Gore under investigation

R.E.I.'s eVent is a 3-layer waterproof and breathable fabric used in outerwear, similar to Gore-Tex. REI

At the 2008 Outdoor Retailer winter tradeshow, the gear behemoth R.E.I. unveiled a new line of jackets and pants made with a patented waterproof, breathable fabric called eVent, which had been marketed as a challenger to the industry-leading Gore-Tex.

It was a bold move for a giant like R.E.I. to commit to eVent, and it sent a message to W.L. Gore & Associates, Inc., maker of Gore-Tex, which at the time was a key ingredient in R.E.I.'s branded footwear line (and had been for a decade). What happened next could factor into a pair of landmark antitrust investigations currently focused on Gore's business practices in the U.S. and Europe.

According to R.E.I.'s director of corporate communications, Libby Catalinich, "Shortly after we introduced our eVent line, Gore terminated our footwear license. They pulled the licenses of the manufacturers who made the boots for us. It essentially eliminated our R.E.I.-branded footwear."

When asked about the case, Gore spokesman Michael Ratchford said he was not familiar with it. "And normally we wouldn't comment on something like that," he said.

Catalinich confirmed July 1 that her company has been in contact with the Federal Trade Commission (FTC), which has conducted a "non-public" investigation of Gore since at least Nov. 5, 2010, according to a letter sent that day by the FTC to Gore. The letter read in part: "Conduct under investigation includes, but is not limited to Gore policies, practices or contracts, agreements, and communications with customers, manufacturers, distributors, or retailers that restrict customers' ability to deal with competing suppliers."

One month before that letter was sent, in October 2010, Oregon-based gear giant Columbia filed a complaint against Gore with the Commission of the European Union, initiating an investigation there. Columbia had purchased an Italian subsidiary and Gore competitor shortly before filing its complaint. According to a recent press release issued by Columbia to clarify its stance, Gore "abuses its dominant position" in the waterproof/breathable gloves and footwear markets, employing practices that senior vice president Peter Bragdon claimed "systematically prevent consumers, brand owners and manufacturers from gaining access to competing product innovations."

Gore's Ratchford denied the charges: "Allegations that we've engaged in unfair practices are without merit."

Neither the FTC nor the European Union (which had yet to contact Gore as of July 1) is commenting about its investigation, and virtually no one in the industry is talking on the record about Gore. Numerous competing brands declined interview requests for this story, most of them content to watch from the sidelines. Ironically, if Gore hadn't challenged the FTC's subpoena for 10 years' worth of corporate documents and records, everything in the case would be sealed. That challenge was rejected by the FTC, and now many details of the case are available on the FTC's website, in letters between Gore and the FTC.

The letters paint a thorny picture. Basically, the FTC asked Gore to produce every document, email, memo and record from every employee who works or worked in its fabrics division (which is only a small fraction of Gore's overall business) over the past decade -- "a complete search of all the files of the company." Gore scoffed at the feds' demand, claiming that to round up the information would cost up to $10 million. "This is not an appropriate way for the [FTC] staff to conduct an investigation," Gore's lawyers responded.

Alas, the FTC didn't budge, and Gore was supposed to have complied with the subpoena by June 7. FTC spokesman Mitchell Katz wouldn't confirm or deny whether Gore complied in time, but Ratchford said his company met the deadline and continues to supply the FTC with information.

Among the documents requested by the FTC were any relating to "Exclusive Dealing Agreements" between Gore and its customers. The FTC also requested information on how Gore trains its employees, its strategic plans, and details on any business relationships that had been discontinued.

Though it's unclear what potential punishment Gore faces in Europe, the company could suffer only a public reprimand if found to have violated federal laws in the U.S. Fines are rarely imposed for a first offense, Katz said; a "settlement with conduct prohibitions" is a more standard outcome.