Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Elanco and pet product retailers allegedly fixed the prices for Imidacloprid topicals, suit alleges, (Jan 31, 2025)

By Seth Abrams, J.D., M.A.

Alleged agreements kept generic Imidacloprid topicals from being sold at major pet product retailers.

A consumer has brought a putative antitrust class action on behalf of consumers and businesses who are direct purchasers of Imidacloprid topical pet products manufactured by Elanco Animal Health, Inc. Filed in the federal district court in Indianapolis, Indiana, the complaint was brought against Elanco, as well as pet product retailers, Chewy, Inc, Petco Health and Wellness Company, Inc., PetMed Express, Inc., Tractor Supply Company, and PetSmart, Inc. (collectively, the “Retailer Defendants”) for violation of both Section 1 and Section 2 of the Sherman Act. The complaint alleged that Elanco fixed the price of Imidacloprid topical pet products by entering into agreements with the Retailer Defendants to exclude generic Imidacloprid products from sale (Kraus-Silfen v. Elanco Animal Health, Inc., No. 1:25-cv-00168-JPH-MJD (S.D. Ind. Jan. 24, 2025)).

Elanco manufactures squeeze-on topical tick and flea prevention for cats and dogs. These products contain Imidacloprid, which are sold under the brand names, Advantage II and K9 Advantix II. In 2018, manufacturers sold approximately $270 million in Imidacloprid topicals, with 25% going to veterinarian offices with the rest sold to consumers—primarily through the Retailer Defendants. The consumer had purchased these products from one or more of the Retailer Defendants on numerous occasions since 2020. Her most recent purchase was on June 11, 2024, when she purchased Advantix Products for $79.98.

Elanco acquired Bayer Healthcare LLC’s animal health and products division, including the Advantix product line, in August 2020, for $6.89 billion. Elanco has a “near-perfect monopoly” with 100% of the market share for Imidacloprid topicals, with 85% of sales conducted by Elanco and the remaining 15% conducted by companies licensed or otherwise affiliated with Elanco. It uses this monopoly power to exclude other competitors in the market and cause a significant price increase. As a result, consumers allegedly have suffered in the form of supracompetitive prices.

The consumer alleged that Elanco had a series of verbal no-generic deals with the Retailer Defendants. These agreements provide that Elanco will “pay higher margins to the Retailer Defendants on the sale of Imidacloprid products if—and only if—the Retailer Defendants refuse to carry lower-cost generic alternatives.” Generic alternatives to Advantix Products often retail for approximately half the price at which Advantix products are sold at by the Retail Defendants, constituting significant damages from the alleged price fixing. The alleged agreements, originally allegedly put in place by Bayer, have been continued by Elanco. The agreements are in a “hub and spoke” design. These “no generics” agreements are alleged to satisfy the small but significant non-transitory increase in price (“SSNIP”) test, as defendants’ conduct “results in profits far exceeding those of a hypothetical SSNIP.” In addition, Elanco is alleged to have used monopolistic tactics to have the Retailer Defendants refuse to sell a generic Imidacloprid topical manufactured by its competitor, Tevra.

Alleged market. The relevant market is the U.S. market for “topical, squeeze-on flea-and-tick products for dogs and cats whose active ingredient is Imidacloprid.” It is alleged that Imidacloprid products are distinct and products containing different, even if similar, compounds are not reasonable replacements. This includes Fipronil products, which are alleged to not be a reasonable replacement because they do not include a repellent effect to prevent bites.

Claims. The consumer brought claims under Section 1 and Section 2 of the Sherman Act. For Section 1, the consumer alleged that the defendants formed an unlawful contract, combination, or conspiracy in unreasonable restraint of trade to “raise, fix, maintain or stabilize prices” in the relevant market. This is based on agreements—in a hub and spoke formation—since at least 2016 between Elanco (as Bayer) and the Retailer Defendants. The consumer also alleged that this conduct is unlawful under a per se standard as well as under “quick look” or “rule of reason” because the “agreement is factually anticompetitive with no valid procompetitive justification.” For Section 2 of the Sherman Act, the consumer alleged that Elanco, along with the Retailer Defendants, had intentionally engaged in a conspiracy to “acquire, maintain, or attempt to maintain monopoly power in the relevant market through a course of anticompetitive conduct and exclusionary agreements.”

Relief sought. The consumer asked the court for (1) certification of the class; (2) a judgment against defendants holding defendants liable for the antitrust violations alleged; (3) a declaratory judgment that the agreements between “Elanco and the Retailer Defendants were made for illegal, anticompetitive purposes were an unreasonable restraint of trade, and had anticompetitive effects on the relevant market in violation of the antitrust laws;” (4) damages, including treble damages as permitted; (5) equitable relief; and (6) costs of the suit, including attorney fees.

The Case is No. 1:25-cv-00168-JPH-MJD.

Judge: Hanlon, J.

Attorneys: Edward B. Mulligan (Cohen & Malad LLP) for Susan Kraus-Silfen.

Companies: Elanco Animal Health, Inc.; Chewy, Inc.

MainStory: TopStory Antitrust IndianaNews GCNNews