[Federal Register Volume 85, Number 140 (Tuesday, July 21, 2020)]
[Notices]
[Pages 44080-44083]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15724]
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FEDERAL TRADE COMMISSION
[File No. 191 0198]
Elanco Animal Health and Bayer Animal Health; Analysis of
Agreement Containing Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement; request for comment.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis to Aid Public Comment describes both the
allegations in the complaint and the terms of the consent order--
embodied in the consent agreement--that would settle these allegations.
DATES: Comments must be received on or before August 20, 2020.
ADDRESSES: Interested parties may file comments online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Please write: ``Elanco and
Bayer; File No. 191 0198'' on your comment, and file your comment
online at https://www.regulations.gov by following the instructions on
the web-based form. If you prefer to file your comment on paper, please
mail your comment to the following address: Federal Trade Commission,
Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610
(Annex D), Washington, DC 20580; or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: Joseph Lipinsky (206-220-4473), Bureau
of Competition, Federal Trade Commission, 600 Pennsylvania Avenue NW,
Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned
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consent agreement containing a consent order to cease and desist,
having been filed with and accepted, subject to final approval, by the
Commission, has been placed on the public record for a period of thirty
(30) days. The following Analysis of Agreement Containing Consent
Orders to Aid Public Comment describes the terms of the consent
agreement and the allegations in the complaint. An electronic copy of
the full text of the consent agreement package can be obtained from the
FTC website (for July 15, 2020), at this web address: https://www.ftc.gov/news-events/commission-actions.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before August 20, 2020.
Write ``Elanco and Bayer; File No. 191 0198'' on your comment. Your
comment--including your name and your state--will be placed on the
public record of this proceeding, including, to the extent practicable,
on the https://www.regulations.gov website.
Due to the public health emergency in response to the COVID-19
outbreak and the agency's heightened security screening, postal mail
addressed to the Commission will be subject to delay. We strongly
encourage you to submit your comments online through the https://www.regulations.gov website.
If you prefer to file your comment on paper, write ``Elanco and
Bayer; File No. 191 0198'' on your comment and on the envelope, and
mail your comment to the following address: Federal Trade Commission,
Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610
(Annex D), Washington, DC 20580; or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024. If possible, submit your paper comment to the
Commission by courier or overnight service.
Because your comment will be placed on the publicly accessible
website at https://www.regulations.gov, you are solely responsible for
making sure that your comment does not include any sensitive or
confidential information. In particular, your comment should not
include any sensitive personal information, such as your or anyone
else's Social Security number; date of birth; driver's license number
or other state identification number, or foreign country equivalent;
passport number; financial account number; or credit or debit card
number. You are also solely responsible for making sure your comment
does not include any sensitive health information, such as medical
records or other individually identifiable health information. In
addition, your comment should not include any ``trade secret or any
commercial or financial information which . . . is privileged or
confidential''--as provided by Section 6(f) of the FTC Act, 15 U.S.C.
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)--including in
particular competitively sensitive information such as costs, sales
statistics, inventories, formulas, patterns, devices, manufacturing
processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular,
the written request for confidential treatment that accompanies the
comment must include the factual and legal basis for the request, and
must identify the specific portions of the comment to be withheld from
the public record. See FTC Rule 4.9(c). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted on the public FTC website--as legally required by FTC Rule
4.9(b)--we cannot redact or remove your comment from the FTC website,
unless you submit a confidentiality request that meets the requirements
for such treatment under FTC Rule 4.9(c), and the General Counsel
grants that request.
Visit the FTC website at http://www.ftc.gov to read this Notice and
the news release describing this matter. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding, as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before August 20, 2020. For information on the
Commission's privacy policy, including routine uses permitted by the
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') with Elanco Animal Health, Inc. (``Elanco''), and Bayer
Animal Health, GmbH (``Bayer''). The proposed Consent Agreement is
intended to remedy the anticompetitive effects that likely would result
from Elanco's proposed acquisition of Bayer (the ``Proposed
Acquisition'').
Pursuant to a Share and Asset Purchase Agreement dated August 20,
2019, Elanco proposes to acquire all of the Bayer Animal Health assets
for approximately $7.6 billion. Both parties sell low-dose prescription
treatments for canine otitis externa, fast-acting oral treatments that
kill adult fleas on canines, and brand name cattle pour-on
insecticides. The Commission alleges in its Complaint that the Proposed
Acquisition, if consummated, would violate Section 7 of the Clayton
Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal Trade
Commission Act, as amended, 15 U.S.C. 45, by lessening competition in
the U.S. market for these three product categories.
The proposed Consent Agreement will remedy the alleged violations
by preserving the competition that would otherwise be eliminated by the
Proposed Acquisition. Specifically, under the terms of the proposed
Consent Agreement, Elanco is required to divest its canine otitis
externa treatment product, Osurnia, to Dechra Pharmaceuticals PLC
(``Dechra''), its fast-acting oral treatment that kills adult fleas on
canines, Capstar, to PetIQ, Inc. (``PetIQ''), and its brand name cattle
pour-on product, StandGuard, to Neogen Corporation (``Neogen'').
II. The Relevant Products and Competitive Effects
The Commission's Complaint alleges three relevant product markets
within which to analyze the Proposed Acquisition. The first relevant
product market is low-dose prescription treatments for canine otitis
externa. Canine otitis externa is an inflammation of the outer ear
caused by bacteria and/or yeast. Common symptoms of otitis externa
include pain, itching, redness, scaling, and swelling of the ear canal,
and may result in serious complications if left untreated. Numerous
prescription products treat canine otitis externa, but only the
parties' products--Elanco's Osurnia and Bayer's Claro--require only one
or two doses to treat the condition. Bayer's prescription otitis
externa treatment product, Claro, is a single-dose otic solution, while
Elanco's product, Osurnia, is an otic gel given in two doses seven days
apart. While other prescription products can be used to treat canine
otitis externa, these other products require numerous applications to
the ear canal, up to twice daily for 14 consecutive days, and are thus
not reasonable substitutes for the parties' products, which are
considerably more convenient to use. As such, the
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Proposed Acquisition would create a monopoly by combining the only two
low-dose prescription products that treat canine otitis externa.
A second relevant product market is fast-acting oral treatments
that kill adult fleas on canines. While there are numerous products
that kill and prevent fleas on dogs, most are slower-acting or
preventative, targeting flea larvae. In contrast, Elanco's Capstar and
Bayer's Advantus start killing adult fleas quickly (within 30 minutes
for Capstar, and within 60 minutes for Advantus), and eliminate all
adult fleas within four hours. Medicated shampoos and sprays that can
be used to kill adult fleas are much less convenient to administer and
are slower-acting. As Elanco's Capstar and Bayer's Advantus are the
only fast-acting oral treatments that kill adult fleas on canines, the
Proposed Acquisition would also create a monopoly for fast-acting oral
treatments that kill adult fleas on canines.
A third relevant product market is brand name cattle pour-on
insecticides. Cattle pour-on insecticides are liquid parasiticides
administered directly to cattle's skin that kill and deter biting
flies, lice, and mites. Many customers trust and rely on brand name
cattle pour-on insecticides rather than generic products. As a result,
generic cattle pour-on insecticides are not a reasonable substitute for
the parties' brand-name cattle pour-on insecticides. The market for
brand name cattle pour-on insecticides is highly concentrated. Bayer is
the market leader, selling three cattle pour-on insecticide products
(Clean-Up II, Cylence, and Permectrin). The only other competitors with
meaningful sales in the market are Merck & Co., Inc., which sells four
products, and Elanco, which sells StandGuard. Thus, the Proposed
Acquisition would allow the third largest competitor, Elanco, to
acquire the market leader, Bayer, significantly increasing
concentration in brand name cattle pour-on insecticides. Moreover, to
avoid insects becoming resistant to the active ingredients in
insecticides, cattle producers typically cycle through different pour-
on insecticides. Elanco's StandGuard and Bayer's Cylence have similar
chemical structures and may compete for and occupy the same slot in
cattle producers' pour-on insecticide rotation.
The United States is the relevant geographic market in which to
assess the competitive effects of the Proposed Acquisition. Each of
these products must be approved by the FDA and/or EPA before being sold
in the United States. Thus, products sold outside the United States,
but not approved for sale in the United States, are not alternatives
for U.S. consumers.
III. Entry
Entry into the U.S. market for low-dose prescription treatments for
canine otitis externa, fast-acting oral treatments that kill adult
fleas on canines, and brand name cattle pour-on insecticides would not
be timely, likely, or sufficient in magnitude, character, and scope to
deter or counteract the anticompetitive effects of the Proposed
Acquisition. Several major obstacles stand in the way of a prospective
entrant. De novo entry would require significant investment to, among
other things, develop products, obtain regulatory approval, where
needed, and establish recognized brand names. Moreover, entry would be
unlikely because the required investment would be difficult to justify
given the sales opportunities in the affected markets.
IV. The Proposed Consent Agreement
The proposed Consent Agreement effectively remedies the Proposed
Acquisition's anticompetitive effects in the three relevant product
markets by requiring the parties to divest the rights and assets
related to Elanco's products in each of the markets. The proposed
Consent Agreement requires Elanco to divest Osurnia to Dechra, Capstar
to PetIQ, and StandGuard to Neogen. The Order requires Elanco to divest
the relevant rights and interests in these products no later than ten
days after the consummation of the Proposed Acquisition.
Dechra, headquartered in Northwich, England, is a global animal
health company and is publicly traded on the London Stock Exchange.
Dechra has significant presence and experience in the United States,
operating in the United States for over 15 years and offering more than
80 U.S. products, including both prescription and non-prescription
companion animal products. Osurnia will complement Dechra's broad
dermatology portfolio, which includes Animax Ointment, an
antibacterial, antifungal, and anti-inflammatory skin application that
is a daily-dose treatment and is indicated for multiple skin
conditions, anal gland infections in dogs, as well as canine otitis
externa. Although Animax can treat canine otitis externa, it is not a
direct competitor to Osurnia given it is an older generation product
requiring daily application to treat the condition.
PetIQ, headquartered in Boise, Idaho, is a rapidly growing pet
health and wellness company. It has served as Elanco's exclusive
distributor of Capstar to retailers since 2018. Capstar aligns well
with the other products for dogs in PetIQ's portfolio. PetIQ's products
include complementary flea and tick products for dogs that offer longer
lasting treatments to kill eggs and larvae and are sold under the
Sergeant's, Advecta, and Sentry brand names. PetIQ sells products
through all the companion animal retail channels through which Elanco
currently sells Capstar and also sells its current product lines to pet
specialty retailers, mass merchandisers/grocers, club stores, and e-
commerce sites.
Neogen, headquartered in Lansing, Michigan, is a global animal and
food safety company offering a wide portfolio of solutions, including
insecticides, diagnostic test kits to detect contamination in animal
feed, animal pharmaceuticals, vaccines, and diagnostics for production
animals. Neogen currently markets and sells its products through the
same distribution channels Elanco uses for StandGuard. In addition,
Neogen manufactures and sells liquid insecticides and aerosol products
used both on livestock and for in-premise insect control, and it has
the capability to manufacture StandGuard in-house.
Each of the divestitures requires Elanco to transfer all supply
input and other manufacturing contracts, business information, product
approvals (including relevant FDA marketing authorizations),
intellectual property, and other related assets to the relevant
divestiture buyer. The proposed Consent Agreement also contains
provisions to ensure that the divestitures are successful and timely,
including provisions that require Elanco to provide the purchasers the
opportunity to review product contracts and to designate knowledgeable
employees to assist each divestiture buyer in transferring and
integrating the relevant divested product into its business.
The Commission will appoint an Interim Monitor to ensure that the
parties comply with all of their obligations pursuant to the Consent
Agreement and to keep the Commission informed about the status of the
transfer of the rights and assets to Dechra, PetIQ, and Neogen. The
Commission's goal in evaluating possible purchasers of divested rights
and assets is to maintain the competitive environment that existed
prior to the Proposed Acquisition.
The Commission does not intend this analysis to constitute an
official interpretation of the proposed Order or to modify its terms in
any way.
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By direction of the Commission, Commissioner Slaughter not
participating.
April J. Tabor,
Secretary.
[FR Doc. 2020-15724 Filed 7-20-20; 8:45 am]
BILLING CODE 6750-01-P