest resources and strongest local market 

share.”), vacated, 829 F.2d 191 (D.C. Cir. 1987). Distributors benefit from the close competition 

between Graco and ITW on special one-time pricing, volume-based discounts, rebates, and 

promotional programs, all designed to keep the top distributors promoting their brands first and 

foremost.90 However, these proverbial carrots dangled in front of distributors by Graco and ITW 

are followed by the inevitable stick.91

Post-transaction, competition for these top distributors and the benefits received by these 

distributors will be extinguished. By and large, Graco and ITW have tied up this limited pool of 

top distributors.95 Graco no longer will need to ply its distributors with carrots to receive top 

billing on their line cards Graco will have achieved domination of their distributors’ 

mindshare. After the acquisition, no other brand could replace Graco’s products at these 

90

91

92

93

94

95
31

distributors only ITW has a similarly strong reputation with end users and a sufficiently broad 

product offering that provides distributors with a credible threat to replace Graco’s products.96

Because Graco will face less competition for sales to distributors after the acquisition, industrial 

end users will likely pay higher prices for industrial liquid finishing equipment. 

2. North America is a Relevant Geographic Market 

North America is a relevant geographic market in which to analyze the effects of Graco’s 

proposed acquisition of ITW Finishing. Courts define relevant geographic markets by way of 

“the ‘area of effective competition . . . in which the seller operates, and to which the purchaser 

can practicably turn for supplies.’” Phila. Nat’l Bank, 374 U.S. at 359 (quoting Tampa Elec. Co. 

v. Nashville Coal Co., 365 U.S. 320, 327 (1961)). A relevant geographic market is where 

“‘consumers can practically turn for alternative sources of the product and in which the antitrust 

defendant faces competition.’” Staples, 970 F. Supp. at 1073 (quoting Morgenstern v. Wilson,

29 F.3d 1291, 1296 (8th Cir. 1994)).

Because end users require sales and support from relatively local distributors,97

distributors constitute a class of customers largely bound to identifiable geographic regions, 

which enables manufacturers to price and sell equipment specifically for North America.98 See

Merger Guidelines § 4.2.2. This holds true for each product market at issue, whether broad or 

narrow, and while equipment manufacturers worldwide may sell into North America, the 

96

97

98
32

importance of local distribution means that sales into North America is a proper geographic 

dimension to evaluate these product markets.99

3. Graco’s Acquisition of ITW Would Significantly Increase Market Concentration 

100

A merger that leads to high market concentration is presumed to have anticompetitive 

effects. See Heinz, 246 F.3d at 716; CCC Holdings, 605 F. Supp. 2d at 44. Such a merger is “so 

inherently likely to lessen competition substantially that it must be enjoined in the absence of 

evidence clearly showing that the merger is not likely to have such anticompetitive effects.” 

Phila. Nat’l Bank, 374 U.S. at 363; accord Heinz, 246 F.3d at 715.

Under the antitrust agencies’ guidelines and as endorsed by case law, an acquisition is 

presumptively anticompetitive if it increases the HHI in a market by more than 200 points and 

results in a post-acquisition HHI that exceeds 2500. See Merger Guidelines § 5.3; see also 

Heinz, 246 F.3d at 716 (“Sufficiently large HHI figures establish the FTC’s prima facie case that 

a merger is anti-competitive.” (citing Baker Hughes, 908 F.2d at 982-83 & n.3)); FTC v. PPG 

Indus., Inc., 798 F.2d 1500, 1503 (D.C. Cir. 1986) (noting that post-merger HHI of 3295 entitled 

the Commission to preliminary relief). That threshold is easily met here. 

The best evidence of Graco’s and ITW’s sky-high market shares comes not from an 

independent source but from the parties themselves.

99

100
33

While each estimate varies slightly, and the nature of the industry seems to resist definitive 

market shares, taken together they point to an overwhelming and inescapable conclusion. 

Graco’s acquisition would significantly increase concentration in each and every relevant 

market. This is not a close case. 

03 Based on this 

estimate, the acquisition would result in a post-acquisition HHI of over 4400 and an increase in 

HHI of approximately 2000, far exceeding the thresholds set forth in the Merger Guidelines and 

supported in the case law.

101

102

103
34

Graco and ITW hold comparably large shares in each product category as well. Graco 

and ITW boast sizable shares for sales of liquid finishing pumps sales and smaller pump 

categories.

107

In liquid finishing gun sales, 

108 This would give Graco 

post-merger. Graco and ITW also dominate narrower segments of liquid finishing spray guns. 

104

105

106

107

108
35

110

In proportioners, for example, 

111 which would give Graco postmerger. 

113

Thus the story is clear, regardless of how finely these categories are further divided. The 

acquisition substantially increases market concentration and gives Graco control over the 

majority of industrial liquid finishing sales. confirm this view of 

industry concentration. Their North American industrial liquid finishing sales are far smaller 

109

110

111

112

113
36

than Graco’s and ITW’s and are consistent with the small shares 

114

These alarmingly high market shares could actually understate the competitive harm 

Graco’s acquisition poses. The importance of distributor access, the significance of brand value 

and reputation, and a risk-adverse installed base of end users reluctant to change equipment 

brands all would magnify the acquisition’s likely competitive harm. Nevertheless, however one 

measures markets and share, the proposed acquisition presumptively violates the Clayton Act 

and the FTC Act. See Elders Grain, 868 F.2d at 902 (affirming preliminary injunction requiring 

rescission of acquisition that increased market share of largest firm from 23% to 32%); Hosp.

Corp. of Am., 807 F.2d at 1384 (affirming Commission’s decision that Section 7 of Clayton Act 

was violated by acquisitions that increased acquiring entity’s market share from 14% to 26%); 

FTC v. Cardinal Health, Inc., 12 F. Supp. 2d 34, 52-53 (D.D.C. 1998) (preliminarily enjoining 

mergers increasing HHIs from 1648 to 2450 and from 1648 to 2277, increasing market shares 

from 22% to 40% and from 25% to 37%). 

B. A Competitive Effects Analysis Raises More “Serious, Substantial” Questions

The FTC’s prima facie case creates a strong presumption of illegality and a high burden 

for Defendants to explain why “‘the market-share statistics [give] an inaccurate account of the 

[merger’s] probable effects on competition’ in the relevant market[s].” Heinz, 246 F.3d at 715 

(quoting Citizens & S. Nat’l Bank, 422 U.S. at 120). Defendants bear a heavy burden to 

overcome the evidence of anticompetitive effects described above, particularly given the strength 

114
37

of the prima facie case. See, e.g., Baker Hughes, 908 F.2d at 991 (“The more compelling the 

prima facie case, the more evidence the defendant must present to rebut it successfully.”); see

also Heinz, 246 F.3d. at 725; Swedish Match, 131 F. Supp. 2d at 167. Defendants cannot 

overcome this presumption. 

The issues here extend far beyond market shares, as extraordinary as they may be. 

Through this acquisition, Graco will eliminate its close competitor and free itself from the 

competitive constraints ITW now imposes. 

 Formidable barriers prevent 

new firms from mitigating the injury to customers, and as shown by the 

absence of competitively meaningful entry over time. See, e.g., Heinz, 246 F.3d at 725 (barriers 

to entry can pose a “substantial question” that warrants entry of a preliminary injunction). A 

competitive response from other firms either by the growth or repositioning of existing 

competitors, or by the entry of new ones would not sufficiently curb the anticompetitive harm 

even if Graco in effect invited entry by raising prices post-acquisition. 

1. The Proposed Acquisition Would Likely Result in Significant Anticompetitive 

Effects in the Relevant Industrial Liquid Finishing Equipment Markets

Under the Merger Guidelines, fears of post-merger unilateral price effects increase as 

more “buyers of products sold by one merging firm consider products sold by the other merging 

firm to be their next choice.” Merger Guidelines § 6.1; see also CCC Holdings, 605 F. Supp. 2d 

at 68. A close competitor need not be the closest competitor in all market segments to support 

concerns of unilateral effects. See 4 P. Areeda & H. Hovenkamp, Antitrust Law: An Analysis of 

Antitrust Principles and Their Application, ¶ 914a (3d ed. 2004 & Supp. 2011) (merging parties 
38

need not be the closest rivals for unilateral anticompetitive effects to arise); United States v. 

H&R Block, Inc., No. 11-00948, 2011 U.S. Dist. LEXIS 130219, at *126 (D.D.C. Nov. 10, 2011) 

(“‘A merger may produce significant unilateral effects even though a non-merging product is the 

‘closest’ substitute for every merging product. . . .’” (quoting Commentary on the Horizontal 

Merger Guidelines at 28)).

Graco and ITW recognize that they match closely, not just in their dominance of the 

distribution channel, but also across the spectrum of industrial liquid finishing guns, pumps, and 

proportioners. Although the firms are not identical twins and their strengths vary somewhat by 

category,

115

As discussed above, Graco and ITW compete closely and fiercely in each product 

market. They compete on price, by offering discounts and rebates to distributors who sell their 

products and by granting one-time pricing relief when competing head-to-head, and they 

compete on product development and innovation. 

115

116
39

See Swedish Match, 131 F. Supp. at 169 (“High 

margins and high diversion ratios support large price increases, a tenet endorsed by most 

economists.”). 

2. The Proposed Acquisition Would Result in a Merger-to-Monopoly for Circulation 

Pumps for Paint Circulation Systems in Automotive Assembly Plants 

In the sale of circulation pumps used in automotive assembly plants’ paint systems, 

Graco and ITW are the only competitively-significant players today. 

118 Graco’s acquisition would 

extinguish current vigorous competition on price and product innovation. No new pump could 

enter rapidly enough to mitigate this harm. 

Graco and ITW manufacture the only paint circulation pumps currently suitable for use in 

the highly sophisticated paint systems used by the automotive assembly industry. Other types of 

pumps do not perform as well in this use, and although small numbers of other brands may 

currently be found in some automotive plants, automotive customers would not specify or 

117

118
40

approve these pumps for use today.119 Graco and ITW compete head-to-head by offering sizable 

discounts against each other,120 and by improving their product design.121 Because a bad pump 

can be so costly, automotive manufacturers insist on extensive product testing in real-world 

operating conditions before approving a pump for use, and only over extended time could a new 

pump gain sufficient reputation to become a competitively significant option in this use.122

This is not a trivial concern. Graco recognizes the long-term strategic significance of 

selling a pump especially to major end users such as automotive manufacturers, where a single 

pump can generate sales of spare parts, replacement pumps, and other equipment. 

123 Moreover, sales in this segment translate into product 

development and sales in adjacent product categories, 

124 This rivalry, which 

119

120

121

122

123

124
41

has led to lower prices and better products for customers,125 will be forever extinguished postmerger. 

3. Repositioning and Entry Are Unlikely to Constrain Anticompetitive Effects 

Competition lost by the acquisition will not be mitigated by expanding sales or 

repositioning of Exel or other firms on the competitive fringe. Nor will competitively-significant 

entry likely occur. The importance of brand reputation, high installed base switching costs, and 

constraints on quality distribution strongly support that even 

reliable products could offer only limited competition in these markets over a short timeframe.126

Nothing in this transaction appears to change that dynamic. 

 Without access to quality distribution Exel or other 

competitors could not deter post-merger anticompetitive effects in these markets. 

125

126

127
42

28 The history of competition in this 

industry bears this out as well.

130 Other firms on the competitive fringe stand even less chance of securing 

competitively-significant distribution after the acquisition. 

 Nor can Defendants show that new entry in these markets would be “timely, likely, and 

sufficient in its magnitude, character and scope to deter or counteract the competitive effects of 

concern.” Merger Guidelines § 9; see also Cardinal Health, 12 F. Supp. 2d at 54-58; Staples,

970 F. Supp. at 1086.

131 See Cardinal Health, 12 F. Supp. 2d at 56 (“The history of entry into the relevant 

market is a central factor in assessing the likelihood of entry in the future.”); see also Merger 

Guidelines § 9. 

128

129

130

131
43

133

4. Efficiencies Cannot Save the Acquisition 

A good deal for Graco is plainly a bad deal for Graco’s customers and for North 

American industrial end users. The acquisition will not produce significant cost savings to 

benefit consumers and offset the acquisition’s anticompetitive effects. To carry weight in merger 

analysis, claims of efficiencies must be cognizable, meaning that they must be merger-specific, 

verifiable, and not arising from anticompetitive reductions of output or service. Heinz, 246 F.3d 

at 721-22; see also Merger Guidelines § 10. Any efficiencies related to this acquisition clearly 

fall short of this test. Moreover, Graco plans to operate ITW as a separate business postacquisition, thereby postponing achievement of any operational efficiencies.134 

35

132

133

134

135
44

II. The Equities Heavily Favor a Preliminary Injunction 

Serious and substantial antitrust concerns “militate for a preliminary injunction unless 

particularly strong equities favor the merging parties.” Whole Foods, 548 F.3d at 1035 (Brown, 

J.); see also Heinz, 246 F.3d at 727. Section 13(b) embodies Congressional recognition that 

divesting assets after an acquisition has been consummated is an inadequate and unsatisfactory 

remedy, H.R. Rep. No. 94-1373 (1976), as reprinted in 1976 U.S.C.C.A.N. 2637, 2640-41, a 

point that has been emphasized by the United States Supreme Court, see, e.g., FTC v. Dean 

Foods Co., 384 U.S. 597, 607 (1966) (“Administrative experience shows that the Commission’s 

inability to unscramble merged assets frequently prevents entry of an effective order of 

divestiture.”), and other cases. See also Heinz, 246 F.3d at 726; FTC v. ProMedica Health 

System, Inc., No. 3:11 CV 47, 2011 WL 1219281, at *60 (N.D. Ohio 2011). Moreover, 

divestiture after a full hearing on the merits cannot remedy the harm suffered by customers and 

consumers in the interim. See, e.g., Elders Grain, 868 F.2d at 904. These considerations explain 

why, once the FTC establishes the likelihood of prevailing in a full hearing on the merits, “it will 

usually be able to obtain a preliminary injunction.” CCC Holdings, 605 F. Supp. 2d at 75. 

 A preliminary injunction to preserve the status quo will prevent interim harm during the 

administrative proceeding on the merits and will preserve the potential for effective relief should 

the FTC ultimately prevail. No equities favor Defendants. There is no reason why the merger, if 

found lawful, could not occur after the close of the administrative proceeding before the FTC. 

See Heinz, 246 F.3d at 726-27. 

CONCLUSION 

 The FTC has raised serious, substantial, difficult, and doubtful questions about the injury 

to competition posed by Graco’s acquisition of ITW, which would combine the two dominant 
close competitors in markets characterized by high entry barriers, high switching costs, and 

limited access to a critical distribution channel. Because the Commission should investigate and 

adjudicate these serious questions in the first instance, and because injunctive relief is necessary 

--------------topreser:vethe-benefits-ofcompetitionand-the-Gommission~-ability-tocraft-a-remedy,thecFTG--------------

respectfully asks the Court to grant a temporary restraining order and preliminary injunction 

delaying consummation of the acquisition pending administrative adjudication of its antitrust 

merits. 

December 15, 2011 

Assistant Director 

PETER RlCHMAN 

MARC W. SCHNEIDER 

BRIAN TELPNER (D.C. BarNo. 462812) 

ROBERT FRIEDMAN 

AMANDA HAMILTON (D.C. Bar No. 499646) 

CATHLIN TULLY 

ANNA CHEHTOVA 

Attorneys 

Federal Trade Commission 

600 Pennsylvania Avenue, N.W. 

Washington, DC 20580 

(202) 326-2805 

Richard A. Feinstein 

Director 

Norman A. Al1nstrong, J1'. 

Deputy Director 

Federal Trade Commission 

Bureau of Competition 

Willard K. Tom 

General Counsel 

Federal Trade Commission 

Attorneys for the Plaintiff 

45