Idexx Laboratories, which has its headquarters in Westbrook, has been sued by a group of 22 pet owners. Staff Photographer/Ben McCanna
Twenty-two pet owners are suing animal-health products maker Idexx Laboratories, alleging it has violated antitrust laws by locking veterinarians into long-term contracts that reduce fair competition and inflate prices for diagnostic tests.
The class-action lawsuit against the Westbrook company was filed in California five months ago and moved to U.S. District Court in Portland on Monday.
The 92-page complaint focuses on test kits and devices that veterinarians use at their clinics to help diagnose and treat animal conditions such as heartworm, or during emergency care. The products provide real-time results that can’t be replicated through offsite laboratories.
Idexx holds the lion’s share of U.S. sales in this market – over 70%, according to the suit. The company’s closest rivals are Heska Corp., of Colorado, and Zoetis Inc. of New Jersey.
The suit contends Idexx dominates sales through an “anticompetitive scheme” involving predatory contracts with veterinarians across the country.
The six-year agreements come with steep purchasing requirements – between $20,000 and $95,000 per year – and even steeper “disloyalty” penalty provisions. According to the lawsuit, Idexx structures the exclusive agreements so that if a practice fails to meet the minimum spending requirement or tries to exit the agreement early, Idexx will impose ruinous financial penalties, sometimes as high as $500,000.
The suit alleges that Idexx further lengthens the contracts with automatic renewals well in advance of their expiration, keeping clinics in their contracts for longer than the initial term.
“Once ensnared in the Idexx contract, a veterinary practice is stuck with the following choices: either continue to buy exclusively from Idexx or go out of business,” the lawsuit says.
Through these practices, the complaint states, Idexx has eliminated price competition that would come from a free and fair market. Although the pet owners don’t purchase the products directly, the plaintiffs claim that as a result, they must pay “supracompetitive” prices passed down to them by Idexx clients.
Idexx says the claims are meritless and that it will “vigorously defend” itself against them.
“Idexx is passionate about supporting veterinarians and advancing the standard of pet healthcare. We value the partnerships we have with our veterinary customers and are relentlessly focused on innovating and providing effective solutions so that they can help pets lead longer, fuller lives,” the company said in a statement.
Neither individual plaintiffs nor several veterinary practices contacted by the Press Herald would discuss the lawsuit or Idexx’s contracting practices.
The complaint seeks an injunction, jury trial and unspecified damages of more than $5 million. The Companion Animal Group, the Idexx division that sells the products in question, reported $2.88 billion in revenue last year, the lawsuit said.
The U.S. Federal Trade Commission investigated a similar practice by Idexx in 2013. At the time, according to the lawsuit, Idexx held illegal long-term exclusive agreements with veterinary product distributors, which were prevented from working with other diagnostic test makers.
The FTC ordered Idexx to discontinue its use of those contracts and required that future distribution agreements be nonexclusive and capped at two years. The order also prohibited Idexx from withholding or threatening to withhold products from the distributors or retaliating against them.
In response, according to the complaint, Idexx upended its entire distribution network and started working directly with veterinary practices, cutting out the distributors.
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