Tevra Brands LLC v. Bayer HealthCare LLC

Background

Tevra Brands LLC brought three federal antitrust claims against Bayer HealthCare LLC: exclusive dealing under Section 1 of the Sherman Act, monopolization under Section 2 of the Sherman Act, and exclusive dealing under Section 3 of the Clayton Act. Tevra alleged that Bayer used agreements with retailers and distributors, along with discounts, rebates, growth bonuses, trade funds, and other monetary incentives, to discourage those businesses from selling generic imidacloprid flea and tick treatments for dogs and cats.

Bayer moved for summary judgment on all three claims. It argued that Tevra had not identified a legally valid relevant market, that Bayer’s agreements were short-term and easily terminable, that the agreements did not block a substantial share of the market, and that Bayer lacked monopoly power. Bayer also sought summary judgment that it was not liable for damages after July 31, 2020, after Bayer transferred its animal health business to Elanco Animal Health Inc.

Expert Market Evidence

Bayer challenged the relevant-market opinion of Tevra’s expert, Dr. Paul Wong, under Federal Rule of Evidence 702 and the standard established in Daubert. Dr. Wong defined the relevant market as sales of imidacloprid spot-on flea and tick treatments by manufacturers to wholesale customers in the United States. His analysis included a SSNIP test—a method asking whether a hypothetical monopolist could profitably impose a small but significant and lasting price increase—and a difference-in-differences regression comparing imidacloprid products with fipronil products after generic fipronil products entered the market.

The court rejected Bayer’s request to exclude Dr. Wong’s opinion. Although the court found that Dr. Wong’s observation of price and sales changes over a six-year period, standing alone, would present problems, it concluded that his broader analysis also examined possible consumer substitution between imidacloprid and fipronil products. The court held that Tevra had shown that the opinion was more likely than not reliable under Rule 702 and Daubert. The court treated Bayer’s criticisms about inflation, estimated data, intervening events, and other market evidence as challenges to the weight of the opinion rather than its admissibility.

Exclusive Dealing Claims

The court held that factual disputes prevented summary judgment on Tevra’s exclusive dealing claims. Bayer relied on the written agreements’ stated duration and termination provisions. Tevra, however, presented evidence that Bayer used discounts and other financial incentives to pressure retailers and distributors not to carry generic products. The court concluded that this evidence created a genuine dispute about whether the agreements were effectively difficult to terminate despite their written terms.

The parties’ experts also disputed how much of the market Bayer’s agreements foreclosed. Dr. Wong calculated that the agreements covered, on average, 37.0 percent of imidacloprid spot-on doses and 38.2 percent of dollar sales between 2016 and 2020. Bayer’s expert calculated that less than 30 percent of Tevra’s potential sales were foreclosed by considering additional retailers that sold fipronil products but not imidacloprid products.

The court found that this disagreement raised another factual issue. It stated that alternative distribution channels matter, but that their mere existence does not resolve whether substantial foreclosure occurred. Because Dr. Wong’s market opinion was admissible and his foreclosure calculation was sufficient to create a factual dispute, the court could not decide as a matter of law that Bayer’s agreements failed to foreclose a substantial share of the market. The court therefore denied summary judgment on Tevra’s Section 1 Sherman Act and Section 3 Clayton Act exclusive dealing claims.

Monopolization Claim

For Tevra’s Section 2 monopolization claim, Bayer argued that it lacked monopoly power in a properly defined market and that its market share was never above 31 percent in a topical-only market. Tevra relied on Dr. Wong’s estimate that Bayer controlled 95 percent of Tevra’s proposed relevant market.

The court concluded that the conflicting expert evidence created a factual dispute that precluded summary judgment. Because factual disputes also prevented summary judgment on the alleged exclusionary conduct under Section 1, Bayer’s argument that there could be no Section 2 violation likewise failed. The court denied Bayer’s motion for summary judgment on the Section 2 monopolization claim.

Damages After July 31, 2020

The parties did not dispute that Bayer completed the sale of its animal health business to Elanco on or around August 1, 2020. Tevra argued that contracts with retailers and distributors continued after Bayer’s divestiture and that those continuing contracts caused damage. When questioned at the hearing, however, Tevra offered no evidence or explanation showing how Bayer caused additional harm after the divestiture.

The court found that Tevra had not presented evidence creating a genuine dispute of material fact about Bayer’s liability for damages after July 31, 2020. It granted Bayer’s motion for summary judgment that Bayer was not liable for damages after that date.

Order

The court ordered that:

The classification is a substantive ruling because the court decided a summary judgment motion addressing the merits of the antitrust claims, while leaving factual issues for further proceedings.