On 17 November 2011, the Office of Fair Trading (OFT) announced that it has “no grounds to take action” against IDEXX Laboratories Ltd (IDEXX) in relation to alleged abuse of dominance in the veterinary diagnostic testing sector.
Following a complaint, the OFT had been assessing alleged practices of:
- providing discounts on diagnostic testing equipment to vets who agree to use IDEXX’s external laboratory services
- providing free or heavily discounted IDEXX analysers to vets who agree to spend a minimum amount each month on materials to be used with those analysers; and
- offering discounted bundles of external laboratory tests which include a test that is only available from IDEXX. The OFT decided not to proceed further with the case because it considered that on the basis of the evidence it had at its disposal, it was unlikely that IDEXX’s conduct would lead to the foreclosure of actual or potential competitors such as to impair effective competition in the market(s) in question and/or that any potential harm would not cover a sufficiently extensive portion of the market.
The OFT’s “no grounds for action” decision runs to 67 pages and offers a useful overview of the methodologies the OFT used in assessing potential theories of harm relating to alleged mixed bundling (also known as multi-product rebates) and alleged predatory pricing in systems markets (a systems market comprises a piece of equipment – here an analyser – and the consumables used by the equipment).
The complaint made against IDEXX also alleged refusal to supply existing customers and that abusive retroactive rebates were offered. The OFT noted that it closed these elements of the investigation on the basis that they did not meet the OFT’s prioritisation principles. However, the OFT decision noted that a particular type of IDEXX contract contained a claw-back provision for all previous rebates where the customer failed to meet a qualifying monthly purchase level in any month during the agreement period. It is interesting to note that in the decision it is stated that IDEXX confirmed it had never enforced the contractual claw-back provision and that it would remove this provision from all of its contracts of this type. Whether this was due to OFT concerns about claw-backs or some other reason cannot be known.