UNITED STATES OF AMERICA
`BEFORE THE FEDERAL TRADE COMMISSION
`
`COMMISSIONERS:
`
`Joseph J. Simons, Chairman
`Noah Joshua Phillips
`Rohit Chopra
`Rebecca Kelly Slaughter
`Christine S. Wilson
`
`In the Matter of:
`
`Elanco Animal Health, Incorporated,
` a corporation; and
`
`Bayer Aktiengesellschaft
` a corporation.
`
`Docket No. C-4725
`
`COMPLAINT
`Pursuant to the Clayton Act and the Federal Trade Commission Act (“FTC Act”), and its
`authority thereunder, the Federal Trade Commission (“Commission”), having reason to believe
`that Respondent Elanco Animal Health, Inc. (“Elanco”), a corporation subject to the jurisdiction
`of the Commission, has agreed to acquire all of the assets of Bayer Animal Health, GmbH, a
`division of Bayer AG (“Bayer”), a corporation subject to the jurisdiction of the Commission, in
`violation of Section 5 of the FTC Act, as amended, 15 U.S.C § 45, that such acquisition, if
`consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and
`Section 5 of the FTC Act, as amended, 15 U.S.C § 45, and it appearing to the Commission that a
`proceeding in respect thereof would be in the public interest, hereby issues its Complaint, stating
`it charges as follows:
`
`I.
`
`RESPONDENTS
`
`1.
`
`Respondent Elanco is a corporation organized, existing, and doing business under and
`by virtue of the laws of the State of Indiana with its principal executive offices
`located at 2500 Innovation Way, Greenfield, Indiana 46140.
`
`

`

`2.
`
`3.
`
`4.
`
`5.
`
`6.
`
`Respondent Bayer is a corporation organized, existing, and doing business under and
`by virtue of the laws of the Federal Republic of Germany with its principal executive
`offices located at Kaiser-Wilhelm-Allee 1, Leverkusen, Germany 51368. Bayer’s
`United States address for service of process of the Complaint, the Decision and
`Order, and the Order to Maintain Assets solely in this matter is as follows: Bayer
`Corporation, a corporation organized, existing, and doing business under and by
`virtue of the laws of the State of Indiana, with its executive offices and principal place
`of business at 100 Bayer Boulevard Whippany, NJ 07981.
`
`Each Respondent is, and at all times relevant herein has been, engaged in commerce,
`as “commerce” is defined in Section 1 of the Clayton Act as amended, 15 U.S.C. §
`12, and engages in business that is in or affects commerce, as “commerce” is defined
`in Section 4 of the FTC Act, as amended, 15 U.S.C. § 44.
`
`II.
`
`THE PROPOSED TRANSACTION
`
`Pursuant to a Share and Asset Purchase Agreement dated August 20, 2019,
`Respondent Elanco proposes to purchase all of the assets of Bayer Animal Health,
`GmbH, a division of Bayer, for approximately $7.6 billion (the “Acquisition”). The
`Acquisition is subject to Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18.
`
`III.
`
`THE RELEVANT MARKETS
`
`A relevant line of commerce in which to analyze the effects of the Acquisition is the
`research, development, manufacture, and sale of low-dose prescription treatments for
`canine otitis externa. Canine otitis externa is an inflammation of the outer ear caused
`by bacteria and/or yeast. 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 older prescription products can be used to treat
`canine otitis externa, these products require numerous applications to the ear canal, up
`to twice daily for 14 consecutive days. Consequently, these older prescription
`products are not a reasonable substitute for the parties’ low-dose prescription
`products for canine otitis externa.
`
`A relevant line of commerce in which to analyze the effects of the Acquisition is the
`research, development, manufacture, and sale of fast-acting oral treatments that kill
`adult fleas on canines. Elanco’s Capstar and Bayer’s Advantus are tablets that 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 on canines are less convenient to administer
`and are slower-acting. Consequently, medicated shampoos and sprays are not a
`reasonable substitute for the parties’ fast-acting oral treatments that kill adult fleas on
`canines.
`
`2
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`7.
`
`8.
`
`9.
`
`10.
`
`11.
`
`12.
`
`A relevant line of commerce in which to analyze the effects of the Acquisition is the
`research, development, manufacture, and sale of 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.
`Consequently, generic cattle pour-on insecticides are not a reasonable substitute for
`the parties’ brand name cattle pour-on insecticides.
`
`The United States is the relevant geographic area in which to assess the competitive
`effects of the Acquisition in each relevant line of commerce.
`
`IV. MARKET STRUCTURE
`
`Bayer’s Claro and Elanco’s Osurnia are the only low-dose prescription products for
`the treatment of canine otitis externa. Consequently, the Acquisition would create a
`monopoly by combining the only two low-dose prescription products that treat canine
`otitis externa.
`
`Elanco’s Capstar and Bayer’s Advantus are the only fast-acting oral treatments that
`kill adult fleas on canines. Consequently, the Acquisition would create a monopoly
`for fast-acting oral treatments that kill adult fleas on canines.
`
`The market for brand name cattle pour-on insecticides is highly concentrated. Bayer,
`with its three brand name cattle pour-on insecticides products (Clean-Up II, Cylence,
`and Permectrin), is the market leader. The only other competitors with meaningful
`sales in the market are Merck & Co., Inc., which sells four products, and Elanco,
`which sells StandGuard. The Acquisition would allow the third largest competitor,
`Elanco, to acquire the market leader, greatly increasing concentration in brand name
`cattle pour-on insecticides.
`
`V.
`
`ENTRY CONDITIONS
`
`Entry into each relevant market described in Paragraphs 5 – 8 would not be timely,
`likely, or sufficient in magnitude, character, and scope to deter or counteract the
`anticompetitive effects of the Acquisition. De novo entry would require significant
`investment to, among other things, develop products, obtain regulatory approval,
`where needed, and establish recognized brand names. Entry would be unlikely
`because the required investment would be difficult to justify given the sales
`opportunities in the affected markets. Entry would also not be timely because drug
`development times and U.S. Food and Drug Administration and U.S. Environmental
`Protection Agency approval requirements, where needed, would be lengthy. In
`addition, no other entry is likely to occur such that it would be timely and sufficient to
`deter or counteract the competitive harm likely to result from the Acquisition.
`
`3
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`

`

`VI.
`
`EFFECTS OF THE ACQUISITION
`
`13.
`
`The effects of the Acquisition, if consummated, may be to substantially lessen
`competition and to tend to create a monopoly in the relevant markets in violation of
`Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC
`Act, as amended, 15 U.S.C. § 45, by, among other things:
`
`a. combining the only two providers of low-dose prescription treatments for canine
`otitis externa, thereby eliminating actual, direct, and substantial competition
`between Bayer and Elanco;
`
`b. combining the only two providers of fast-acting oral treatments that kill adult
`fleas on canines, thereby eliminating actual, direct, and substantial competition
`between Bayer and Elanco;
`
`c. combining the market leader and one of the only two other providers of brand
`name cattle pour-on insecticides, thereby eliminating actual, direct, and
`substantial competition between Bayer and Elanco;
`
`d.
`
`e.
`
`increasing the likelihood that Elanco would unilaterally exercise market power in
`the relevant markets; and
`
`increasing the likelihood that customers would be forced to pay higher prices for
`the relevant products.
`
`VII. VIOLATIONS CHARGED
`
`14.
`
`15.
`
`The Acquisition described in Paragraph 4 constitutes a violation of Section 5 of the
`FTC Act, as amended, 15 U.S.C. § 45.
`
`The Acquisition described in Paragraph 4, if consummated, would constitute a
`violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5
`of the FTC Act, as amended, 15 U.S.C. § 45.
`
`WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this
`fourteenth day of July, 2020, issues its Complaint against said Respondents.
`By the Commission, Commissioner Slaughter not participating.
`
`April Tabor
`Acting Secretary
`
`4
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`

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`SEAL:
`SEAL:
`
`5
`
`