FTC, States Sue Pesticide Makers Over Exclusionary Schemes to Block Generics

Syngenta and Corteva used “loyalty programs” to cut off competition and inflate prices paid by farmers and consumers, suit says.

The Federal Trade Commission and 10 state attorneys general have sued pesticide manufacturers Syngenta Crop Protection AG (and related companies) and Corteva, Inc. in federal court in North Carolina for allegedly paying distributors to block competitors from selling their cheaper generic products to farmers.

Syngenta Crop Protection AG’s global headquarters are in Switzerland, but it is an indirect subsidiary of a large Chinese chemical company. Its North American headquarters are in North Carolina, where the suit was filed, and it is incorporated in Delaware. Corteva is headquartered in Indianapolis, Indiana, and incorporated in Delaware. Generating more than $13 billion annually, it is the successor company to the agriscience businesses of E.I. du Pont de Nemours and Dow Chemical Company. Corteva is incorporated in Delaware. Its annual revenues are nearly $15.7 billion.

In addition to the FTC, the plaintiffs are the states of California, Colorado, Illinois, Indiana, Iowa, Minnesota, Nebraska, Oregon, Texas, and Wisconsin (FTC, et al. v. Syngenta and Corteva, et al., Case 1:22-cv-00828, M.D. N.C.). Both companies do business in North Carolina, which is not part of the suit.

Every year U.S. farmers spend more than $10 billion on pesticides, crucial to crop yields and food security for everyone in the United States, the complaint says. “And every year, U.S. farmers collectively pay many millions of dollars more than they should for these products because of Defendants’ so-called ‘loyalty programs,’ which function as unlawful exclusionary schemes. Defendants design those programs to exclude and marginalize competitive generic products even after relevant patent and regulatory exclusivity periods expire and thereby to maintain excessive, supracompetitive prices. This law enforcement action seeks to end those ‘loyalty programs’ and restore competition in this vital sector of the economy.”

The federal and state attorneys say Congress enacted a comprehensive regulatory regime for the crop protection industry to promote innovation and competition. Syngenta and Corteva initially develop, patent, and register the active ingredients within these products and are able to exploit their commercial potential via exclusive rights for a period of years. When patents expire, generic manufacturers may then enter the market with equivalent products. “Unimpeded competition from generic products predictably leads to dramatic price reductions. This regulatory structure thus incentivizes innovation while encouraging price and other competition—all of which benefits U.S. farmers and consumers,” the complaint explains. However, it continues, Syngenta and Corteva “systematically undermine and frustrate the goals of this system” by using “loyalty programs to exclude generic manufacturers from the traditional distribution channel, which is a critical link between manufacturers and farmers.” The full details of the programs are heavily redacted from the complaint.

The causes of action include Unfair Methods of Competition in Violation of Section 5 of the FTC Act; Unlawful Conditioning of Payments in Violation of Section 3 of The Clayton Act; Unreasonable Restraints of Trade in Violation of Section 1 of the Sherman Act; Unlawful Monopolization in Violation of Section 2 of the Sherman Act; Violation of California’s Cartwright Act, California Business and Professions Code Section 16700; and violations of antitrust laws of each of the other states.

Edited by Tom Hagy for MoginRubin LLP.

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