Antitrust Case Alleges IDEXX Labs Caused Pet Owners to Pay Inflated Prices for Veterinary Diagnostic Tests

New to ClassAction.org? Read our Newswire Disclaimer

A proposed class action alleges “anticompetitive behavior” on the part of IDEXX Laboratories and IDEXX Distribution has caused pet owners nationwide to pay artificially inflated prices for certain veterinary diagnostic tests and other items. 

The 92-page antitrust complaint was filed in California by nearly two dozen plaintiffs who allege IDEXX achieved and protected its dominant market position through “illegal long-term exclusive agreements” with veterinary product distributors. The lawsuit says that these agreements allowed IDEXX to block rivals from competing in the market and submarkets for veterinary diagnostic tests, which are critical in allowing vets to test, diagnose and treat certain conditions in a single office visit, by cutting them off from product distributors. 

After a 2013 Federal Trade Commission (FTC) order hampered IDEXX’s efforts to cut off competitors from distributors, however, the company switched to an “even more direct and effective route for foreclosing competition” by entering into long-term exclusive contracts with veterinary practices themselves, the lawsuit contends. In this way, IDEXX used its dominant position in the market to make it “prohibitively expensive” for practices to switch to one of the company’s rivals and thus nearly impossible for competitors to gain market share, the suit says. 

“IDEXX has a greater than 70% share of sales in the United States in the [point-of-care] Diagnostic Products market and submarkets for (a) analyzers and their compatible consumables, and (b) single-use rapid test kits...,” the case states. “IDEXX has repeatedly violated the antitrust laws to maintain and enhance its dominance.” 

Per the case, IDEXX provides point-of-care diagnostic tests, called analyzers; supplies used in conjunction with the tests, including reagents and slides; and single-use rapid test kits used by vets to run critical tests. IDEXX’s products provide real-time results that cannot be obtained through, for instance, services offered by outside labs, the suit says. 

According to the lawsuit, the Federal Trade Commission (FTC) in February 2013 ordered IDEXX to discontinue its use of exclusive distribution agreements with three national distributors, and required that future distribution agreements be non-exclusive and capped at two years. Further, the FTC prohibited IDEXX from withholding or threatening to withhold its products from distributors or retaliating against them for carrying diagnostic products made by the defendant’s rivals, the filing says. 

Rather than compete on merit in the market for point-of-care diagnostic testing products, IDEXX, the lawsuit relays, “upended its entire distribution network,” cutting loose distributors on whom it previously relied, in order to maintain the “exclusive restraints” it had in place without running afoul of the FTC’s order. 

The suit says that after cutting out distributors, IDEXX switched to a direct sales strategy and “proceeded to lock the vast majority of veterinary practices into long-term exclusive agreements,” thereby foreclosing competition in the market and maintaining and enhancing its monopoly power over point-of-care diagnostic testing products. 

Per the case, IDEXX’s exclusive contracts initially run for six-year terms, and include steep purchase requirements and equally steep “disloyalty” penalty provisions, all of which, the suit relays, are scaled to a veterinary practice’s individual purchase history to “optimize their lock-in effects.” Further, the lawsuit says that IDEXX lengthens its already exclusive contracts by including automatic renewal provisions in some while extending most others well in advance of their expiration, locking vets into arrangements that run longer than the initial six-year term.

Should a practice fall behind on purchase requirements, the complaint goes on, IDEXX is able to “leverage that indebtedness” into a longer lock-in period, in particular by allowing payments in arrears to be extended over a longer period of time in exchange for a practice’s agreement to extend their contract. 

“As a result, once practices sign the long-term deals with IDEXX, many find themselves unable to terminate them, ever, without risking ruinous financial penalties, and thus the exclusive contracts often extend in perpetuity—thereby blocking rivals and potential rivals from accessing the vast majority of customers,” the lawsuit says. 

According to the complaint, IDEXX’s practice of scaling the financial penalties for practices who give their diagnostic test business to any other company to the size of each individual practice means that any vet who tries to extricate itself from IDEXX’s six-year contract faces “business-crippling” penalties as high as six years’ worth of the practice’s typical spending on point-of-care diagnostic tests. Practices who cannot meet their contractual requirements are subject to “aggressive collection actions” that “are not mere threats that IDEXX uses to browbeat veterinary practices into meeting their minimum spend requirements,” the suit says. 

Further still, the filing states that IDEXX’s contracts include a “loser pays” provision, under which a practice who unsuccessfully tries to stand up to the defendant’s litigious debt collection tactics is left to pay IDEXX’s legal fees and court costs. 

Ultimately, IDEXX has left competitors foreclosed from having any financially viable opportunity to compete for the business of the vast majority of veterinary practices that buy point-of-care diagnostic testing products, the lawsuit alleges. 

“Indeed, as a result of IDEXX’s tactics, including renewing contacts before they reach the end of their terms, out of the 16,000 to 20,000 veterinary practices in the United States that buy [point-of-care] Diagnostic Products from IDEXX, less than 2.5% are ever able to get out from under IDEXX’s thumb in any given year,” the case alleges. 

The suit looks to cover all persons or entities in Arizona, California, District of Columbia, Florida, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, West Virginia, and Wisconsin who indirectly purchased, paid and/or provided reimbursement for some or all of the purchase price of IDEXX point-of-care analyzers, consumables or single-use rapid test kits for companion animals, other than for resale, at any time from July 26, 2018 through and until the allegedly anticompetitive effects of the challenged conduct cease. 

Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s free weekly newsletter here.