UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

COMMISSIONERS: Jon Leibowitz, Chairman

J. Thomas Rosch

Edith Ramirez

Julie Brill

__________________________________________

)

In the Matter of )

)

GRACO INC. )

a corporation, )

) Docket No. 9350

ILLINOIS TOOL WORKS INC. )

a corporation, ) PUBLIC

)

and )

)

ILLINOIS FINISHING LLC, )

a limited liability company. )

__________________________________________)

DEFENDANT GRACO INC.’S MEMORANDUM OF LAW 

IN RESPONSE TO COMPLAINT COUNSEL’S MOTION TO PLACE THE 

UNREDACTED COMPLAINT ON THE PUBLIC RECORD

01 23 2012
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TABLE OF CONTENTS

I. INTRODUCTION ...............................................................................................................1

II. FACTUAL BACKGROUND..............................................................................................2

III. ARGUMENT.......................................................................................................................3

A. THE SAME ISSUE IS CURRENTLY PENDING BEFORE THE DISTRICT 

COURT, AND THIS COURT SHOULD REFRAIN FROM DECIDING 

COMPLAINT COUNSEL’S MOTION .............................................................................3

B. THE DISCLOSURE OF CONFIDENTIAL INFORMATION CONTAINED IN 

THE UNREDACTED COMPLAINT IS PROHIBITED BY THE PROTECTIVE 

ORDER ......................................................................................................................4

C. EVEN ABSENT THE PROTECTIVE ORDER, GRACO’S CONFIDENTIAL 

BUSINESS COMMUNICATIONS ARE ENTITLED TO IN CAMERA REVIEW......................5

1. The Redacted Portions Of The Public Complaint Represent 

Secret Business Information ........................................................................7

2. The Redacted Portions Of The Public Complaint Are 

Material To Graco’s Business......................................................................8

IV. CONCLUSION..................................................................................................................10
ii

TABLE OF AUTHORITIES

CASES PAGE(S)

ACT, Inc. v. Sylvan Learning Sys.,

No. CIV. A. 99-63, 1999 WL 305300 (E.D. Pa. May 14, 1999)................................................8

Awuah v. Coverall North America, Inc.,

585 F.3d 479 (1st Cir. 2009) ......................................................................................................7

Bradburn Parent/Teacher Store, Inc. v. 3M,

No. Civ. A. 02-7676, 2004 WL 1146665 (E.D. Pa. May 19, 2004)...........................................9

Bristol-Myers Co.,

90 F.T.C. 455 (1977)..............................................................................................................6, 8

California Dental Ass 'n,

Dkt. No. 9259, 1996 FTC LEXIS 277, *8-*12 (May 22, 1996)............................................... 3

Dynamic Health of Florida, LLC,

Dkt. No. 9317, 2005 FTC LEXIS 6 (Jan. 12, 2005)..................................................................3

F.T.C. v. Exxon Corporation,

636 F.2d 1336 (D.C. Cir. 1980)..................................................................................................9

General Foods Corp.,

95 F.T.C. 352 (1980)..................................................................................................................6

H.P. Hood & Sons, Inc.,

58 F.T.C. 1184 (1961) ................................................................................................................6

LEAP Systems, Inc. v. MoneyTrax, Inc.,

638 F.3d 216 (3rd Cir. 2011)......................................................................................................7

Lieberman v. Federal Trade Commission,

771 F.2d 32 (2nd Cir. 1985).......................................................................................................8

Tavourlareas v. Washington Post Co.,

724 F.2d 1010 (D.C. Cir. 1984) .................................................................................................7

United States v. Hubbard,

650 F.2d 293 (D.C. Cir. 1980)................................................................................................7, 9

Vesta Corset Co. v. Carmen Founds., Inc.,

No. 97 CIV. 5139 (WHP), 1999 WL 13257 (S.D.N.Y. Jan. 13, 1999) ......................................8

FEDERAL STATUTES & RULES

15 U.S.C. § 18a(h) ...........................................................................................................................8

15 U.S.C. § 57b-2 ........................................................................................................................3, 4

FTC Rules of Practice § 3.31(d) ......................................................................................................4

FTC Rules of Practice § 3.45.......................................................................................................5, 6

FTC Rules of Practice §§ 4.10 – .11............................................................................................3, 4
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I. INTRODUCTION

There is absolutely no reason to publicly disclose Graco’s confidential information which 

Complaint Counsel placed in the unredacted complaint. Such a release would cause Graco 

serious injury, with no countervailing public interest served. The full, unredacted complaint has 

served to put the Court and the parties on notice of the allegations, and the redacted version has 

adequately informed the public of Complaint Counsel’s allegations. 

The unredacted complaint includes quotations and summaries extracted by Complaint 

Counsel from confidential company documents. These excerpts concern matters of business 

strategy and market analysis that are routinely protected from disclosure by federal courts and 

federal agencies. These documents were produced to the FTC under a claim of confidentiality 

and have not been previously made public. Furthermore, the issue of whether such confidential 

information can be disclosed to the public is currently fully briefed and pending before the 

United States District Court for the District of Columbia ("District Court"). In submitting the 

present motion to the Court prior to the District Court’s decision, Complaint Counsel seeks to 

have two bites at the apple. Respondents respectfully request that this Court refrain from 

deciding the motion before it, pending the District Court's ruling.

Should this Court proceed to rule on the issue, Graco requests that the unredacted 

complaint not be made public. The release of Graco’s confidential information has the potential 

to severely prejudice the company. First, the information redacted in the sealed complaint 

includes highly confidential communications between Graco’s CEO and its Board of Directors 

regarding business strategy, as well as closely guarded strategic business plans. Complaint 

Counsel does not dispute that the redacted information reflects and includes Graco’s strategic 

planning at this highest level of management. Second, the information has been selectively and 

misleadingly included in the complaint in a manner calculated to cause readers to make unfair 
2

inferences about the implications of these documents. The misuse of these confidential 

documents threatens to harm Graco’s business reputation and good will. 

II. FACTUAL BACKGROUND

The redacted portions of the public complaint include the following confidential 

information from Graco:

• Communications by Graco’s CEO to its Board of Directors discussing the proposed 

acquisition and assessment of the industry [Sealed Complaint, ¶ 1];

• An unverified internal Graco estimation of its market position [Id., ¶ 2];

• Excerpts of a Graco strategic planning presentation prepared for its Board of Directors 

[Id., ¶ 6];

• An estimate of combined Graco and ITW sales that relies on confidential Graco sales 

data [ Id., ¶ 12];

• Confidential statements made by Graco’s CEO to the FTC in the course of the FTC’s 

investigation of the proposed transaction [ Id., ¶ 18]; and

• Graco’s CEO’s confidential discussion of its strategic position [ Id., ¶¶ 19 and 23].

The redactions in the public version of the complaint were narrowly tailored and removed 

a mere 21 lines from the sealed version. (In addition to these redactions of Graco information, 

five additional redactions of non-Graco sourced information were made in the public complaint.) 

Graco provided the above information to the FTC during its pre-complaint investigation. 

In producing all of these materials, Graco invoked and relied on the FTC’s statutory and 

regulatory provisions governing the confidentiality of competitively sensitive business 

information. See 15 U.S.C. § 57b-2 and the FTC Rules of Practice §§ 4.10 – .11 (1987).
3

On the same day it filed its administrative complaint before this Court, the FTC filed a 

nearly identical complaint in the District Court, seeking a temporary restraining order and 

preliminary injunction to prevent Respondents from consummating the proposed acquisition by 

Graco of the finishing business of ITW. The redactions made in the public versions of the 

administrative complaint and the District Court complaint are identical.

III. ARGUMENT

Procedurally, a decision on Complaint Counsel’s motion should await the outcome of the 

FTC’s similar motion to the District Court. Substantively, if addressed, the motion should be 

denied.

A. The Same Issue Is Currently Pending Before The District Court, And This 

Court Should Refrain From Deciding Complaint Counsel’s Motion 

The Commission has frequently recognized that a stay of administrative proceedings is 

appropriate pending the decision of collateral issues in the district court in order to avoid 

duplicative and potentially inconsistent rulings. See, e.g., In re Dynamic Health of Florida, LLC, 

Dkt. No. 9317, 2005 FTC LEXIS 6, *4–*6 (Jan. 12, 2005) (issuing a stay in the proceeding 

pending decision of federal criminal court proceeding because the same issues were being 

addressed, the stay was limited, and sentencing was imminent); In re California Dental Ass 'n, 

Dkt. No. 9259, 1996 FTC LEXIS 277, *8-*12 (May 22, 1996) (issuing a stay in the proceedings 

pending decision of federal court in order to “avoid the potential cost and confusion” from 

parallel determinations).

The parties have already fully briefed to the District Court the issue of whether the 

confidential information cited in the complaint can be made public. A decision on the protection 

of the very same confidential information at issue here is imminent. To avoid the potential for 
4

disparate rulings, this Court should exercise its discretion and refrain from ruling on Complaint 

Counsel's motion pending the District Court's ruling.

B. The Disclosure Of Confidential Information Contained In The Unredacted 

Complaint Is Prohibited By The Protective Order

Graco’s cooperation with the FTC’s mammoth information requests was, in part, 

predicated on the FTC’s continued assurances that Graco’s confidential business information 

would not be disclosed to its competitors. In its response to the second request, Graco invoked 

and relied on the FTC’s statutory and regulatory provisions governing the confidentiality of 

competitively sensitive business information. See 15 U.S.C. § 57b-2 and the FTC Rules of 

Practice §§ 4.10 – .11 (1987). These investigation stage confidentiality protections do not vanish 

upon the initiation of a judicial proceeding. In fact, Commission Rule 3.31(d) expressly requires 

that the parties enter into a protective order “[i]n order to protect the parties and third parties 

against improper use and disclosure of confidential information . . . .” 16 C.F.R. § 3.31(d). The 

issuance of a protective order ensures that the confidential materials disclosed during the FTC’s 

pre-complaint investigation are not summarily disclosed to the public upon the FTC’s decision to 

issue a complaint before the Commission. The present case is no exception—as required by 

Rule 3.31(d), this Court issued a protective order on December 16, 2011. See Protective Order 

Governing Discovery Material (“Protective Order”).

The Protective Order governing discovery materials in this proceeding expressly 

prohibits the disclosure of the confidential materials redacted from the public complaint. The 

Order extends to “any document or portion thereof submitted by a respondent or third party 

during a Federal Trade Commission investigation . . . .” Protective Order, ¶ 2. The information 

redacted from the public complaint was not and is not publicly available, but was disclosed by 

Graco to the FTC during its investigation. Any “confidential material,” which the Protective 
5

Order defines to include “competitively sensitive information” (Id., ¶ 1), “shall be treated as 

confidential material” (Id., ¶ 2) that shall not be disclosed publicly. Id., ¶ 7. If “confidential 

material is contained in any pleading, motion, exhibit, or other paper . . . such papers shall be 

filed in camera.” Id., ¶ 8 (italics in original). In compliance with the Protective Order, 

Complaint Counsel made redactions of specific confidential materials from the public complaint, 

allowing the unsealed complaint to be disclosed only to the Administrative Law Judge, counsel, 

and other relevant court personnel. Complaint Counsel now requests that this Court circumvent 

its own Order and put these confidential materials into the public record. Complaint Counsel’s 

request should be denied.

C. Even Absent The Protective Order, Graco’s Confidential Business 

Communications Are Entitled To In Camera Review

Notwithstanding the fact that the Protective Order conclusively renders the redacted 

information confidential, Complaint Counsel feels that public policy nonetheless instructs the 

Court to place the unredacted complaint in the public record. To support this argument

Complaint Counsel cites to Commission precedent and rules addressing in camera review of 

documents. The record is clear, however, that Graco is not seeking to remove complete 

documents from the public record under in camera review. Instead, Graco merely seeks to 

maintain the limited redactions already present in the public complaint, consistent with the 

Protective Order in place.

Regardless, Complaint Counsel has over-simplified the standard for in camera review of 

documents. Commission Rule § 3.45 states that the determination of whether sensitive 

information is entitled to in camera review “shall be based on the standard articulated in H.P. 

Hood & Sons, Inc., 58 F.T.C. 1184, 1188 (1961); see also Bristol-Myers Co., 90 F.T.C. 455, 456 

(1977), which established a three-part test that was modified by General Foods Corp., 95 F.T.C. 
6

352, 355 (1980).” Complaint Counsel wishes to collapse the multi-part analysis contained in 

these three precedents into the blanket statement that there is a strong presumption in favor of 

open access. 

While H.P. Hood provides that a strong presumption in favor of open access should be 

the starting point for the analysis of requests for in camera review, it recognizes that the full 

balancing of interests is more nuanced: 

[T]he Commission should protect the confidential records of persons or 

corporations involved in proceedings before it insofar as such protection is 

practicable. Is this duty in conflict with our duty to hold public hearings? We 

think not. The answer lies somewhere between the Scylla of indiscriminate "in 

camera" rulings and the Charybdis of complete and unnecessary disclosure.

H.P. Hood, 58 F.T.C. 1184, 1961 FTC LEXIS 368, at *9 (Mar. 14, 1961). The Commission 

continues on to hold that public disclosure of “trade secrets” should be presumptively prohibited, 

while an applicant seeking in camera review of business information must make a “good cause” 

showing that disclosure would cause serious injury. Rule § 3.45 then cites Bristol-Myers

because it is here that the Commission clarified how an applicant demonstrates serious injury: 

[W]e believe demonstrating serious injury requires the applicant to show [1] that 

the documents are secret, [2] that they are material to the applicant's business and 

that [3] public disclosure will plausibly discourage the future production of such 

information. 

Bristol Meyers Co., 90 F.T.C. 455, 1977 FTC LEXIS 25, at *4–*5 (Nov. 11, 1977). Finally, 

General Foods Corp modifies Bristol Meyers Co. by removing the third prong. 

Thus, Complaint Counsel states only half the test when asserting that Graco must 

demonstrate that it will suffer “a clearly defined, serious injury” as the result of disclosure. 

Rather, to demonstrate serious injury, such that public disclosure is not warranted, Graco must 

show that (1) the documents are secret and (2) that they are material to the Graco’s business. It 
7

is abundantly clear that the information redacted from the public complaint meets both prongs of 

this test.

1. The Redacted Portions Of The Public Complaint Represent Secret 

Business Information 

The public has not had access to Graco’s competitively sensitive information. Indeed, 

Graco has not allowed this information to be circulated beyond its Board of Directors and the 

highest levels of management. In order that Graco’s CEO may speak openly and frankly to its 

Board of Directors, Graco takes care to ensure the complete privacy of all CEO-Board 

communications. In fact, the CEO’s presentations to the Board are not circulated at all and only 

presented once to the Board alone. The testimony given by Graco’s CEO covered subjects that 

are not discussed beyond Graco’s highest levels of management. Furthermore, this testimony 

was proffered in express reliance on the FTC’s rules granting confidentiality to the subject 

documents and testimony. 

Courts recognize that documents and communications of this nature are highly 

confidential and regularly allow them to be submitted under seal. See, e.g., United States v. 

Hubbard, 650 F.2d 293, 318 (D.C. Cir. 1980) (reversing the district court’s order placing church 

business documents on the record); Tavourlareas v. Washington Post Co., 724 F.2d 1010, 1022 

(D.C. Cir. 1984) (holding that the district court erred in lifting the seal on confidential business 

information), vacated in part on other grounds, 763 F.2d 1472 (D.C. Cir. 1985) (en banc); 

LEAP Systems, Inc. v. MoneyTrax, Inc., 638 F.3d 216 (3rd Cir. 2011) (holding that privacy 

interests are significant where “secretive business information” was disclosed under assurances 

of confidentiality); Awuah v. Coverall North America, Inc., 585 F.3d 479, 482 (1st Cir. 2009) 

(citing the district court’s rejecting of a motion to unseal in light of confidential business 

practices information). Similarly, courts have acknowledged the significant privacy interests 
8

corporations have in closely guarded business information. See, e.,g., Vesta Corset Co. v. 

Carmen Founds., Inc., No. 97 CIV. 5139 (WHP), 1999 WL 13257 at *2 (S.D.N.Y. Jan. 13, 

1999) (granting a protective order limiting the disclosure of confidential pricing and marketing 

information); ACT, Inc. v. Sylvan Learning Sys., No. CIV. A. 99-63, 1999 WL 305300 at *2 

(E.D. Pa. May 14, 1999) (denying motion to compel on the basis that disclosure of the 

company’s proprietary market analysis could cause it serious commercial harm).

Complaint Counsel’s quotations derive from materials submitted confidentially by Graco 

as part of Hart-Scott-Rodino (“HSR”) antitrust review process. Such material is protected from 

public disclosure during pre-complaint discovery. See 15 U.S.C. § 18a(h); Lieberman v. Federal 

Trade Commission, 771 F.2d 32, 38 (2nd Cir. 1985) (“Congress wanted premerger information 

kept confidential.”). At every step of the way, Graco sought confidential protection for the 

documents and information it disclosed. As the Commission has noted, “the extent of measures 

taken by the part to guard the secrecy of the information” is germane to a consideration of the 

protection which should be afforded to the information. See Bristol-Myers Co., 90 F.T.C. at *5. 

None of the confidential statements and information at issue is public today. Complaint Counsel 

should not be allowed to make it public at the expense of Graco.

2. The Redacted Portions Of The Public Complaint Are Material To 

Graco’s Business

The redacted information is material to Graco’s business such that it would face harm to 

both its legal and business interests if the information is disclosure publicly. First, Graco faces 

harm to its business interests by publication of the redacted information. For example, the 

strategic planning information redacted from the complaint is not known by Graco’s competitors, 

some of whom have submitted declarations to the FTC in support of its investigation. Graco’s 

internal business communications should not be laid bare to its competitors. Moreover, Graco 
9

has no ability to claw back the information once it has been made public, and release of the 

information should not be allowed to establish a precedent in this proceeding that Graco’s 

confidential business documents are not entitled to protection. This is exactly the type of 

information that should never be disseminated to competitors, who are sure to read any public 

version of the Complaint. See F.T.C. v. Exxon Corporation, 636 F.2d 1336, 1350 (D.C. Cir. 

1980) (“It cannot be disputed that the most critical of all protective measures is that which 

prevents the disclosure of competitively sensitive information [to competitors].”); Bradburn 

Parent/Teacher Store, Inc. v. 3M, No. Civ. A. 02-7676, 2004 WL 1146665 at *1-3 (E.D. Pa. 

May 19, 2004) (accord).

Second, a “[s]ensational disclosure” that will cause a party prejudice in later proceedings 

goes to the appropriateness of maintaining a seal on it. Hubbard, 650 F.2d at 320-21. Complaint 

Counsel has taken snippets of statements made by Graco’s CEO out of context in order to bolster 

its allegations. Given the lack of any identified public need for the redacted information, there is 

no reason to allow Complaint Counsel to impugn Graco publicly with allegations before either 

this Court or a District Court decides the merits of the case. 

Third, Graco cooperated in the FTC’s regulatory investigation in reliance on FTC rules 

protecting confidentiality. For example, Complaint Counsel now seeks to unseal testimony of 

Graco’s CEO given with the understanding that such testimony would be protected from 

disclosure. Graco will suffer prejudice from denial of the confidentiality protections upon which 

it has relied in cooperating with the FTC’s investigation. 

Finally, Complaint Counsel’s motion is an attempt to establish an unfair and tactical 

advantage. Complaint Counsel has cherry picked excerpts from confidential business materials 

to support publicly its allegations. Graco cannot respond, either in kind or by attempting to place 
10

the selected excerpts in context, while simultaneously protecting the confidentiality of these 

materials. Complaint Counsel should not be allowed to use Graco’s confidential materials for 

public relations gain.

IV. CONCLUSION

For the foregoing reasons, Graco respectfully requests that Complaint Counsel’s motion 

to unseal the unredacted complaint be denied.

Dated: January 23, 2012 Respectfully submitted,

s/ Richard A. Duncan 

John H. Hinderaker

Richard A. Duncan

FAEGRE BAKER DANIELS LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, MN 55402-3901

(612) 766-7000

(612) 766-1600 (fax)

and

Richard G. Parker

Michael E. Antalics

Katrina M. Robson

O’MELVENY & MYERS LLP 

1625 Eye Street, NW

Washington, DC 20006

(202) 383-5300

(202) 383-5414 (fax)

Attorneys for Respondent 

Graco Inc.
CERTIFICATE OF SERVICE

I certify that on January 23, 2012, I have caused the foregoing Defendant Graco Inc.’s 

Memorandum of Law in Response to Complaint Counsel’s Motion to Unseal the Unredacted 

Complaint to be served by email upon Phillip Broyles (pbroyles@ftc.gov), Peter Richman 

(prichman@ftc.gov), Marc Schneider (mschneider@ftc.gov), and Amanda Hamilton 

(ahamilton1@ftc.gov) of the Federal Trade Commission; and upon J. Robert Robertson 

(robby.robertson@hoganlovells.com), Logan Breed (Logan.Breed@hoganlovells.com), and 

Meghan Edwards-Ford (Meghan.Edwards-Ford@hoganlovells.com) of Hogan Lovells US LLP,

counsel for Illinois Tool Works Inc. and Illinois Tool Works Finishing LLC. 

I also emailed a copy of the foregoing to secretary@ftc.gov and caused a copy to be filed 

via ECF.

Matthew M. Martin (MNBN 989341)

s/ Matthew M. Martin______________

Faegre Baker Daniels LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, MN 55402-3901

(612) 766-7000

(612) 766-1600 (fax)

Attorney for Graco Inc.