Pool Products Distributor Settles Charges of Anticompetitive Tactics

Pool Corporation, the largest distributor of swimming pool products in the United States, has agreed to stop anticompetitive tactics that it allegedly has been using to keep out new competitors in local markets around the nation, as part of a settlement that resolves charges by the Federal Trade Commission.

PoolCorp distributes products used in the construction, renovation, repair, service, and maintenance of residential and commercial swimming pools.

The FTC charged that for the past eight years, PoolCorp, based in Covington, Louisiana, used its monopoly power to thwart entry by new competitors by blocking them from buying pool products directly from manufacturers. The strategy significantly raised the costs incurred by its rivals, thereby lowering sales, increasing prices, and reducing the number of choices available to consumers, the agency alleged.

Specifically, the FTC contends that PoolCorp threatened manufacturers of pool products that PoolCorp would not sell their products at any of its 200 distribution centers if manufacturers also sold their products to new distributor rivals. According to the complaint, PoolCorp's threats were significant because the loss of PoolCorp sales could be catastrophic to even the largest pool products manufacturer.

As a result, the agency alleged, these threats were effective, and manufacturers representing more than 70 percent of all pool products sales refused to sell to new distributors. In order for a distributor to succeed, the FTC alleged, it must be able to buy pool products directly from manufacturers because there are no cost-effective alternatives.

The FTC alleges that PoolCorp's conduct impeded new distributors from entering the market, raised the costs of new distributors, and likely resulted in higher prices. The FTC alleged that the company's tactics constituted illegal exclusionary acts and practices. There allegedly was no pro-competitive rationale for PoolCorp's exclusionary conduct.

The proposed order settling the charges is intended to remedy PoolCorp's alleged anticompetitive conduct. It prohibits PoolCorp from:

• Conditioning the purchase or sale of pool products, or membership in PoolCorp's preferred vendor program, on the intended or actual sale of pool products by a manufacturer to any other distributor;
• Pressuring, urging, or otherwise coercing manufacturers to stop selling, or to limit their sales, to any other distributor; and
• Discriminating or retaliating against a manufacturer for selling, or intending to sell, pool products to any other distributor.

The settlement order also requires PoolCorp to put in place an antitrust compliance program to ensure it does not violate the terms of the order in the future.