On August 1, 2024, a unanimous jury in the United States District Court for the Northern District of California found plaintiff, a veterinary drug manufacturer, failed to allege a relevant antitrust market under Sherman Act, Section 2 and Clayton Act, Section 3 to support its claims against a rival company for allegedly restraining trade in the flea and tick treatment industry. Because plaintiff failed on this threshold question, the jury did not need to consider any other elements of plaintiff’s claims, and the court entered a verdict in favor of defendant. Tevra Brands LLC v. Bayer HealthCare LLC, No. 5:19-cv-04312 (N.D. Cal. July 26, 2019).
Plaintiff filed its initial complaint in July 2019, alleging that defendant violated Sherman Act, Section 2 and Clayton Act, Section 3 by instituting exclusive dealing and illegal tying schemes involving over-the-counter “Imodacloprid” topical flea and tick treatments purchased by retailers across the U.S. See Tevra Brands LLC v. Bayer HealthCare LLC, No. 5:19-cv-04312 Compl. 2 (N.D. Cal. July 26, 2019). Plaintiff alleged that defendant entered into “Secret Bundled Loyalty Rebate” agreements whereby retailers were forced to carry only defendant’s brand name product and could not sell generic alternatives. Plaintiff alleged that defendant economically coerced retailers to carry and sell its product by illegally tying the purchase of Imodacloprid to defendant’s “must have” flea collar, which defendant maintained exclusive use over pursuant to a registered formulation with the U.S. Environmental Protection Agency. Additionally, plaintiff also alleged that defendant entered illegal agreements requiring buyers (retailers of the products) to sell certain quantities of defendant’s other products to receive rebates.
In its Second Amendment Complaint, plaintiff provided further clarity about its alleged market, defining it as “topical flea and tick products for dogs and cats containing Imidacloprid.” See Tevra Brands LLC v. Bayer HealthCare LLC, No. 5:19-cv-04312 2d Amended Compl. 6 (N.D. Cal. July 26, 2019). Plaintiff alleged that defendant monitored competition with substitutes (i.e., topicals utilizing different active ingredients) to determine price elasticity and found that those products were “weaker” alternatives that customers did not switch to in response to price increases. Plaintiff argued that these products could not be included in the relevant market based on defendant’s own studies. Further, plaintiff alleged that topical flea and tick products containing Imdacloprid could not be reasonably substituted by flea collars, oral medications, sprays, wipes, or shampoos as these had different efficacies and were aimed at relieving itching and pain for tick-infested animals. Additionally, plaintiffs argued that retailers indicated they did not view these products as reasonable substitutes. Plaintiff’s Second Amended Complaint alleged that defendant foreclosed at least 56% of the relevant antitrust market, even where plaintiff offered a significantly lower price, by maintaining exclusive dealing arrangements with retailers.
Previously, on May 1, 2024, the Court had denied in part defendant’s Motion for Summary Judgment, finding plaintiff’s arguments persuasive and determining that the evidence plaintiff relied on created a “genuine issue of material fact” as to whether the agreements were short-term and easily terminable.
This case serves as a reminder of the importance of market definition in antitrust cases. And, even where a defendant is ultimately successful on this threshold question at trial, the evidence may not be sufficiently clear to dispose of a case at the summary judgment stage.
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