Idexx Laboratories Inc. has settled a federal complaint that the veterinary diagnostics giant engaged in unfair competition by barring three leading distributors from selling competitors’ products.
The Westbrook, Maine, manufacturer signed a 10-year consent agreement with the Federal Trade Commission under which Idexx this month freed one of the three, MWI Veterinary Supply Co., to distribute rivals’ point-of-care diagnostics products.
Two other large distributors—Butler Shein Animal Health of Dublin, Ohio, and Patterson Veterinary Supply of Devens, Mass.—will be allowed to maintain simultaneous exclusive contracts with Idexx provided MWI is not part of the arrangement.
Idexx, which also makes digital X-ray equipment and practice management software, admitted no wrongdoing.
“We continue to believe that our distribution practices do not violate the antitrust laws, as these same practices have been upheld by two federal courts of appeal,” said Bill Ayers, Idexx’s chairman and CEO. “However, the consent agreement provides a framework that allows us to put an end to the expense and distraction of the FTC investigation and to avoid long and costly litigation with the FTC, while preserving and even strengthening the longstanding relationships we have with our distribution partners.”
Idexx, whose global sales totaled $1.2 billion in 2011, captured at least 70 percent of the U.S. market for POC diagnostics equipment from 2006 to 2011, the FTC reported. The company’s equipment and supplies allow small animal veterinarians to diagnose medical conditions such as heartworm and canine and feline influenza in a single visit.
More than 75 percent of U.S. veterinarians use in-clinic diagnostic testing, the FTC added.
The consent agreement opened the door for Idexx competitor Abaxis Inc. of Union City, Calif., to sell its blood analysis systems through Boise, Idaho-based MWI.
“This FTC action and consent decree, once final, should allow the providers of animal health care…less-biased exposure to the laboratory diagnostic products that are available in the marketplace,” said Martin Mulroy, Abaxis’ chief commercial officer. “I expect it will, as well, open opportunities for greater innovation and reduce the veterinarians’ costs associated with providing essential hospital-based laboratory diagnostics.”
Also doing new business is Heska Corp. of Loveland, Colo. The company declined to comment on the case other than to report that it expects a sales boost through the partnership with MWI.
The federal consent agreement is expected to be finalized after Jan. 24, when a 30-day public comment period expires.
The allegations outlined in the complaint were widespread:
• That Idexx used “monopoly power, the threat of termination and explicit agreements” to prevent top distributors from selling rival products.
• That the company employed “exclusionary practices to successfully diminish, marginalize or force its competitors from the U.S. market.”
• That other manufacturers were “impeded from effectively and efficiently marketing competing POC diagnostic equipment to veterinarians.”
• That Idexx used exclusivity “at the expense of distributors who would prefer to offer a greater variety of POC diagnostic products and veterinarians who could buy cheaper, superior and more convenient POC diagnostic products.”
• That distributors had a “clear and well-founded understanding” that Idexx would cut off the supply of all Idexx product categories to any distributor that sold or promoted a competing product.
The FTC pointed out that more than 85 percent of products and supplies purchased by small animal veterinarians come from one of Idexx’s top five distributors. Besides MWI, Butler Shein and Patterson—formerly Webster Veterinary Supply—the others are regional distributors Victor Medical Co. of Lake Forest, Calif., and Midwest Veterinary Supply Inc. of Burnsville, Minn.
“Veterinarians overwhelmingly prefer to buy through distributors because of the efficiency and customer service they offer,” the FTC stated in a public analysis of the case. “Other purchasing options are less efficient and more costly.”