# IN THE UN ITED STATES DISTRICT COURT (2024)

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A28311ecc5ca744ef

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

IN THE UN ITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
FEDERAL
TRADE
COMMISSION,
STATE OF CALIFORNIA, STATE OF
COLORADO, STATE OF ILLINOIS ,
STATE OF INDIANA, STATE OF
IOWA, STATE OF MINNESOTA, STATE
OF NEBRASKA, STATE OF OREGON,
STATE OF TENNESSEE , STATE OF
TEXAS , STATE OF WASHINGTON, and
STATE OF WISCONSIN,
Plaintiffs ,

1:22CV828

v.
SYNGENTA CROP PROTECTION AG ,
SYNGENTA CORPORATION, SYNGENTA
CROP
PROTECTION ,
LLC,
and
CORTEVA, INC . ,
Defendants.
MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, District Judge.
In this action ,
states

allege

that

the Federal Trade Commission and a
two major manufacturers

dozen

of crop-protection

products have employed anticompetitive loyalty discount programs.
These programs
market

even

exclusivity

allegedly exclude

after

the

protections

generic competition

products '
have

patent

expired,

and

other

t hereby

from

the

federal

leading

to

supracompetitive prices for farmers.

Before the court are the

motions

Protection

of

Defendants

Syngenta

Crop

AG,

Syngenta

Corporation, Syngenta Crop Protection , LLC , and Corteva, Inc., to
dismiss all claims against them pursuant to Federal Rule of Civil

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 1 of 88

Procedure 12 (b) ( 6) .
opposition
133) .

(Doc.

(Docs. 94 , 99 . )

150),

Plaintiffs have responded in

and Defendants h ave replied

(Docs.

130,

The court held argument on the motions on December 1 , 2023.

(Doc. 157.)

For the reasons set forth below, the motions wi ll be

denied.
I .

BACKGROUND

A.

Factual Background

The

facts

"complaint")

out li ned in

Plaintiffs'

amended complaint

(the

(Doc. 1 49) , 1 which are taken as true for the purpose

of the present motion , show the following :

1.

Crop-Protection Product Industry

The Syngenta Group is a global company comprised of businesses
including

Defendants

Corporation ,
"Syngenta").

and

Syngenta

Syngenta

(Do C •

1 49

<J[

Crop

Crop
30 . )

Protection

Protection,

AG ,

Syngenta

LLC

(collectively

Syngenta Crop

Protection AG

oversees Syngenta ' s g lobal crop protection business.

( I d.

<J[

3 1.)

1

Limit ed portions of t he complaint and briefs remain under sea l.
{See
Doc. 148 {grant ing part ies ' mot ions to seal).)
Ci t ations are t o t he
unseal ed versions, except where t he court references sealed and redact ed
mat eri a l . While the court prel imi nar il y grant ed motions to seal portions
of the complaint in t his case , the court discloses here those portions
of the pleadings necessary for a full understanding of the allegations
and legal issues raised .
Courthouse News Serv. v . Schaefer, 2 F . 4th
318 , 327 {4 t h Cir. 2021) {"[A]ccess to [allegations in ] complaints . . .
is crucial to 'not only t he public's int erest in monitoring the
functioning of the courts but also t he integrity of the judiciary.'"
(quoting Doe v . Pub . Citizen , 749 F . 3d 246, 266 (4th Cir . 2014)); Doe,
749 F . 3d at 271 {"When parti es call on the courts, they must accept the
openness that goes wit h subsidized dispute reso l ution by publ ic {and
publicly accountable) offici als . " (internal quotation marks omitted)) .

2

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 2 of 88

Syngenta Corporation is a

corporate affiliate of Syngenta Crop

Protection AG and is the top- level Syngenta business incorporated
in the United States .

(Id.

<JI

Syngenta Crop Protection , LLC

32.)

operates Syngenta's U.S. crop-protection manufacturing, which is
the

second

largest

by

revenue

among

manufacturers in the United States.

crop-protection

(Id.

<Jl<Jl

allegedly operates as a single enterprise.
Corteva,

Inc.

33,

(Id .

48.)
<JI

product
Syngenta

35.)

("Corteva") was established to operate as an

independent agriscience business through the merger of E . I .
Pont de Nemours and Dow Chemical Company.
is the

(Id.

<JI

38.) 2

Corteva

third largest by revenue among crop-protection product

manufacturers in the United States.

(Id .

<JI

48.)

Defendants manufacture crop-protection products referred to by Plaintiffs as "pesticides" -

commonly

to control diseases,

weeds, insects , or other unwanted organisms that harm crops .
39,

40.)

fungicides.

(Id .

<j[<_j[

37,

<JI

include herbicides,

42.)

Every crop-protection product contains

sell

Ais

in

technical-grade

form,

(Id .

<JI

insecticides ,

(Id.

These

at least one active ingredient ("AI").
may

du

43 . )

which

and

Manufacturers

requires

further

processing before being sold in finished form, which is ready for
use by farmers .

(Id.

<JI

44.)

Ais are distinguished by the pests

2

To the extent the complaint includes allegations involving Corteva's
predecessor corporations, the court will simply refer to all such
entities as "Corteva.,,
3

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 3 of 88

they target, the effectiveness at controlling the target pest, and
t he crops upon which t he AI is used and registered for use, among
(Id.

other characteristics.

<JI

45.)

The AI's "mode of action" is

the chemical and biological manner in which the crop-protection
(Id .

product kills or controls the target pest.

46 . )

<JI

Farmers'

preferences for one AI over another may depend on variati ons in
t he mode of action.
Developers
mechanisms .

of

(Id.)
new

Ais

obtain

exclusive

use

through

two

First, under the Federal Insecticide, Fungicide, and

Rodenticide Act ("FIFRA"), 7 U.S.C. § 136 et seq., a developer of
crop-protection products must submit environmental impact data to
the

U.S .

Environmental

Protection

distribution in the United States.

Agency

prior

Upon approval,

to

sale

or

the developer

obtains 10-year exclusive protection from others citing t he data
the developer used to support its FIFRA submission.
52 .)

Second, under patent law,

patent

protection.

(Id .

<JI

(Id.

<j[<j[

51,

a developer can obtain 20-year
The

51.)

timing

of

the

FIFRA

application can effectively extend t he exclusive- use period beyond
the date the patent expires.

(Id.

<J[

52 . )

When both exclusive-

use protections expire, however, a generic manufacturer may enter
the market.

(Id.

<JI

54.)

Manufacturers of crop-protection products traditiona lly sell
to distributors,

who then sell to retailers,

farmers.

<JI

(Id.

55. )

Approximately

90%

who then sell to
of

crop-protection

4

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 4 of 88

products reach farmers through this traditional supply chain, and
about 90% of the traditional supply chain is managed by seven
In other words ,

distributors .
account

for

approximately 80%

products in the United States.

of all
(Id.)

these seven distributors
sales of crop-protection

This traditional channel of

distribution is allegedly the most efficient because it provides
access to retail and logistics networks and economies of scale ,
among other factors.
2.

(Id .

<JI

56 . )

Defendants ' Loyalty Programs

Plaintiffs allege that Defendants operate loyalty programs
intended to limit the distribution of competing generic products.
(Id.

<.II

59.)

Under these programs, Defendants offer "substantial"

payments as an end-of- year lump sum to distributors - allegedly up
to millions of dollars - conditioned on the distributors limiting
their purchases

of generic crop- protection products containing

specified post-patent Ais.

(Id.

the

expressed

loyalty

payment

is

<JI

60.)

The threshold to receive
as

a

percentage

of

the

distributors' total purchases of the AI , and the permissible amount
of generic AI a distributor may sell is referred to as "open space"
or "head space."

(Id . <JI 61.)

Typically, a distributor must source

less than 15 % of its total purchase of a certain AI from generic
manufacturers to qualify to receive the loyalty payment.
Syngenta implements its loyalty program,
through

written

marketing

agreements

with

(Id. )

known as "Key AI,"
distributors .

5

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 5 of 88

(Id.

<JI

66. )

Loyalty performance is calculated by dividing the amount

of qua l ifying AI purchased or so l d by the distributor in the year
by the

to t al of the AI purchased or sold by the distributor ,

including generics.

(Id.

<JI

68 . )

If the distributor ' s percentage

is above the threshold for the specific AI, it will reap a "special
marketing bonus . "

(Id.

<JI

69.)

If not, the distributor will lose

the entire loyal ty payment.
change the Ai s

Year-to-year,

Syngenta can

included in distributor marketing agreements as

well as the associated share thresholds and calculation methods .
(Id.

<JI

70.)

A similar program is offered for retailers as well ,

in which multiple top retailers nationally have participated .
':![<JI

71 , 72; Doc. 81

<JI

Under Corteva' s

(Id.

82 . )
program -

the Crops ,

Industrial Vegetation Management

( "CRPIVM")

Range

&

Pasture and

Loyalty Program,

a

distributor generally receives an annual payment for sourcing a
certain percentage of its purchases of an AI from Corteva.
149 ':![':I[ 75 , 77 . )

(Doc.

The percentage that Corteva pays varies but could

run as high as 11%.

(Id.

<JI

77.)

Corteva offers a second, higher

payment when a distributor reaches a high er threshold for the AI .
(Id.

':I[

75 . )

Moreover, the CRPIVM usually links together multiple

active ingredients within each offer, thus requiring a distributor
to hit the loyalty threshold for every AI in the offer to receive
the payment for any one AI .

(Doc . 81 <j[ 75 . )

Additionally, Corteva

typically permits a portion of any payment to be deferred into
6

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 6 of 88

subsequent

years,

which

would

otherwise

be

forfeited

if

the

distributor missed the l oyal ty t hresho l d for any AI in t he offer.
(Id.

<JI

Further ,

78.)

Cort eva conditi ons its Corporate Offer -

another annual payment offer that covers a broader range of Corteva
products -

on meeting the CRPIVM figure .

distributor fails to qualify,

(Id .

<JI

If a

79 . )

it could forfeit certain loyalty-

dependent payments under the Corporate Offer.

(Id. )

" [S]ubstantially all l eading distributorsn enter into l oyal ty
program agreements,

and Defendants promote broad participation

allegedly to assure distributors that others are not partnering
with generic manufacturers to undercut prices .

(Doc . 149

<JI

84.)

Moreover, the structure of the program is designed to make it less
likely that distributors will lower prices in anticipation of a
future loyalty payment because of its complexity, uncertainty, and
timing.

(Id .

<JI

85.)

Defendants "regularlyn audit distributors ,

which has a llegedl y l ed to withhe l d l oyal ty payments.
<JI

87 . )

(Doc. 8 1

Defendants also "rarelyn grant exceptions for missing the

threshold without good cause .

(Doc .

149

<JI

87 . )

Additionally ,

they have allegedly retaliated against distributors who fail to
reach the loyalty thresholds by canceling distribution contracts,
delaying

access

to

new

products ,

and

al l ocation during a supply shortage.

(Id.

withholding
<JI

product

88.)

7

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 7 of 88

Plaintiffs focus on the fo l lowing Ai s:

Syngenta AI

Azoxystrobin
(fungicide)
Mesotrione
(herbicide)
Metolachlor 3
(herbicide)
Corteva AI

Rimsulfuron
(herbicide)
Oxamyl
(insecticide/
nematicide)
Acetochlor 4
(herbicide)

Current
Loyalty
Threshold

Date Added
to Loyalty
Program

Patent
Expiration

FIFRA
Expiration

92%

20 13-14

2014

2010

92%

2014 -1 5

2008

2014

2008

2010

Patent
Expiration

FIFRA
Expiration

Current
Loyalty
Threshold

Early
2000s
Date Added
to Loyalty
Program

85%

2017-18

2006

2007

90%

After 2017
Merger

1988

1987

95%

20 1 6- 17

2000

2007

90 %

(See id . 11 89-150 ; Doc . 81 11 89-150.)

Plaintiffs allege that

distributors of each of these Ais have strictly managed their
purchases and sales to ensure that they stay above the respective
threshold t o receive the payments.
Further ,

Plaintiffs

allege,

generic

manufacturers

attempted to enter the market for each AI -

have

with demand from

farmers - but have had little to no success because distributors

Syngenta produces "s-metolachlor," which was phased in by 2001 over
the original metolachlor. (Doc. 1 49 '][ 114.) However, Syngenta allegedly
includes sales of generic original metolachlor in the denominator of its
calculation of a distributor's loyalty figure.
(Id . 'l[ 115.)
3

4

Acetochlor is manufactured by a joint venture of Corteva and Bayer .
Corteva apparently treats the sale or purchase of
(Doc . 149 '][ 142 .)
Bayer acetochlor as it would a sale or purchase of Corteva acetochlor .
(Doc . 81 <JI 146 .)

8

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 8 of 88

would not purchase the generic.

As to azoxystrobin ,

two

generics have exited the market entirely, and one that attempted
to mix azoxystrobin was "hindered in its attempt to market" because
of the Key AI program.
two

generics

delayed

(Doc . 14 9
or

<J[ <J[

9 6- 9 7 . )

As to mesotrione,

terminated

entry,

and

a

third

that

developed a mixture product dropped it due to the Key AI program.
(Id.

<J[

As

105.)

to

metolach l or,

a

generic

manufacturer

had

considered bringing a mixture to market but chose not to do so
because of the Key AI program .

(Id .

<J[

120.)

As to rimsulfuron ,

at least one generic canceled or deferred entry plans ,

despite

apparent demand from farmers to bid on generics, because of the
CRPIVM program.

(Id.

<J[

As to oxamyl , Corteva's production

132.)

of oxamyl stopped for a span of roughly two years, generics entered
the

market

with

"plummeted"

upon

"relative[]
Corteva' s

success[],"

re - entry

loyal ty program appl ied to oxamyl.
acetochlor,

but

into
(Id.

the

<J[<J[

generic
market

1 36-38 .)

sales

with

the

And as to

the CRPIVM program has allegedly deterred generics

from the market altogether, even t hough one generic firm has had
success selling the AI overseas.
Plaintiffs

allege

that

the

(Id.

presence

of

<JI

149 . )

For each AI,

generics

has

imposed

downward pricing pressure.
The complaint further alleges t hat Syngenta supplies Corteva
with mesotrione and metolachlor .

(Id .

<J[<j{

109, 122 . )

Defendants

allegedly struck this agreement as an incentive to keep Corteva
9

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 9 of 88

from purchasing generics of these two Ais.
does not penalize distributors
Corteva products
<[<JI

containing

In exchange , Syngenta

in the Key AI program who buy

these

two

Syngenta

Ais .

(Doc .

81

109 , 122.)

3.

Alleged Market and Competitive Harm

Plaintiffs allege that Syngenta has had monopoly and market
power as to azoxystrobin,

mesotrione, and metolachlor ,

and that

Corteva has had monopol y and market power as to rimsulfuron and
oxamyl and market power as to acetochlor .

(Doc. 149 <JI<JI 151, 152 . )

Plaintiffs claim two relevant product markets :
(a) A relevant product market exists that is no broader
t han the active ingredient , consisting of ( 1) active
ingredient included as a component of an EPA-registered
finished crop-protection product for sale in the United
States, and (2) technical-grade or manufacturing-use
active ingredient to be formulated into an EPA­
registered finished crop- protection product for sale in
the United States; a nd
(b) A relevant product market(s) also exists that is no
broader than EPA-registered crop-protection products for
sale in the United States that contain the active
ingredient.
(Id.

<JI

155 . )

Syngenta' s market share for azoxystrobin, mesotrione,

a nd metolachlor exceeded 70% from at least 2017 through 2020.
<JI

1 61. )

(Id .

Corteva's market share for rimsulfuron and oxamyl also

e xceeded 70% for those same years ,

whi l e

its market share for

acetochlor exceeded 40% (with another roughly 50% attributabl e to
Bayer , its joint venture partner for t hat AI).

(Id .

<][<JI

162, 163.)

In all , Plaintiffs allege that Defendants have foreclosed generics
10

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 10 of 88

from "approximately 70% or more" of the market.
Each

AI

has

"particular

(Doc. 81

characteristics

differentiate it from other active ingredients . "

and

<JI

171.)

uses

that

(Doc. 149 <JI 157 . )

Azoxystrobin "can be used across all major row crops

[and]

has

growth-enhancing effects not proven in other active ingredients . "
Mesotrione has "superior efficacy and crop safety,
low use rate."

(Id . )

and

to

so

tends

and a

Metolachl or has "superior water solubility ,

perform better

in

dry

conditions [ ,

and

it]

outperforms other active ingredients in warmer conditions, is more
' crop friendly , ' and can be used on a broader spectrum of crops."
(Id. )

Rimsulfuron "can be used on a

broader range of crops,

controls a wider spectrum of weeds , can be used on both pre- and
post-emergence,

and has

more

application methods,

no dormancy

restrictions , and a lower use rate."

(Id . )

directly onto crops ,

similar insecticide active

whereas other,

Oxamyl can be "sprayed

ingredients must be applied at the root level or mixed into the
soil[, and] is also safer for crops and better for soil health[.]"
(Id.)

Acetochlor "tends to perform better in wetter and cooler

conditions,

[and] tends to have better weed control early in the

growing season and is more effective against certain weed species . "
(Id.)
Plaintiffs
substitutes

allege
to

supracompetitive

that

prevent
prices

of

other

Ais

Defendants
their

are

not
from

c l ose

enough

maintaining

crop-protection

products

11

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 11 of 88

containing these six Ais .

(Id.

<J[

158.)

Moreover ,

substantial

barriers exist to enter the market for these Ais no twiths tanding
(Id.

the loyal t y programs.
regulatory,
from the

160.)

<J[

and legal barriers

EPA,

These capital ,

include

technical ,

"obtaining registration

developing manufacturing processes

and sourcing

[the] active ingredient , and paying data compensation costs to the
initial active ingredient registrant ."

(Id.)

The loyalty programs

impose a substantial barrier by limiting generic manufacturers '
access to the traditional distribution channel .
Plaintiffs

contend that

competitive harms .

First ,

the

loyalty programs

t he programs

cause

"forclos [e]

anti-

actual or

potential competitors from access to distribution services ," or to
" efficient

distribution

distribution channel).

services"

(Id.

<J[<_J[

(i.e .,

1 69 , 170.)

the

traditional

Although t he programs

are nominally voluntary , Plaintiffs allege that the mere prospect
of

rece i ving

a

payment

is

sufficient

incentive

to

induce

distribu tors to participate and to limit or forego purchases from
generic

compe t i t ors .

(Id.

<_J[

173 .)

Allegedly,

one

generic

manufacturer represented that " this dynamic is so we ll establ ished
in

the

industry

that

it

is

futile

to

even

approach

distributor that is subject to loyalty requirements."

(I d .

a

large
<J[

178.)

Absent t he loyal ty programs, Pl aintiffs al l ege , sal es of generics
would be significantly higher and would exceed t he open space
presently allowed for each AI, thus decreasing prices overall for
12

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 12 of 88

farmers.

(Id.<[ 180.)

Second,
programs

and relatedly,

have

prevented,

Plaintiffs charge that the loyalty
delayed,

and

expansion by generic manufacturers into,

diminished

entry

as well as caused the

exit from, the market for products containing the Ais.
see

also,

id .

e .g. ,

<[<[

96-97

and

(demonstrating

(Id .

that

<_j[

182;

generic

manufacturer of azoxystrobin mixture was "hindered in its attempt
to

market";

id .

<[

132

(alleging

t hat

at

leas t

one

generic

manufacturer of rimsulfuron canceled or deferred entry plans,
despite apparent demand from farmers to bid on generics, because
of the CRPIVM program).)

Third, t hese programs have reduced the

ability and incentive for generic manufacturers to innovate cropprotection products containing the Ais.
the

programs

have

resulted
for

in

(Id. <[ 186.)

supracompetitive

retailers

and farmers

products

<[ 190.)

Plaintiffs point to Defendants'

Finally ,

prices

containing the Ais.

for
(Id.

internal studies that

allegedly demonstrate that the loyalty programs have curtailed
generic entry and sustained higher prices t han would otherwise
prevail.
B.

(Id.

<JI<[

195-99.)

Proc edural History

On September 29, 2022, Plaintiffs filed t his action seeking
declaratory,

injunctive,

penalties .

(Doc . 1 . )

complaint,

equitable

monetary

relief,

and

civil

Defendants moved to dismiss the original

after which Plaintiffs

filed an amended complaint.

13

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 13 of 88

(Doc. 79 ; Doc . 149 (lesser-redacted complaint).)

Now before the

court are Defendants' motions to dismiss the amended comp l aint .
(Docs . 94 , 99.)
respective

Following this court's order granting the parties '

motions

to

seal

(Doc.

148) ,

the

operative

public

complaint i s at docket entry 1 49. 5
Plaintiffs allege sixteen counts under state and federal law.
Under

federal

l aw,

Plaintiff Federal Trade

Commission

("FTC" )

alleges violations of Section 5 of the FTC Act , 15 U.S.C. § 45(a),
and all Plaintiffs allege violations of Section 3 of the Clayton
Act , 15 U. S . C. § 14 , and Sections 1 and 2 of the Sherman Act , 15
U. S . C. §§ 1, 2 .

under

state

Colorado ,

(Doc . 149 i~ 203- 10.)

law and

Illinois ,

are

The remaining c l aims arise

raised by the

Indiana ,

Iowa ,

states

Minnesota ,

Te n nessee, Texas , Washington , and Wisconsin . 6

of California ,

Nebraska ,

Oregon ,

(Id . ii 2 12-76 . )

5

Separ ate simi lar act i ons brought by farmer s have been consolidated by
the Uni ted St ates Judi cial Panel on Multidis t r i c t Li tigati on and
transferred to thi s court for pretrial p r oceedi ngs .
(See Doc . 78 i n
1 : 23-md-3062 (amended consoli dat ed complai n t ) ; I n r e Crop Pr o t ection
Pr ods . Loyalt y Pr ogram Antitrust Liti g . , 655 F . Supp . 3d 1380 (J.P . M. L .
2023) .

6

Specifical ly, t he s t ate law clai ms a ri se under Californi a's Cartwri gh t
Act , Califo r nia Business and Pr o f ess i ons Code § 16700 e t seq . , and
California' s Unfair Compet ition Law, California Business and Prof essions
Code§ 17200 e t seq . ; t he Colorado Ant itru s t Act , C . R . S. § 6-4-104 and
C.R.S. § 6- 4 - 105 ; Secti on 7 of t he Illinoi s Ant i t rus t Act , 740 ILCS 10/1
e t seq. ; t he Indi ana Decepti ve Consumer Sales Act , Ind. Code§ 24 - 5- 0.5 1 e t seq. and t he Indiana Ant itrust Act , Ind. Code§ 24-1-2-1; t he Iowa
Compet i t ion Law, I owa Code Chapt er 553, and t he Iowa Consumer Fraud Act ,
Iowa Code § 714.16 ; the Minnesota Ant itrust Law of 1971, Minnesota
St atut es Sect ions 3250.49- .66; t he Nebraska Consumer Prot ect ion Act,
Neb. Rev. St a t . §§ 59-1 602 et seq . , and Neb . Rev . St at . § 84 - 21 2; t he
Oregon Antit rust Law , Oregon Revised Stat utes 646 . 705 to 646 . 836 ; the

14

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 14 of 88

Following oral argument on the motions to dismiss , they are
ready for reso l ution.
II .

ANALYSIS
A.

Legal Background
1.

Mo tion t o Dismiss Standar d

A Rule 12 (b) ( 6)
sufficiency

of

a

motion to dismiss is meant to "test []
complaint"

and

not

to

" resolve

the

contests

surrounding the facts, the merits of a claim, or the app l icabi l ity
of defenses . "

Republican Party of N. C . v . Martin ,

952 (4th Cir . 1992).

980 F . 2d 943,

To survive such a motion , " a complaint must

contain sufficient factual matter , accepted as true , to ' state a
claim to relief that is plausible on its face . ' "
Iqbal ,

556

U.S.

662 ,

678

(2009)

Twombly, 550 U.S . 544 , 570 (2007 )).

Ashcroft v .

(quoting Bell Atl.

Corp .

v.

In considering a Rule 12 (b) (6)

motion , a court "must accept as true all of the fact ual allegations
contained in the complaint , " Erickson v . Pardus, 551 U.S. 89 ,
(2007)

94

(per curiam) , and all reasonable inferences must be drawn

in the non- moving part y ' s favor , I b arra v . Uni t ed States , 120 F . 3d
472 , 474 (4th Cir. 1 997) .

Ru l e 12(b) (6) must be read in l ight of

Ru le 8' s

standard that a

complaint con tain "a short and plain

statemen t

of the claim showi ng that the pleader is entitled to

Tennessee Trade Practices Act, Tenn . Code Ann. §§ 47 - 25 - 101 et seq . ;
Sections 15 . 20(a) and 15 . 20(b) of the Texas Business and Commerce Code
and Section 402 . 006 of the Texas Government Code; the Washington Consumer
Protection Act , RCW 19 . 86 . 030 et seq . ; and the Wisconsin Antit rust Act ,
Wis . Stat . Ch . § 133 . 03 et seq .

15

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 15 of 88

relief."

Fed . R. Civ. P. 8 (a) (2).

2.

Federal Antitrust Statutes

Plaintiffs allege violations of the Sherman Act (sections 1
and 2)

and Clayton Act

(section 3) ,

and Pl aintiff FTC alleges

violations

of

the

Federal

Trade

Commission

Section

of

the

Sherman

Act

prohibits

1

Act

(section

" [e]very

5).

contract ,

combination in the form of trust or otherwise , or conspiracy, in
restraint of trade or commerce among t he several States , or with
foreign

nations . "

15

u. s .c.

§

1.

Section

2

prohibits

" monopoliz[ing] , or attempt [ing] to monopolize , or combin [ ing] or
conspir[ing] with any other person or persons, to monopolize any
part of the trade or commerce among the several States . "
§

2.

15 U. S.C .

A violation of Section 2 consists of two elements :

(1)

possession of monopoly power and (2) "maintenance of that power as
distinguished from growth or development as a consequence of a
superior product, business acumen, or historic acc i dent."
Kodak Co .
(1992).

v.

Image Technical

Servs .,

Inc.,

504 U. S .

Eastman
451 ,

48 1

Monopoly power is defined as the ability "to control

prices or excl ude competition . "

United States v . Grinne l l Corp.,

384 U. S . 563 ( 1 966 ) (internal quotation marks omitted) .

Al though

evidence of such abi l ity is " only rare l y available , " courts turn
to circumstan tia l

evidence -

such as a company's share of the

market - to determine whether monopoly power exists .

United States

v . Dentsply Int ' l , Inc ., 399 F . 3d 181, 187 (3d Cir . 2005)

(quoting

16

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 16 of 88

United States v.
2001)).

Microsoft Corp.,

253 F.3d 3 4,

51

(D.C.

Cir.

Maintenance of that power requires some illegal conduct

that forecloses competition,
destroys a competitor.

gains a

competitive advantage,

or

Eastman Kodak, 504 U.S . at 482-83.

Section 3 of the Clayton Act makes it unlawful for
any person engaged in commerce .
. to lease or make a
sale or contract for sale of goods
for use,
consumption, or resale within the United States.
. or
fix a price charged therefor , or discount from, or rebate
u pon , such price, on the condition, agreement, or
understanding that the lessee or purchaser thereof shall
not us e or deal in the goods . . . of a competitor or
competitors of the lessor or seller, where the effect of
such lease , sale , or contract for sale or such condition,
agreement, or understanding may be to substantially
lessen competition or tend to create a monopoly in any
line of commerce.
15 u.s.c. § 14.
Section 5 of the FTC Act makes illegal "[u ] nfair methods of
competition in or affecting commerce , and unfair or deceptive acts
or practices in or affecting commerce . "

15 U. S.C .

The act, while not solely focused on antitrust ,
linked to the antitrust laws ."
Ralston Purina Co.,

§

45(a) (1).

is "nonetheless

Chuck's Feed & Seed Co., Inc. v.

810 F .2d 1289,

1293

(4th Cir .

1989).

The

Supreme Court has stated that the act was "designed to supplement
and bolster the Sherman Act and the Clayton Act,

[]

to stop in

their incipiency acts and practices which, when full blown, would
violate those Acts."

Fed. Trade Comm'n v. Motion Picture Advert.

Serv. Co., 344 U.S . 392, 394-95 (1953 ) (internal citation omitted).

17

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 17 of 88

The

act

"functions

as

a

kind of penumbra

around the

federal

antitrust statutes," Chuck' s Feed, 810 F.2d at 1292-93, such that
any practice that violates the Sherman Act or the Clayton Act also
violates the FTC Act.

See Fed. Trade Comm'n v.

Dentists, 476 U. S. 447 , 454 (1986)

Ind.

Fed'n of

("The standard of 'unfairness'

under the FTC Act is, by necessity, an elusive one , encompassing
no t

only practices that violate the Sherman Act and the other

antitrust

laws,

[]

but

also

practices

t hat

t he

Commission

determines are against public policy for other reasons." (internal
citations omitted)).

The extent to which these four provisions

impose varying requirements on a plaintiff is discussed in more
detail below.

3.

Exclusive Dealing

Plaintiffs allege that Defendants'

loyal ty rebate programs

are illegal exclusive dealing arrangements.

An exclusive dealing

arrangement is one in which a buyer agrees to purchase certain
goods or services only from a particular seller for a certain
period of time.

Phillip E. Areeda & Herbert Hovenkamp, Antitrust

Law~ 1800a (4th & 5th ed. 2023).

Neither absolute exclusivity

nor an express agreement is necessary for an exclusive dealing
arrangement to violate antitrust laws .

ZF Meritor, LLC v . Eaton

Corp., 696 F.3d 254, 270, 282 (3d Cir. 2012); Tampa Elec. Co. v.
Nashville Coal Co. , 365 U.S . 320 , 328
f oreclosed

by

the

contract

must

be

(1961)
found

("[T]he competition
to

constitute

18

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 18 of 88

a

substantial

share

of the

relevant market."

(emphasis

added)) .

Although not "per se " i llegal , exclusive dealing arrangements may
give rise to cognizable claims under all four statutory provisions
alleged here.

See, e .g., Grinnell Corp., 384 U.S. at 576 (Sherman

Act § 2); ZF Meritor,

696 F.3d at 281

(Sherman Act §§ 1 and 2,

Clayton Act§ 3) ; LePage's Inc . v. 3M, 324 F . 3d 141, 157 & n . 10
(3d Cir . 2003)

(same); Allied Orthopedic Appliances Inc. v. Tyco

Health Care Grp. LP, 592 F . 3d 991 ,
Act

§

1); McWane,

996 (9th Cir. 2010 )

783 F . 3d 814 ,

827

Exc l usive contracts serve many pro-competitive purposes.

ZF

(11 th Cir. 2015)

Meritor ,

Inc. v. Fed . Trade Comm'n,

(Sherman

(FTC Act

§

696 F . 3d at 270.

5).

On the demand side ,

they can assure

supply, protect against rises in price, enable long-term planning
based on known costs , and reduce the expense and risk of storing
goods that have fluctuating demand.
States, 337 U.S. 293, 306
substantially

reduce

(1949) .

selling

Standard Oil Co . v. United
On the supply side, they can

expenses ,

protect

against

price

fluctuations , justify and enable capital expenditu res, and shield
against counterattacks by competitors.
"virtually

every

contract

to

buy

Id . at 306- 07.

' forecloses'

or

Indeed,
'excludes'

alternative sellers from some portion of the market, namely the
portion consisting of what was bought."
Grinnell Corp . ,
(emphasis

724 F . 2d 227,

removed) .

Barry Wright Corp. v. ITT

236

(1st Cir.

1983)

(Breyer ,

Accordingly,

whether a

contract

rises

19

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 19 of 88

J .)

to

illegal

exclusivity,

"rather

than

merely

a

competition, can be difficult to discern[.]"
F.3d at 58.

antitrust court

in

as

Microsoft Corp., 253

acts ,

general rule

which

reduce

competitive acts , which increase it. "

(e . g.,

vigorous

are myriad," posing a challenge for an

"stating a

exclusionary

While

of

"[T]he means of illicit exclusion , like the means of

legitimate competition,

between

form

exclusive dealing is
alleged here,

distributor),

it

has

a

the

for distinguishing

social

welfare,

Id.

formally a

vertical

restraint

restraint

between manufacturer

potential

to

have

adverse

on horizontal

competition.

Jefferson Par.

Dist.

v.

U. S .

(1984)

2

concurring).

Hyde,

466

2,

45

and

economic

consequences
No .

and

Hosp.

(O'Connor,

J .,

More specifically, an exclusive dealing arrangement

runs afoul of the antitrust laws when it unreasonably deprives
other suppliers of a market for t heir goods or allows one buyer of
goods unreasonably to deprive other buyers of a needed source of
supply.
exclusive

Id.

The potential collateral consequences of illegal

dealing

include

higher

prices,

reduced quality, or slower innovation.

restricted

output,

McWane, Inc . , 783 F . 3d at

827.
B.

Defendants ' Grounds for Motion to Dismiss

Defendants
complaint : first,

argue

two

primary

grounds

to

dismiss

the

t hey contend that Plaintiffs fail to allege a

relevant product market; and second, they argue that Plaintiffs
20

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 20 of 88

fail

to

allege

anticompetitive

conduct

and

injury .

Syngenta

further argues that the claims against Syngenta Crop Protection AG
and Syngenta Corporation should be dismissed .

Corteva argues that

the FTC Act violates Article II of the U.S .

Constitution,

requiring dismissal of the complaint.

thus

And finally , all Defendants

argue that the state law claims should be dismissed on a range of
grounds.
The court turns first to the thresho ld question of whether
Plaintiffs allege a relevant product market.

1.

Relevant Product Market

Defendants contend that the complaint is defective because it
fails to allege a cognizable product market .

(Doc. 95 at 17; Doc .

100

is

at

37.)

A

relevant

product

market

defined

by

"the

reasonable interchangeability of use or the cross-elasticity of
demand between the product itself and substitutes for it."
Shoe Co. v . United States, 370 U.S. 294, 325 (1962).

Brown

Courts begin

with a preliminary inquiry into market definition because it serves
as the frame through which the court analyzes monopoly power and
substantial market foreclosure .

E.I. Du Pont De Nemours & Co. v .

Kolon, 637 F . 3d 435, 441 (4th Cir . 2011); Ind . Fed'n of Dentists,
4 7 6 U.S .

at

4 60

(" [T] he purpose of the

inquiries

into market

definition and market power is to determine whether an arrangement
has the potential for genuine adverse effec t s

on competition . "

(emphasis in original)).
21

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 21 of 88

Plaintiffs allege two product markets in the United States.
One is the AI itsel f ,
(Doc . 149

form .

<J[

in both its finished and technical -grade

155 . )

The other is crop-protection products

that contain the active ingredient.

Defendants do not

contest the markets ' geographical scope or that Plaintiffs allege
more than one market .
Corteva argues that Plaintiffs ' market definitions are only
two sentences that vaguely describe general characteristi cs of the
Ais

that

amount

products. "

to

"alleged advantages

( Doc . 9 5 at 19 . )

they

have

over

other

In Corteva ' s view, Plaintiffs have

an obligation to do more - namely, to expl ain why products without
those characteristics are not reasonably interchangeable .

(Id . at

18 (cit i ng Bayer Schering Pharm AG v. Sandoz , Inc. , 813 F. Supp.
2d 569 ,

575

(S.D . N. Y. 20 11) ; Todd v . Exxon Corp ., 275 F . 3d 191,

200 (2d . Cir . 2001)) . )
l abe l

registrations

In support , Corteva points to several EPA

outside

of

the

record that ,

per Corteva,

demonstrate that the alleged produ ct markets are both too narrow
and too broad.

This follows , according to Corteva , because these

EPA l abel

registrations show that the EPA has registered crop­

pro tection

produ cts

that

(1)

contain

Ais

alleged markets but have different uses,
outside of Pl aintiffs '
(Id . a t 19- 20 . )

within

and

(2)

Plaintiffs'
are products

alleged markets but share similar uses.

Syngenta argues that Plaintiffs ' market definition

is unreasonably narrow because each market is only a single AI.
22

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 22 of 88

(Doc.

100

at

38-40 . )

In

support ,

Syngenta

points

to

other

antitrust proceedings outside of t he record where t he FTC and the
U.S. Department of Justice have alleged broader crop-protection
product markets with multiple Ais.

(Id. at 41-42 . )

For example,

Syngenta cites United States v . Bayer AG, 83 Fed. Reg. 27652 , 27653
(DOJ

June

herbicides '

2018) ,

13,

as

"analyzing

alleged

' fou ndational

and ' nematicidal seed treatment' markets ,ll and Ciba-

Geigy Ltd ., 62 Fed. Reg. 409, 4 12 (FTC Jan. 3 , 1 997), as "analyzing
alleged

'corn herbicides

market -

includ ing metolachlor -

emergent control

for

pre-emergent control

of grasses'

and ' corn herbicides for post-

of broadleaf weeds'

market ."

Syngenta

contends that FTC ' s effort to allege narrower product markets here
is not based on "different facts ,
philosophy of the

FTC ' s

but instead on the evolving

Chair," and demons trates that "FTC is

attempting to gerrymander its way to an antitrust victory ."

(Id.

at 42 (internal quotation marks omitted).)
Plaintiffs respond that their product markets are supported
by

ample

factual

allegations.

(Doc.

150

at

52 . )

Namely ,

Plaintiffs point to the conduct of Defendants, who des ign the ir
loyal ty programs

around each

Plaintiffs

"characteristics

allege

individual AI .
and usesll

Further,
and " industry or

public recognition" for each AI:
Azoxystrobin has " growth-enhancing effects not proven in
other active i ngredients."
Mesotrione has "superior
efficacy and crop safety" "[c ]ompared to other, similar
23

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 23 of 88

herbicide
active
ingredients."
Metolachlor "has
superior water solubility," and "outperforms other
active ingredients" in warmer and drier conditions .
Rimsulfuron "has more application methods, no dormancy
restrictions , and a lower use rate " than similar
chemicals.
Oxamyl , unlike "similar insecticide active
ingredients, " "can be sprayed directly onto crops." And
acetochlor " tends to perform better" than similar
herbicides "in wetter and cooler conditions," and has
" better weed control early in the growing season."
(Id.

(quoting

Doc.

149

1

157)

(internal

citations

omitted).)

Plaintiffs also allege that each AI is distinguishable enough that
farmers "may prefer it over others."
1 46) .)

(Id. at 54 (citing Doc. 149

Finally, Plaintiffs contest that t he court should take

judicial notice of the EPA label registrations and prior FTC and
DOJ antitrust proceedings at this stage .
A

relevant

product

market

interchangeable products.

products

is

include

all

reasonably

United States v . E . I . du Pont de Nemours

& Co ., 351 U.S . 377, 404 (1956).
of

must

(Doc. 150 at 58-59.)

generally

The reasonable interchangeability

determined

according

to

the

cross-

elasticity of demand for the product and its alternatives .

It's

My Party, Inc. v. Live Nation, Inc., 811 F.3d 676, 683 (4 th Cir.
2016).

In other words,

courts look to the degree to which a

defendant would sacrifice sales to alternative products by raising
t he price of its goods.

Eastman Kodak ,

504 U.S. at 469.

therefore more than simply technical interchangeability .

It is
Rothery

Storage & Van Co. v. Atlas Van Lines, Inc., 792 F .2d 210, 218 n . 4
(D. C. Cir. 198 6)

(discussing functional subs titutability as one

24

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 24 of 88

factor among many as it relates to "the economic criteria that
make one market distinct from another").
Market definition is a question of fact .
442

(collecting cases).

fact-intensive

inquiry,

dismiss for failure

Kolon , 637 F.3d at

"Because market definition is a deeply
courts

hesitate

to plead a

to

grant

motions

to

relevant product market."

(quoting Todd, 275 F .3d at 199-200).

Id.

Nevertheless, there is "no

absolute rule against the dismissal of antitrust claims for failure
to allege a relevant product market . "
at 199-200).

Id . (quoting Todd, 275 F.3d

"No party can expect to gerrymander its way to an

antitrust victory without due regard for market real ities."
My Party, Inc ., 811 F . 3d at 683 .
pleadings

is

appropriate

It's

"Cases in which dismissal on the

frequently

involve either

(1)

failed

attempts to limit a product market to a single brand, franchise,
institution ,

or comparable entity that competes with potential

substitutes or (2) fai l ure even to attempt a plausible explanation
as to why a market should be limited in a particular way."

Kolon,

637 F . 3d at 442 (quoting Todd, 275 F.3d at 199-200).
Under this fact-intensive inquiry, the scope of the relevant
product market differs on a case-by-case basis .

For example, in

Eastman Kodak , 504 U.S . at 481-82, the Supreme Court held that a
properly constituted market may be comprised of a single product.
In the pharmaceutical context,

lower courts have ruled that a

brand-name drug and its generic analogs can comprise a relevant
25

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 25 of 88

product market .

In re Zetia (Ezetimibe) Antitrust Litig. , MDL No.

2: 1 8-md-2836 , 202 1 WL 66897 1 8 , at *1 8-20 (E . D. Va . Nov . 1, 202 1 ),
adopted in full by 587 F . Supp . 3d 356

(E.D. Va . 2022);

In re

Nexium (Esomeprazole) Antitrust Litig., 968 F . Supp. 2d 367, 388
(D. Mass. 2013) ; In re Cardizem CD Antitrust Litig. , 1 05 F. Supp.
2d 61 8 , 680- 81 (E . D. Mich . 2000)

(accepting plaintiffs ' contention

on motion to dismiss that branded and generic versions of heart
medication constitute a single market), aff ' d, 332 F.3d 896 (6th
Cir. 2003) .

Whether a market is plausible when comprised of a

single product - or many products - " can be determined only after
a

factua l

inquiry

consumers."

into

the

'commercial

realities '

faced

by

Eastman Kodak , 504 U. S. at 482 (quoting Grinnell Corp ,

384 U.S. at 572).
Courts employ a variety of methods to de t ermine if a product
market is properly constituted.
consider

( 1) the Defendants '

Plaintiffs urge the court to

own conduct;

(2)

the "hypothetical

monopolist test"; and (3) the factors set out in Brown Shoe , 370
U. S.

294 .

(Doc .

150

at

49- 52 . )

Courts

Plaintiffs '

first

proposed methodology -

generally
the

consider

Defendants '

own

conduct and recognition of the market - under the assumption that
" economic actors usually have accurate perceptions of economic
rea l ities."

Todd,

275 F. 3d at 205

(collecting cases)

(quoting

Rothery Storage, 792 F . 2d at 218 n . 4) ; Kolon , 637 F . 3d at 442 - 43
(considering

the

"area

within

which

the

defendant

and

26

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 26 of 88

its

competitors view themse lves as competing").
Plaintiffs' second proposed methodology is the hypothetical
monopolist test ("HMT") .

The HMT is an aid in determining if the

relevant product is properly constituted.

The court begins by

hypothesizing that every good as alleged in the product market is
under the control of a hypothetical monopolist.
Am.

United States v .

Express Co., 838 F.3d 179, 198-99 (2d. Cir. 2016).

Under such

conditions, if the hypothetical monopolist could profitably impose
a

small

but

significant

and

nontransitory

increase

("SSNIP"), then the product market is properly defined.
contrast,

the

product

market

is

improperly

defined

in

price

Id .

By

when

the

hypothetical monopolist imposes the SSNIP unprofitably because the
alleged market does not include reasonably interchangeable goods
-

i.e., goods that consumers will shift demand toward in light of

the SSNIP.
test,

Id.

While the Fourth Circuit has yet to endorse this

other circuits have at least acknowledged it or outright

embraced it as a viable methodology in the context of defining
markets.

See, e.g., Fed. Trade Comm'n v. Penn State Hershey Med.

Ctr . , 838 F . 3d 327, 339-41 (3d Cir. 2016)

(adopting HMT as proper

test to define market); Fed . Trade Comm' n v . Sanford Health, 926
F.3d 959 ,

964

(8th Cir. 2019)

(holding not clear error to define

relevant market with HMT); Fed. Trade Comm'n v. Advocate Health
Care Network, 841 F .3d 460, 473 (7th Cir. 2016)
Am.

(endorsing HMT) ;

Express Co., 838 F.3d at 198-99 (2d Cir . 2016)

("[T]his Court

27

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 27 of 88

often applies a ' hypothetical monopolist test [ .] ' ).
Pl aintiffs '
In

factors .

third proposed methodology is

Brown

Shoe ,

the

Court

the

endorsed

Brown

Shoe

considering

the

following factors when defining a product market :

"industry or

public recognition of the submarket as a separate economic entity ,
the product ' s peculiar characteristics and uses , unique production
facilities ,
price

distinct customers ,

changes ,

and

distinct prices ,

sensitiv i ty to

vendors."

U. S.

special ized

370

at

325.

Notably, the D. C . Circuit has observed that some of these factors
are

merely

" evidentiary

substitutability. "

proxies

for

direct

Rothery Storage , 792 F . 2d at 218.

court noted that while

proof

of

The Rothery

sensitivity to price changes ,

distinct

prices , and unique production facilities " relate directly to the
economic definition of the market," the other factors

require

inferential reasoning to draw economic conclusions and "may be
he l pful where the other indicia are ambiguous . "
Turning

to

Defendants'

arguments,

I d. at 2 1 8 n . 4.

the

court

finds

unpersuasive Defendants' contention t hat Plaintiffs must explain
in their complaint why certain Ais or crop-protection products are
excluded

from

the

markets.

To

the

extent

Defendants'

cases

demonstrate a burden on antitrust plaintiffs to explain a negative,
t h ey are either anoma l ous or distinguishabl e.

For exampl e ,

in

Bayer- Schering , 813 F. Supp . 2d 569 , the court appeared to apply
enhanced

scrutiny

to

the

alleged

product

market

because

28

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 28 of 88

the

counterclaimant amended its product market inconsistently with its
original

counterclaim.

Id.

at 576 - 77

pleadings counsel that this Court
counterclaims

in

ensuring

standards.") .

Through this lens ,

("Sandoz ' s

closely scrutinize the amended

that

they

meet

I d.

Rule

12 (b) (6)

the court analyzed particular

alternatives outside of the alleged market,
appears,

contradictory

many of which ,

it

the counterclaimant introduced into the record itself .

Wh atever caused the Bayer-Schering court to impose this burden

and analyze particular products, the Fourth Circuit has suggested
that such scrutiny is misguided on a motion to dismiss .
Kolon,

637 F . 3d at 442

fact-intensive

inquiry ,

See , e . g. ,

("Because market definition is a deepl y
courts

hesitate

to

grant

motions

to

dismiss for failure to plead a relevant product market." (quoting
Todd, 275 F.3d at 1 99-20 0 )).
Defendants'

other cases

fare no better .

For example ,

in

Therapearl, LLC v . Rapid Aid Limited, Civil No . 13- 2792 , 2014 WL
4794905 (D . Md. Sept. 25 , 20 1 4) , the court dismissed a Sherman Act
claim for failure to plead a produ ct market because the plaintiff
did not even attempt an exp l anation of why the market was l imited
and

"made

no

interchangeability.

allegations

concerning"

reasonable

In Global Discount Travel Services ,

LLC v.

Trans World Airl ines , Inc., 960 F. Supp. 702 , 706 (S . D.N.Y. 1997) ,
the court found the product market was improperly pleaded because
the plaintiff included only its brand in the product market and
29

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 29 of 88

made no plausibl e exp l anation as to why other competitors did not
suppl y interchangeable products.
Division for Yout h ,

And in Chapman v . New York State

546 F . 3d 230 , 238

(2 d Cir . 2008) ,

the court

found a product market too narrow where the plaintiff did not
provide "any theoretically reasonable explanation for restricting
the product market . "

Here ,

Plaintiffs have

included such an

explanation and include in the market products beyond just those
of Defendants (namely , t h e generics).
Moreover,

the

court

is

unpersuaded

that

taking

judicial

notice of the EPA label registrations and FTC and DOJ antitrust
matters would materially a l ter the court ' s anal ysis at this stage.
While the court ,

under Federal Rule of Evi dence 20 1,

may take

judicial notice of facts that are " matters of public record,"
Justice

360

v.

Stirling ,

42

F.4th

450,

455

(4th Cir .

2022) ,

Defendants ask the court to also accept their interpretation of
facts within the cited publ ic records .
be probative of interchangeability,
interchangeable

function ,

not

The EPA registrations may

but they appear to speak to

whether

and

how

these

crop­

protection products are interchangeable in the marketpl ace - i.e.,
cross-elasticity of demand.
(finding

it

"immaterial "

In re Nexium, 968 F . Supp . 2d at 388
on

a

motion

to

dismiss

that

other

ph armaceuticals coul d be used to treat the same symptoms because
function does not necessarily speak to cross- elasticity of demand
among consumers) .

At a minimum, the EPA label registrations raise
30

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 30 of 88

fact

questions,

pleading

which are ill-suited for

stage .

And

whi le

the

prior

determination at

FTC

and

DOJ

the

antitrust

proceedings may suggest some inconsistency in how the government
views the crop-protection product market, the court must consider
each antitrust dispute on a case-by-case basis.
504 U. S .

at 467

Eastman Kodak,

(demonstrating preference to resolve antitrust

claims "on a case-by-case" basis);

(See Doc. 100 at 41-42 (citing

Ciba-Geigy Ltd . , 62 Fed. Reg. 409, 412 (FTC Jan. 3, 1997), because
FTC alleged in merger action a broader product market of "corn
herbicides") .)

As a result, even if the court took judicial notice

of these facts outside of the record, they woul d not materiall y
impact the court ' s analysis at this stage .
Defendants' other arguments fall short as well.
have

alleged plausible ,

albeit

narrow ,

product

Plaintiffs

markets .

The

reasoning applied in cases analyzing the relevant product market
for pharmaceuticals, specificall y that a p l ausible product market
may consist of a brand chemical and its generic alternative, is
instructive.
Zetia,

See In re Nexium, 968 F . Supp . 2d at 388 - 89; In re

2021 WL 6689718 at *19

consisting

of

Additionally ,

brand

drug

(finding proper a product market

and

generic

on

summary

judgment) .

Plaintiffs have plausibly al l eged facts that show

that there is limited cross-elasticity between the products inside
and

outside

of

Plaintiffs'

alleged

markets .

For

example,

Plaintiffs allege that Defendants' prices would fall significantly
31

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 31 of 88

upon entry of a generic of the same AI.

(See Doc. 149 <Jl.<Jl. 92 , 121 ,

127, 144, 150 , 158; Doc . 81 <Jl.<Jl. 101, 11 9 (demonstrating anticipated
market devaluation upon generic entry) . )

The alleged effect on

price result ing from generic entry plausibly suggests that the AI
i n each alleged product market does not already fac e substantial
competition from products outside the alleged market.
&

Hovenkamp,

supra

<JI

56lb2

(" [I] f

See Areeda

the price of one incumbent

product drops signi ficantly in response to new entry, while the
prices

of other

product,

plus

incumbents

the

new

do

not ,

then

that

is

very

likely

entrant ,

first
a

incumbent
market.").

Moreover, Defendants ' own alleged conduct, namely that Defendants '
own loyalty programs cover only individual Ais, plausibly suggests
that Defendants view the market as including only one AI b ut not
o t hers.

(Doc. 149

<Jl.<Jl.

67, 76); Todd,

275 F . 3d at 205

(crediting

evidence of defendant's conduct as suggestive of scope of product
market) .

Finall y,

Plaintiffs p lausibly allege characteristics

t hat make each AI unique in t he marketplace , that alternatives are
not considered by farmers as suitable ,
specific Ais.

and that farmers prefer

(Doc . 149 <Jl.<Jl. 46, 157 . )

In sum, Plaintiffs have alleged a plausible explanation as to
why the market should be limi ted as alleged .
at 442.

Cf. Kolon, 637 F.3d

Whether, as Defendants argue, they have the better of the

argument after the facts develop ,
must await another day .

and the evidence is weighed,

As a result, Defendants ' motion to dismiss
32

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 32 of 88

for fai l ure to plausibly al l ege a product market will be denied.

2.

Anticompetitive Conduct and Injury

Defendants argue that Plaintiffs have not plau sibly alleged
anticompetitive conduct and inj ury .
25.)

(Doc . 95 at 2 1 ; Doc . 100 at

The parties dispute first which legal test the court should

apply to Defendants '

loyalty programs, and second,

depend ing on

the test applied, whether Plaintiffs have alleged anticompetitive
conduct and i njury .

The

court considers each in turn for the

purposes of the instant motion .

a.

The Rule of Reason and Price-Cost Test

Defendants urge the court to apply the "price- cost" test,
argu ing that Plaintiffs failed to allege facts to survive this
measure of anticompetitive conduct.
22-23.)

(Doc. 95 at 24 ; Doc. 100 at

As suggested by its name , where the price-cost test is

applied, alleged condu ct may only be illegal if the price is set
bel ow the cost .

Brooke Grp. Ltd . v . Brown & Williamson Tobacco

Corp . ,

2 0 9,

50 9 U . S .

222

( 1993) .

Plaintiffs appear to concede

that the complaint does not allege prices below cos t.

(Doc. 150

at 43

("Pl aintiffs do not bring a predatory-pricing claim . ").)

This

concession

antitrust

claims

maintai n, however ,

would

seemingly

short-circuit

Plaintiffs'

if

price-cost

test

Plaintiffs

the

applies .

that the court would gravely err in apply i ng

the price- cost test , arguing instead t hat the cour t must apply the
defau lt "ru le of reason."

(Doc. 150 at 39-40 . )

Under that test ,

33

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 33 of 88

an exclusive dealing arrangement is unlawful only if its "probable
effect" is to substantially lessen competition in the relevant
market.

Tampa Elec., 365 U.S . at 327-29.

As a matter of principle, antitrust law is not intended to
prevent all price-cutting.

Brooke Grp . ,

509 U. S.

at 223

(" Low

prices benefit consumers regardless of how those prices are set,
and so

long as

t hreate n

they are

(quoting

competition."

Petroleum Co.,

above predatory levels,

495 U.S . 328, 340

Atl.

Richfield

(1990)).

they do not
Co.

In fact,

v.

USA

competitors

should generally be enabled to cut prices to a certain extent even to

increase market

antitrust laws .

share -

without running afoul of the

Id . ("The antitrust laws require no such perverse

result." (quoting Cargill, Inc. v. Monfort of Colorado, Inc., 479
U. S. 104, 116 (1986)).
generally

Low prices that are still above-cost are

procompetitive

because

"the

exclusionary

effect

of

prices above a relevant measure of cost [generally] reflects the
lower cost structure of the alleged predator, and so represents
competition on the merits."
On

the

other

hand,

Id . at 222 - 24.

predatory pricing

harms

competition.

Predatory pricing occurs where a company sets prices below cost to
eliminate competitors in the short run and reduce competition in
t he long run.

Cargill, 479 U.S. at 117.

Such a pricing scheme is

"rarely tried, and even more rarely successful."

Matsushita Elec .

Indus. Co. v. Zenith Radio Corp . , 475 U.S. 574 , 589 (1986).

"For

34

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 34 of 88

such a scheme to make economic sense ,
l osses

suffered

during

supracompetitive phase . "
Weyerhaeuser Co.

v.

the

the firm must recoup the

below-cost

ZF Meritor,

phase

in

696 F . 3d at 272

Ross-Simmons Hardwood Lumber Co.,

the

(citing
54 9 U.S.

312, 318 (2007)).
To separate the competitive wheat from the predatory chaff,
the Supreme Court devised the price-cost test: to succeed on a
predatory pricing claim, a plaintiff must demonstrate

(1)

"that

the prices complained of are below an appropriate measure of [the
defendant's] costs"; and (2) that the defendant had "a dangerous
probability
prices."

of
Id .

recouping

its

investment

(quoting Brooke Grp .,

509 U. S .

in

below-cost

at 222-24) .

In

fashioning this formalistic approach, the Court acknowledged that
the price-cost

test will miss

some

anticompetitive

above-cost

pricing , but that it "is beyond the practical ability of a judicial
tribunal"

to

ascertain

whether

above-cost

pricing

is

anticompetitive "without courting intolerable risks of chilling
legitimate price- cutting."

Id. at 273.

Where the price-cost test does not apply, courts apply the
rule of reason to exclusive dealing arrangements . 7

Tampa Elec . ,

7

The ZF Merit or court indicat ed that t he price-cos t t est is a "specific
applicat ion of t he rule o f reason" when applied in the cont ext of
exclusive dealing.
ZF Meritor, 696 F.3d at 273; see also In re EpiPen
(Epi nephrine Injection, USP) Ant i t rust Lit ig., 44 F.4 t h 959, 983 n.7
(10th Cir. 2022) (quot ing ZF Merit or's "specific application" language
and referring to the Tampa Electric analysis as the ''full rule of reason
35

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 35 of 88

365 U.S. at 327.

"[E ] xcl usive dealing arrangements violate the

antitrust laws only if they are likely to foreclose the entry in to
a substantial part of the market of products that compete with the
products

benefitting

from

the

exclusive

dealing

arrangement."

Chuck's Feed, 810 F.2d at 1293 (citing Standard Oil Co. v. United
States, 337 U.S . 293, 314 (1949)) .
following

considerations

when

The Supreme Court set out the

analyzing

an

exclusive

dealing

arrangement:
[T] he probable effect of the contract on the relevant
area of effective competition, taking into account the
relative strength of the parties, the proportionate
volume of commerce involved in relation to the total
volume of commerce in the relevant market area, and the
probable immediate and future effects which pre-emption
of that share of the market might have on effective
competition therein .
Tampa Elec . ,

365 U. S. at 329.

The concern of t he courts about

exclusive dealing arrangements is "the possibility that a single
manufacturer will control all or a

substantial number" of the

available options for a certain kind of product in a specified
geographical area.

Chuck's Feed,

810 F.2d at 1293

(addressing

concern in the context of retail markets)
To succeed on an exclusive dealing claim, a plaintiff must

analysis") ; UniStrip Techs. , LLC v. LifeScan, Inc., 153 F. Supp. 3d 728,
736 (det ermining whether to apply the "'price cos t t est' or the 'rule
of reason'"); In re Surescripts Antitrust Litig ., 608 F. Supp . 2d 629,
636 (N.D. Ill . 2022) (describing the "apt test" as the " rule of reason,"
as opposed to the "price-cost test"); cf. Atl . Richfield, 495 U.S . at
342 ("Per se and rule-of-reason analysis are but two methods of
determining whether a restraint is "unreasonable," i .e . , whether its
anticompetitive effects outweigh its procompetitive effects . ").

36

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 36 of 88

prove (1) the rel evant product market ;

(2) the geographical area

of competi t ion for the product market ; and (3 ) that the arrangement
at issu e extends to a " substantial share of the relevant market . "
Id.

(citing Tampa Elec .,

substan tial

foreclosure,

365 U.S .

327-28).

it

still

must

If a

court finds

consider

"whether

an

otherwise unacceptable level of market foreclos u re is justified by
procompetitive efficiencies . "

Id . at 1294

(citing Cont ' l

T.V .,

I nc. v. GTE Sylvania , I nc ., 433 U. S. 36, 57-58 (1 977); Arizona v.
Maricopa Cnty . Med . Soc ' y , 457 U. S . 332 , 343 (1 982) ) .

Substantial

foreclosure has been found " even though the contracts foreclose[d]
l ess than [a) roughly 40% or 50% share."

Microsoft, 253 F . 3d at

70 (Sherman Act§ 2 claim).
The Supreme Court's price- cost line of cases demonstrates
that the price-cost test applies at least where a pricing practice
itself operates as the e x clusionary tool ,
plaintiff

styles

i ts

allegations .

In

regardless of how the
Pacific Bell

Telephone

Company v. Linkline Communications , Incorporated, for example, the
defendant , which sold input s at wholesale and finished goods at
retai l , allegedly drove competitors out of the market by raising
the

wholesale

price.

price

simultaneously

555 U. S . 438 , 457 (2 009) .

" price-squeezing"
scheme

while

was

claim

permissible

remain[ed] above cost . "

lowering

the

retail

The Supreme Court analyzed this

under

Brooke

because

"the

Id. at 451-52.

Group,

holding

defendant' s

that

ret ail

the

price

In Cargill , Incorporated

37

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 37 of 88

v. Monfort of Colorado, Incorporated, the Supreme Court rejected
a

plaintiff's

theory

of

antitrust

injury where

the

plaintiff

alleged that the defendant's merger would lead to reduced prices
that were still at or above cost.

479 U.S. at 114-16.

And in

Atlantic Richfield Company v. USA Petroleum Company, the plaintiff
alleged that the defendant, a gasoline manufacturer, had engaged
in price-fixing by offering its dealers discounts and rebates to
stave off competition from independent dealers.
32 .

495 U.S. at 331-

The Supreme Court held that where a firm or group of firms

lowers prices through a vertical agreement, but maintains prices
above cost, competitors ' losses are attributable to procompetitive
forces , not anticompetitive predatory pricing .

Id. at 337-38 .

Lower courts have nevertheless grappled with the question of
when to apply the price-cost test when it is not clear that a
company engages merely in "price- cutting" - e.g . , when a company
offers discounts in exchange for purchasing a certain percentage
of goods from that company .

To be sure, courts have in some cases

applied the test to above- cost discounting in such instances .

For

example, in NicSand Incorporated v . 3M Company, two suppliers of
automotive

sandpaper

competed

for

business

with

retailers that controlled 80% of the retail market .
447 (6th Cir . 2007).

six

large

507 F.3d 442,

Five out of the six retailers sold only one

brand at a time, meaning each retailer sold only either NicSand or
3M, but not both .

Id.

In order to obtain that exclusive shelf38

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 38 of 88

space ,

NicSand or 3M had to offer a favorable price and meet a

number of additional terms,

such as providing a

fu ll

line of

automotive sandpaper and providing the racks for the shelves.
at 448.

Id.

For years , NicSand dominated the shelves in four of the

five retailers that insisted on single-brand shelves.

That is,

until 3M offered retailers up-front payments worth hundreds of
thousands of dollars in exchange for switching to 3M.

Id.

The

Sixth Circuit applied the price-cost test in rejecting NicSand ' s
claim.

In doing so ,

the court reasoned that exclusivity was an

essential

feature

of

this

specific

retai l ers

(i.e. ,

the

buyers)

retail

required

market

because

exclusivity,

and

the
that

NicSand, as the market incumbent , could not now complain that 3M
had knocked it from its perch using similar exclusive terms it had
previously utilized.

Id. at 456

("When one exclusive dealer is

replaced by another exclusive dealer , the victim of the competition
does not state an antitrust injury. " ).

Ul timate l y, the court found

that the up-front payments 3M offered were a pricing measure that
the re t ailers "insisted on receiving" in order to switch suppliers .
Id. at 453.
The Eighth Circuit, in Concord Boat Co rporation v . Brunswick
Corporation , 207 F.3d 1039 (8th Cir . 2000), applied the price-cost
test to the plaintiffs' Sherman § 2 claim and the rule of reason
to the plaintiffs ' Sherman§ 1 claim, albeit with little discussion
as

to why the cou rt applied different tests

to

the different

39

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 39 of 88

claims.

The defendant, Brunswick, offered market-share discounts

to boat builders and dealers in order to increase the sales of its
engines .

Id . at 1044.

From 1995 to 1997, Brunswick offered a 3%

discount

if

purchased

a

buyer

70%

of

its

engines

from

the

defendant, a 2% discount for 65% of its engines, and a 1% discount
for 60% of its engines.

Brunswick also offered additional

Id .

discounts to anyone who signed a multi-year market-share agreement
and to t hose who purchased a higher volume of engines
volume discount) .

Id.

(i.e., a

Analyzing the plaintiffs' section 1 claim

under the rule of reason because the plaintiffs did not allege
activity that would "trigger a per se analysis," the Eight Circuit
held that the plaintiffs

failed to establish that Brunswick's

discount program was anticompetitive exclusive dealing because
boat builders were not required to commit for a specified time
period and many had switched to other sellers when offered superior
discounts.

Id. at 1058-59.

plaintiffs

did

not

show

Moreover, the court held that the

that

"significant

barriers

to

entry

existed" in the market because firms had little difficulty entering
t he market.

Id.

Then, applying the price-cost test to plaintiffs '

section 2 claim, the court held that Brunswick's loyalty program
was a "normal competitive tool" because its prices remained above
variable cost.
justify this

Id. at 1062.
holding,

the

Though not apparently necessary to
court

reiterated that

t he

discount

program was not exclusive dealing, that the boat builders could
40

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 40 of 88

walk away at any time (and did so), and that there were low barriers
to entry.

Id. at 1063.

Equipped with

these

precedents,

t he

Third Circuit

in

ZF

Meritor dealt more explicitly with which of the two tests to apply
when presented with another loyalty discount program.

In that

case, the defendant, Eaton, had about an 80% market share in the
manufacture

of

heavy-duty

truck

transmissions

and

introduced

loyal ty contracts t hat provided both upfront payments and rebates
to

four

major

truck

transmissions .

manufacturers

ZF Meritor,

t ha t

696 F.3d at 265,

purchased

truck

286 n.5.

These

contracts lasted for at leas t five years and would scale discounts
based on the percentage of goods the manufacturers purchased from
the defendant.

Id. at 265.

ranged from 85% to 95%.
beyond

the

Generally, the market-share targets
Eaton included additional terms

Id .

discounts.

Notably,

Eaton

retained

the

right

to

termi nate the agreements if the market share figures were not met,
and if the manufacturers did not meet the market-share figure for
one

year,

savings."

Eaton

could

require

Id.

Moreover,

"repayment

all

contractual

direct-from-manufacturer truck buyers

could customize certai n equipment,

including transmissi ons,

could browse options in the manufacturers'
agreements required t hat

of

its

catalogues.

transmissions be

and

Eaton's

fea tured as

the

standard offering in the catalogues and even required the removal
of

competitors'

products

in

two

of

the

four

manufacturers'

41

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 41 of 88

catalogues.

Id.

Further,

the manufacturers were contractually

required to price competitors' products above those of Eaton.

Id.

at 265-66.
The ZF Meritor court weighed whether to apply the price-cost
test or the rule of reason to Eaton's agreements.

Id . at 268.

The court noted that the price-cost test "would control if this
case presented solely a challenge to Eaton's pricing practices."
Id.

at

273-74.

However,

the

court

credited

testimony

that

demonstrated that manufacturers were forced to meet the market­
share targets , or else risk financial penalties, supply shortages ,
or severed ties with t he market-dominant defendant entirely.
at 277.

Because Eaton was

a

monopolist,

Id.

the court reasoned,

forgoing the rebates and "losing Eaton as a supplier was not an
optio n."
The

Id. at 278.
court

defendant's

stated that

low price was

"this

is not a

the clear driving

customer's compliance with purchase targets,

case

in which the

force

behind the

and the customers

were free to walk away if a competitor offered a better price ."
Id.

(citing Concord Boat, 207 F.3d at 1063 as a counter-analogy).

Put another way, Eaton ' s de facto exclusive dealing arrangements
drove out other firms "not because they cannot compete on a price
basis, b ut because they are never given an opportunity to compete,
despite their ability to offer products with significant customer
demand."

Id . at 281 .

The court held that when price itself is
42

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 42 of 88

not the "clearly predominant mechanism of exclusion ," the priceId. at 277. 8

cost test does no t app l y.

A few years later , the Third Circuit revisited ZF Meritor in
the pharmaceutical context .

Eisai, Inc . v. Sanofi Aventis U.S.,

LLC ,

821 F . 3d 394

(3d Cir. 2016) .

In that case, Eisai alleged

that

Sanofi Aventis engaged i n three modes of anticompetitive

conduct in the market for anticoagulant drugs in U.S. hospitals:
" ( 1)

market-share

and

volume

discounts,

( 2)

a

restrictive

formulary access clause, and (3) aggressive sales tactics used to
market the program."

Id. at 400.

Specifically, Sanofi offered a

baseline 1% discount for a market-share below 75% and a scaled
discount from 9% to 30% for market-shares above 75% .

Id .

The

court ultimately held that Sanofi ' s program was distinguishable
from that in ZF Meritor because the discounts were not de facto
mandatory , did not threaten repayment of contractual savings , and
did no t t hreate n refusa l t o dea l in t he future.

Id. at 406.

The

cou rt nevertheless refrained from commenting on whether the price-

8

In dissent , Judge Greenberg disagreed wit h t he majority 's view that
the agreement s were exc l usive dealing and inst ead would have applied the
price-cost
t est.
ZF Meritor ,
696 F.3d a t
349 (Greenberg , J .,
dissent ing).
He
principally
d isagreed
wi t h
the
majorit y's
characterization of Eaton's conduct as coercive, as he viewed the
agreements as neither exclusive nor mandatory and contended t hat there
was no evidence " t hat Eaton would have refused to supply t ransmissions
to the [manufacture rs]u if they failed t o meet t he market share targets.
Id . at 312 . Moreover, Judge Greenberg took the position t hat the price­
cos t test should apply in a situation such as this because the agreements
themselves - with or without non-price f eatures - woul d not exist
"without the reduced prices that Eaton offeredu as an incentive to enter
the agreement in the first p lace . Id . at 321 .

43

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 43 of 88

cost test applied because,
applied

in

ZF Meri tor,

even under the rule of reason test

the p laintiff 's

claims

insufficient evidence of market foreclosure.

failed

due

to

Id. at 408-09 .

The Thi rd Circuit's approach suggests that loyalty discount
arrangements may be pure (or nearly pure) pricing schema, and in
such situations, the price-cost test applies neatly .
NicSand,
other

507 F.3d at 453.

allegedly

coercive

However,

See, e . g . ,

an arrangement may include

mechanisms

that

impose

costs

on

competitors to enter the market such that price is not "clearly"
doing

the

work

formulation,

of

exclusion.

Following

the

Third Circuit 's

other circuits have since relied upon and cited ZF

Meritor where the defendant offers loyalty discounts.

See, e.g . ,

In re EpiPen (Epinephrine Injection, USP) Antitrust Litig., 545 F.
Supp.

3d 922,

1016-17

(D.

Kan.

2021)

(explicitly applying the

"clearly predominant mechanism of exclusion" analysis), aff'd , 44
F.4th 959 (10th Cir. 2022)

(observing that ZF Meritor and other

Third Circuit precedent "merit close consideration in this case");
McWane, 783 F.3d at 835

(citing ZF Meritor to just ify a rule of

reason approach to exclusive dealing cases); Aerotec Int 'l, Inc.
v . Honeywell Int'l, Inc . , 836 F . 3d 11 7 1, 1182-83 (9th Cir. 2016)
(citing ZF Meritor as a counter-analogy for situation with " extra­
contractual conditions,

or preferential treatment terms");

see

also Dial Corp . v. News Corp., 165 F . Supp. 3d 25, 32 (S.D.N.Y.
2016)

(citing

and

applying

ZF

Meritor's

"clearly

predominant

44

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 44 of 88

method

of

exclusion"

test

in

non-loyalty

discount

exclusive

dealing case) .
ZF Meri to r
Supreme

Court

appears
has

to balance the important concerns

identified

in

over-regulating

the

price-cutting

schema, see Matsushita , 475 U.S . at 594 ("[M]istaken inferences in
[pricing cases]
chill

the

very

cases
conduct

are especially costly, because they
the

antitrust

l aws

are

designed

to

protect."), and under-regulating exclusive dealing, see Jefferson
Par., 466 U.S . at 45 (O'Connor, J. , concurring) ("Exclusive dealing
can have adverse economic consequences by allowing one supplier of
goods or services unreasonably to deprive other suppliers of a
market for their goods [.] ") .

The ZF Meri tor approach counsels

applying the price-cost test where a pricing practice is clearly
doing the work of exclusion and the rule of reason where there are
mechanisms

beyond

price-cutting

that

exclude

competition

by

imposing unilateral costs on competitors.
The parties do not appear to disagree with the above analysis.
(Doc. 100 at 25; Doc. 95 at 24-25; Doc. 150 at 41 .)

Rather, they

depart on whether price clearly predominates over other mechanisms
of exclusion in this case.

Syngenta argues that Plaintiffs do not

plead " any of the non-price coercive features that courts have
required"

before

anticompetitive.

finding

market-share

a

(Doc . 100 at 27 .)

rebate

program

Furt her , Syngenta argues, the

single-year and single-product scope of the

rebates

undermines

45

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 45 of 88

Plaintiffs '

claim that price clearly predominates.

Syngenta dismisses Plaintiffs'
distributor

as

an

"isolated

(Id. at 29.)

allegation that it terminated a
allegation"

probative of the program itself."

that

is

"simply

not

(Id. at 30 (emphasis removed) .)

Finally, Syngenta characterizes Plaintiffs' allegations regarding
Defendants' agreement whereby Syngenta supplies mesotrione ands­
metolachlor for Corteva's use as an "effort to muddy the waters."
(Id. at 32.)
Corteva first argues that "Plaintiffs' allegations make clear
that price is the primary means of exclusion, but do not allege
that Corteva's programs fail the price-cost test."
25.)

(Doc. 95 at

Corteva specifically contends that Plaintiffs do not allege

long-term

contract

noncompliance,

terms

which

are

or

exclusions

recognized

from

supply

non-price

would trigger the default rule of reason.

based

conditions

(Id . at 26.)

on

that

Second,

Corteva claims that its term that defers a certain percentage of
rebates

into subsequent years

and retracts

unpaid rebates

for

noncompliance is "no more than a 'threat of a lost discount'" that
is, in its view, not anticompetitive.

(Doc . 98 at 26.)

Third, Corteva claims that conditioning the Corporate Offer
on compliance with the CRPIVM is not anticompetitive "bundling."
(Id. at 27-28.)
goods

Bundling occurs "when a firm sells a bundle of

. for a lower price than the seller charges for t he goods
purchased

individually ."

Cascade

Health

Sols .

46

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 46 of 88

v.

PeaceHealth , 515 F . 3d 883 , 894 (9th Cir . 2008).
the

Corporate

Offer

"just

offers

an

In Corteva' s view,

additional

discount

to

Corteva's customers who do buy products covered by the [Corporate
Offer ] ."
"should

(Doc. 95 at 28 . )
not

nonspecific

credit

Fourth, Corteva contends that the court

[P]laintiffs '

allegations

that

unsupported ,

' Defendants

have

conclusory

and

retaliated

and

threatened to retaliate ' against distributors that have failed to
satisfy

l oyal ty

by

cance ll ing

distribution

contracts

or

withholding access to supply."
Plaintiffs argue in response that Defendants mischaracterize
their own discount program as a pricing scheme.

(Doc . 150 at 35.)

Plaintiffs point to the complaint ' s allegations that "Defendants
have

' threatened

distributors .

to

retaliate

against

[disloyal]

by canceling distribution contracts , de l aying

access to new products , or withholding product allocation during
a supply shortage. "

(Id . at 36 (citing Doc. 149 <I[ 88).)

Pl aintiffs

further maintain that they allege that each Defendant "follow [ed]
through"

on

their

threats

by

refusing

to

sell

pesticides

9

or

Corteva argues that this litigation was filed well over fou r years
after the loyalty programs were allegedly put in place, outside the four ­
year statute of limitations provided for in t he Sherman Act and Clayton
Act .
(Doc . 95 at 29 - 30.)
In its briefing on i t s motion to dismiss t h e
original complaint, Corteva argued t hat those claims therefore "long ago
expired . "
(Doc. 70 at 23-24 . ) Though Corteva does not claim that now,
and while Plaintiffs responded to Corteva ' s suggestion by noting, among
other bases, the continuing violation doctrine , (Doc . 150 at 67-68), the
court concludes that the issue is not fairly raised in Corteva ' s brief
and therefore does not consider i t .

47

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 47 of 88

limiting sales of an insecticide to two distributors.
at 36 (citing Doc. 81 1 88) .)

(Doc. 112

Plaintiffs respond to Defendants'

argument - that t hese are isolated incidents t hat do not exemplify
the program - by arguing that the reasonable inference which must
be

drawn

in

Plaintiffs'

favor

i ns tances

of

retaliation

are

working as intended.

(Id.

at

this

evidence

stage

is

of

loyalty program

at 37-38.)

the

that

limited

Plaintiffs also contend

that the one-year length of the agreements triggers no presumption
that the contracts are lawful and that looking to the practical
effect of agreements demonstrates " long-term foreclosure. "
at 38-39.)

(Id.

Plaintiffs finally argue that even if the price-cost

test applies to the Sherman Act and Clayton Act claims, it does
not apply to the FTC Act claim.

(Id. at 45- 47.)

In other loyalty discount cases, courts have observed a number
of

non - price

mechanisms

of

exclusion ,

such

as

provisions

aggravating existing barriers to enter the market , McWane, Inc.,
783 F.3d at 836; In re Surescripts Antitrust Litig ., 608 F . Supp.
3d

629 ,

645

exclusive

(N . D.

dealing,

Ill.

NicSand,

obligations to purchase a
defendant ,

2022) ;

whether

507

F. 3d

the

buyer

insists

at

456;

contractual

set percentage of products

Allied Orthopedic,

592

F.3d at

997

n .2;

on

from the
discounts

involving tying or bundling, Eisai , 821 F.3d at 405; LePage's, 324
F . 3d at 157 - 58 ;

t hreats to retract unpaid rebates or claw back

discounts from prior years, McWane, 783 F.3d at 820-21; threats to
48

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 48 of 88

cut off supply from a monopolist ,

ZF Meri tor ,

696 F. 3d at 27 8 ;

requirements to exclude competitors from marketing materials, id .;
and the length of time of the discounting agreements, McWane, 783
F.3d at 820-21.

While these cases are instructive, each antitrust

case "must be determined upon the particular facts disclosed by
the record, and . . . the opinions in those cases must be read in
t he

light

of

their

facts

and of

a

clear

recognition

of

the

essential differences in the fac ts of those cases, and in the facts
of any new case to which the rule of earlier decisions is to be
applied."

Maple Flooring Mfrs. Ass'n v. United States, 268 U.S.

563 , 579 (1925).
Here, Plaintiffs have alleged sufficient non-price mechanisms
of exclusion to foreclose application of the price - cost test as a
matter

of

law at

this

plausibly

alleges

that

Defendants '

monopolist

pleading

stage.

First,

the

loyalty

programs

status

and

t he

the

leverage

market's

barriers to entry to exclude competition for the Ais.
<J[

160.)

lega l

Among the alleged "capital,
barriers"

are

"obtaining

technical,

registration

complaint
the

substantial
(Doc. 14 9

regulatory and
from

the

EPA,

developing manufacturing processes and sourcing active ingredient,
and paying data compensation costs to the initial active ingredient
registrant."

While high entry barriers

alone may not

trigger the rule of reason, Plaintiffs have plausibly alleged that
Defendants' use o f the loyalty discounts - as alleged monopolists
49

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 49 of 88

relating to production of the Ais - exacerbates the already high
costs

to

enter

the

market by locking up

efficient channel of dist ribution .

access

to

the

most

See McWane , 783 F.3d at 836;

ZF Meritor , 696 F . 3d at 284-85 (app l ying rule of reason where high
barriers e x isted in high-concentration market ) ; Eastman Kodak, 504
U. S.

at

488 (Scalia,

J.,

("Behavior

dissenting)

that

might

otherwise not be of concern to the antitrust laws . . . can take
on exclusionary connotations when practiced by a monopo l ist.")
Second,

the

complaint

alleges

threatened to cut off supply,

not

only

that

Defendants

but that each Defendant followed

through on that threat, a l beit in l imited instances.
':II 8 8. )

(Doc. 1 49

While Defendants contend that these do not exemplify the

program,

the

court

must

draw

Plaintiffs' favor at this stage.

all

reasonable

inferences

in

Such instances plausibly support

the claim that Defendants' threats to restrict supply are effective
deterrence against non- compliance.

(See i d . ':II 84

(alleging that

Defendants

to

thresholds

communicate

distributors) . )
to

restrict

adherence

loyalty

to

The complaint plausibly alleges that the threats
suppl y

factors

into

distributors '

purchasing

decisions .
Third,

whi l e

the l e ngth of the agreements is facia l ly one

year, the alleged yearl y renewals and threat of retaliat i on are
claimed t o have a longer- term effect.

(Id .

':11':ll

164 , 172 . )

Further,

Corteva ' s agreements allegedly contain terms that defer payments
50

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 50 of 88

into subsequent years and require forfeiture of unpaid discounts
for non-compliance.
Fourth,

(Doc. 81

Corteva' s

<_![

78.)

agreements allegedly share some features

with bundling because Corteva offers terms that link discounts for
any one AI to compliance with the loyalty threshold fo r all Aisin
a distributor's offer and that link discounts under the Corporate
Offer to compliance with the CPRIVM offer.
Finally,

Plaintiffs

plausibly

allege

(Id.

<_![

that

79.)
the

Syngenta­

Corteva supply agreement for mesotrione and metolachlor allegedly
enhances the exclusive effect of the loyalty programs.
<_j[<_j[

(Doc. 149

109, 122.)
Whether these non-price mechanisms have the alleged exclusive

effect vis-a-vis
record.

price will

depend on the development of the

In light of these plausible allegations, Defendants have

not demonstrated at this stage that price clearly predominates
over non-price mechanisms of exclusion.
Defendants'

other

arguments

do

not

alter

this

analysis.

First, that t he loyalty discounts cover a single product

(i.e.,

each individual AI) does not necessarily mean that price clearly
predominates .

While Defendants cite to ZF Meritor and Eisai for

this proposition, neither supports it .

In ZF Meritor, the Thi rd

Circuit did state, "we join our sister circuits in holdi ng that
the price- cost test applies to market-share or volume rebates
offered by suppliers within a single-product market."

ZF Meritor,

51

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 51 of 88

696 F.3d at 274 n.11

(citing NicSand,

507 F . 3d at 452 ; Concord

Boat , 207 F.3d at 1061 ; Barry Wright , 724 F . 2d at 236) .

In making

this observation , the Third Circuit was distinguishing LePage's v.
3M, 324 F . 3d 131 (3d Cir. 20 03 ), where the court did not apply the
price-cost test because the alleged conduct involved "bundling"
across multiple products .

Id .

The court reasoned that LePage's

should not extend to the facts of ZF Meritor ,
product

is

at

issue

and

allegations of bundling . "

the

p l ainti f fs

ZF Meritor,

where "only one

have

not

made

any

696 F . 3d at 274 n . 11.

Though the court stated that the price-cost test " applies " to a
single-product discount, the ZF Meritor court itself applied the
rule of reason discount.

not the price-cost test -

to a single-product

This indicates that the price- cost test can apply where

there is a single-product market , not that it must .
reliance on Eisai fares no better ,
that

pricing

" usually"

Defendants'

as the Third Circuit stated

predominates

over

other

means

of

exclusivity when "a firm uses a single-product loyalty discount or
rebate to compete wi t h s.imilar products . "

Eisai , 821 F . 3d at 409 .

However, the court ultimately refrained from applying t he price­
c o st test because the plaintiff's claim failed under Tampa Electric
as well .
claims

Id .
are

at 409

("Because we have concluded that Eisai ' s

not

substantiated

a rule of reason analysis,

and

that

they

fai l

we will not opine on when ,

if ever,

the price-cost test applies to this type of claim . ") .

Notably ,

52

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 52 of 88

neither ZF Meritor nor Eisai was decided at the pleadings stage
but after the development of a factual record.

ZF Meritor was

decided on post-trial motion , and Eisai was decided on motion for
summary judgment.

Though the price-cost test may apply to certain

loyalty

programs ,

discount

the

Supreme

Court

admonishes

that

"[l]egal presumptions that rest on formalistic distinctions rather
t han actual market reali ties " are "generally disfavored" and that
courts should resolve anti trust cases on a
"focusing on the
Eastman Kodak ,

'particular facts

504 U.S .

at 466-67

case-by-case basis,

disclosed by the

record.'"

(quoting Maple Flooring,

268

U.S . at 579 ).
Second, at least at this early stage, it is not clear that
the single- year term of the loyalty discount agreements mandates
application of t he price-cost test as a matter of law.

Defendants

contend that the single- year term of their agreements in t his case
"are presumptivel y incapable of harming competition."
at 29 .)

While long-term exclusive dea ling has been found to factor

in favor o f finding anticompetitive injury,
at

(Doc. 100

286-87,

Defendants

have

not

ZF Meritor, 696 F.3d

demonstrated

t hat

a ny

such

presumption exists .

Rather,

t he cases Defendants cite for this

position

courts

have

show

determining

that

anticompetitive

anticompetitive effects.

weighed

effects,

not

short
presumed

duration
a

lack

in
of

See R.J. Reynolds Tobacco Co. v . Philip

Morris Inc ., 199 F . Supp . 2d 362, 391-93 (M.D.N.C 2002) , aff'd sub
53

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 53 of 88

nom. RJ Reynolds Tobacco Co. v.
App'x

810

(4th Cir.

2003)

Philip Morris USA,

(unpublished)

Inc.,

67 F.

(considering contract

length along with percentage of foreclos ure and costs of switching
to other vendors); see also In re EpiPen Mktg., 44 F.4th at 988
(" It

is

axiomatic

that

short,

easily

terminable

exclusive

agreements are of little antitrust concern; a competitor can simply
wait

for

the

contracts

to

expire

or make

alluring

offers

to

initiate termination." (collecting cases)); Allied Orthopedic, 592
F . 3d at 997

("The

'easy terminabili ty'

of an exclusive dealing

arrangement 'negate [s ] substantially [its] potential t o foreclose
competition.'" (quo t ing Omega Env't, Inc. v. Gilbarco, Inc., 127
F.3d 1157,

1163-64

(9th Cir .

1997))).

Here,

Plaintiffs allege

that Defendants' renewable single- year contracts create long-term
competitive harms, including cutting off supply and, in Corteva's
case,

deferring

rebates

into

subsequent

years

further compliance with meeting market-share.
F.3d at 193-94

conditioned

on

See Dentsply ,

399

(finding "strong economic incentive to continue"

compliance with market-share agreement despite "legal
which the relationship can be terminated"); McWane,
833-34

(finding

anticompetitive

injury

dealing was "short-term and voluntary").

even

ease with

783 F .3d at

though

exclusive

Moreover, each of the

Ais has been in a loyalty program for at least four years, and one
has been included for almost two decades.
115, 127, 137, 146.)

(Doc. 149

<J[<J[

93, 102,

While the annual length of the agreements is
54

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 54 of 88

generall y a factor that favors Defendants , the court must draw a l l
reasonabl e

inferences

from

the

compl aint ' s

Plaintiffs ' favor at this early stage .

a llegations

in

As such , the court cannot

say that the length of the agreements requires a finding at this
time that price clearly predominates over other alleged non-price
mechanisms of exclusion .
In sum, Pl aintiffs have plausibly alleged suffic i ent facts ,
if believed,

for

the court to concl ude

that price is not

clearly predominant mechanism of exclusion .

the

The complaint alleges

that Defendants are dominant suppliers who have entered into de
facto

exclusive

deal ing

arrangements

t h at

include

significant

mechanisms

Accordingly,

the court cannot conclude at this stage that the

of

beyond

plausibl y

exclusion

price-cost test must apply as a matter of law.

price-cutting .

Indeed, Defendants'

cited cases demonstrate that courts have reached , or even closely
considered,

such

circumstances.
to

dismiss

trial);
tria l

plaintiff

207 F . 3d 1039

ZF Meritor,

after

conclusion

before

discovery

in

only

rare

NicSand, 507 F . 3d 442 (price-cost applied on motion

where

Concord Boat,

a

did

have

antit r u st

standing) ;

(price-cost partially applied post­

696 F . 3d 254

extensive

not

(rule of reason applied post­

discussion) ;

(dismissing price- squeezing c l aim,

Pac .

Bell ,

555

U. S .

438

not excl usive d ealing c l aim).

Depending on the facts addu ced at a later stage, it remains to be
seen whether the price-cost test or Tampa Electric' s rule of reason
55

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 55 of 88

and its progeny will ultimately be the proper test for Plaintiffs '
claims.

For purposes of the pending motions, therefore, the court

turns to Defendants' contention that the complaint fails under the
rule of reason.
b.

Defendants

Allegations
Injury

argue

that

of

Anticompetitive

Plaintiffs

anticompetitive conduct and injury .

have

failed

Conduct

to

and

al l ege

Corteva contends that it is

" entirely dispositive" that Plaintiffs have not pled any actual
exclusivity because the loyalty programs are voluntary,
cover all distributors in the market,
exclusivity.
that

any

(Doc.

market

95 at 22-23 . )

foreclosure

is

do not

and do not require 100%

Syngenta principal ly argues
the

result

of

"lawful

price

competition," that Syngenta incentivized customers to "buy more of
its products by lowering its prices," and that there is an absence
of non-price mechanisms of exclusion present in other cases like
ZF Meritor and Dentsply.

(Doc. 100 at 33-35 . )

Syngenta further

argues that Plaintiffs failed to explain why generic competitors
do not lower their prices to make their products more profitable
to distributors.

(Id. at 35.)

Finally, Syngenta claims that its

exclusive dealing arrangement with Corteva is evidence of legal
competitive conduct.
Plaintiffs

(Id . at 36-37.)

respond

that

they have plausibly alleged both

indirect and direct evidence of harm to competition.

(Doc. 150 at

56

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 56 of 88

26.)

On the indirect side ,

Plaintiffs contend that they have

a lleged foreclosure of a " substantial part of the market."
(citing Chuck's Feed, 810 F . 2d at 1293-95) .)
contend

that

Defendants

have

Doc. 81

<JI

171) . )

Sp ecifically, they

foreclosed

"approximately 70% or more" of the market.

(Id.

generics

from

(Doc . 112 at 27 (citing

Plaintiffs further argue that this estimate is

likely conservative because it relies on the lowest market-share
thres hold available and conservatively assumes that distributors
only narrowly hit the market-share threshold .

(Doc . 150 at 27 . )

On the direct side , Plaintiffs argue that they have alleged three
competitive harms : reduced choices for farmers , higher prices for
farmers ,

and less innovation .

contend

that

Defendants '

(Id . at 28 . )

discounts

may

Plaintiffs further

benefit

distributors but do not get passed on to farmers.

participating
(Id. at 35 . )

As an initial matter , Defendants ask the court to apply the
same mode of inquiry , i.e. , the ru l e of reason or price-cost test
- regardless of the antitrust statute at issue .
13.)

(Doc . 157 at 33 : 7-

Indeed, courts have conducted the exclusive dealing inquiry

in such a manner.

See ,

e.g.,

ZF Meritor,

696 F.3d at 269 n . 9

(stating that the r u le of reason is applicable to the plaintiff ' s
claims under Sections 1 and 2 of the Sherman Act and Section 3 of
t h e Cl ayton Act);

Microsoft,

253 F. 3d at 59

reason to Sherman Sections 1 and 2) ;
1294

(appl ying ru l e

Chuck' s Feed,

of

810 F. 3d at

(appl ying rule of reason to exclusive dealing under the FTC
57

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 57 of 88

Act and Clayton Section 3).
Moreover, Defendants do not argue that Plainti ffs ' c l aims may
survive under some antitru st statu tes b u t not others , at least at
this stage.
the

Here , the relevant threshold requirements specific to

statutes

are Sherman Section 1 ' s

contract requirement ,

15

U. S.C. § 1 ("Every contract . . . "), Sherman Section 2 ' s monopoly
power

requirement ,

15

U. S . C.

§

2

( " Every

person

who

shall

monopolize . . . "), and Clayton Secti on 3 ' s conditional discount
or rebate requirement,

15 U. S . C.

§

1 4 (".

. discount from,

rebate u pon , such price, on the condition .

.") .

or

Defendants do

not appear to contest that these requirements are a l leged, so the
court will treat them as uncontested for the purpose of these
motions.

Boles v.

(M . D.N.C. 20 1 4) .

United States ,

3 F.

Supp .

3d 491,

507 n.10

In any event, it appears that Plaintiffs have

adequately pleaded these elements.

Kolon , 637 F . 3d at 450 (" [T]his

Court has previously noted that when monopolization has been found
the defendant controlled seventy to one hundred per cent of the
relevant market . "
<_![<JI

81 ,

84,

161-63

(internal quotat ion marks omitted)) ;
(al leging agreements with

(Doc . 150

substantially al l

leading distribu tors; market share in excess of 70% during relevant
time period for five of six Ais and 40% for Corteva ' s acetochlor
(based on its joint venture partner h aving approximately 50%); and
conditional payme n ts).)
To prevail , Plaintiffs must plausibly allege that Defendants '
58

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 58 of 88

loyalty agreements constitute anticompetitive conduct and caused
antitrust injury.
issue,

there

Microsoft , 253 F.3d at 58-59 .

is no

set

formula to demonstrat e

conduct under the rule of reason.

As to the first
anticompetitive

ZF Meritor 696 F.3d at 271.

Courts have considered
a showing of significant market power by the defendant ,
substantial
foreclosure,
contracts
of
sufficient
duration to prevent meaningful competition by riva l s , []
an analysis of likely or actual anticompetitive effects
considered in light of any procompetitive effects [,]
whether there is evidence that the dominant firm engaged
in coercive behavior , [] the ability of customers to
terminate the agreements [, and t Jhe use of exclusive
dealing by competitors of the defendant[ . ]
ZF

Meritor,

696

F.3d

(collecting cases) .

at

271-72

(internal

An allegation of a

foreclosure is not required.

citations

omitted)

percentage of market

Kolon , 637 F.3d at 452 n.12 .

As to

the second issue, an antitrust injury is "of the type that the
statute was intended to forestall"

Microsoft ,

253 F . 3d at 59

(quoting Brunswick Corp. v. Pueblo Bowl-0-Mat , I nc., 429 U.S. 477,
487-88 (1977))
brought

by

(internal quotation marks omitted) .

t he

Government,

it

must

"[I]n a case

demons t rat e

that

the

monopo l ist ' s conduct harmed competition , not just a competitor."
Id.
Section 1 and 2 of the Sherman Act and Section 3 of the
Clayton Act require different degrees of

substantial ity.

The

Supreme Court has implied in dic t a that Section 3 of the Clayton
Act requires a lesser showing than the Sherman Act does:

"[I]f

59

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 59 of 88

[the contract] does not fall within the broader proscription of
§ 3 of the Clayton Act it follows that it is not forbidden by those
of the [Sherman Act]."

Tampa Elec . ,

365 U. S . at 335 {summarily

rejecting Sherman claims after re jecting Clayton claim).

The

majority of courts have since followed Tampa Electric' s dicta.
See,

e.g . ,

Microsoft Corp.,

Hovenkamp,

supra

<][

253 F .3d at 69;

1800c4 n. 67

see also Areeda

{collecting cases).

&

As between

Sections 1 and 2 of the Sherman Act, Section 2 may require less
foreclosure to be substantial than Section 1 .

Microsoft Corp . ,

253 F.3d at 70 {"[A] monopolist's use of exclusive contracts , in
certain circumstances, may give rise to a§ 2 violation even though
the contracts foreclose less than the roughly 40% or 50% share
usually requ ired in order to establish a§ 1 violation.").
Corteva lodges several arguments that it contends establish
per se legality , namely that the agreements are voluntary and cover
nei t her

1 00%

distributors'

of

the

goods .

distributors

nor

It is true t hat

100%

of

participating

courts have factored in

whether customers were "free to walk away from the discounts at
a ny time ."

Concord Boat ,

207

F . 3d at

1059;

see also Allied

Orthopedic, 592 F.3d at 995 (affirming district court that found
t hat agreements were "voluntary and [could] be ended at any time,
and hospi tal s

[were]

t hus free to switch to more competitively

priced generics"); Omega Env't,
duration

and

easy

127 F . 3d at 1163

terminability

of

these

("[T]he short

agreements

negate

60

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 60 of 88

substantially
However,

their

t hese

dispositive,"

potential

cases

as

do

Corteva

not

to

foreclose

treat

t his

suggests.

By

competition.") .

fact

as

contrast,

"entire ly
courts

are

admonished to look to "the practical effect" of exclusive dealing
agreements.

Tampa Elec . , 365 U. S . at 326.

By doing so, courts

have fo und de facto partial exclusive dealing arrangements to be
cognizable violations under antitrust law.

ZF Meritor,

696 F.3d

at 282; Concord Boat, 207 F.3d at 1059 ("[C]laims that allege only
de facto exclusive dealing may be viable.").
Assuming

Defendants'

agreements

are

formally

voluntary,

Plaintiffs have plausibly alleged that the Defendants'

market­

share targets combined with the schedule of payments and threat of
non- price retaliation create de facto exclusivity.
t he

complaint

alleges

that

t he

"complexity,

For example,

uncertainty,

and

timing" of payments "make it less likely t hat a distributor will
lower its prices" and that the t hreat of "canceling distribution
contracts, delaying access to new products , or withholding product
allocation during a supply shortage" instills strict compliance.
(Doc. 149 <J[<J[ 85-88.)

The complaint also alleges t ha t t he loyal ty

discounts

incentive

manage"

create

their

an

generic

for

purchases

distributors

and

"steer"

to

"strictly

customers

toward

loyal ty discount-qualifying products despite consumer demand for
generics.

(Id .

plausible

that

<J[<J[

95,

104 ,

Defendants'

117,

1 47 .)

loyalty

In other words,

discount

programs

it is

are

61

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 61 of 88

"as

effective as express purchase requirements."

See ZF Meritor , 696

F.3d at 283 (recognizing voluntary agreement as de facto exclusive
dealing because

"no

risk averse business would

jeopardize its

relationship with the largest manufacturer of transmissions in the
market" (internal quotation marks omitted)); Dentsply, 399 F . 3d at
194 ("[I]n spite of the legal ease with which the relationship can
be terminated,

the dealers have a strong economic incentive to

continue carrying [the defendant's product]."); McWane , 783 F.3d
at

833-34

(rejecting

argument

that

short-term

and

voluntary

exclusive dealing agreements are " presumptively legal ").
Moreover, the lack of complete exclusivity is not fatal to
Plaintiffs '

claims ,

as

Corteva argues .

It contends

that

the

ability of distributors to purchase some generics and the fact
that

some distributors

(approximately 20%)

creates a presumption of legality.

do

not participate

This position appears at odds

with Tampa Electric, which requires that Plaintiffs demonstrate
the

exclusive

contract's
a

probable

substantial

share

effect

is

of

line

the

to

"foreclose

competition

in

of

commerce

affected ."

365 U.S . at 327 (emphasis added); see also 15 U.S.C.

§ 14 (" . . . where the effect of . . . such condition, agreement,
or understanding may be to substantially lessen competition [. J"
(emphasis added)).

"[ J]ust as 'total foreclosure' is not required

for

deali ng

an

exclusive

arrangement

to

be

unlawful ,

complete exclusivity required with each customer."

nor

is

ZF Meritor ,

62

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 62 of 88

696 F.3d at 283 (analyzing claim under the Sherman Act).

Rather

than treating lack of true exclusivity or voluntariness as legall y
dispositive , the court may weigh the relevance of these facts at
a later stage.

See, e . g . , Concord Boat , 207 F . 3d at 1060 (weighing

lack of true exclusivity on review of summary judgment order) .
Syngenta's

argument

that

dismissal

is

warranted

because

Plaintiffs did not explain why generic competitors do not lower
their price to make their products more profitable to distributors
is similarly unpersuasive at this stage.

(Doc . 1 00 at 35 . )

Even

assuming , without deciding ,

that Plaintiffs bear this burden at

this

plausibly

stage,

they

have

alleged

that

generic

manufacturers' attempts to lower their prices would be futile in
the presence of the

loyalty programs .

This

follows

from the

allegation that distributors would not be willing to accept the
risk of losing all supply from Defendants and becau se Defendants '
forec l osure of the most efficient distribution channel imposes
costs

on

generic

effectiveness . "
This
allegations

manufacturers

market

contention

is

regarding

azoxystrobin

because

program."

(Id.

has

"harmed

the [ ir]

(Doc . 149 <JI 170 , 173 . )
supported

by

Plaintiffs '

manufacturers

of

generics

attempted to enter the market.
Syngenta' s

that

of
<][<JI

and

Manufacturers

metolachlor

"constraints

96-97 , 11 8 , 120.)

that

have

of generics

a llegedl y

imposed by

specific

exited

Syngent a ' s

of
the

loyalty

One generic manufacturer of

63

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 63 of 88

azoxystrobin that sought to mix azoxystrobin with a

fungicide

failed because the distributor feared it could impact its abi li ty
to meet the market-share target.

(Id.

~[<)[

96-97.)

Manufacturers

of generics of mesotrione were also hindered from entering the
market, an issue Plaintiffs allege was exacerbated by Syngenta's
agreement to supply Corteva with mesotrione under the condition
that Corteva's products containing mesotrione be treated neutrally
(Id.

under Syngenta 's Key AI program .

105; Doc. 81

CJ[

CJ[

109.)

Plaintiffs allege that a generic manufacturer of Corteva 's
rimsulfu ron "canceled or deferred entry plans," despite farmer
demand for lower-priced generics of rimsulfuron.

(Doc. 1 49 CJ[ 132.)

According to the complaint, generics of oxamyl found some success
in the market during a "plant outage" at Corteva from 2 015 to 2017 ,
but thereafter under Corteva' s
plummeted ,

particularly

manufacturers

could

lowering prices . "

not

(Id.

CJ[

at

loyalty program,

large

retain
136-38.)

"generic sales

distributors,

distributor

and

business

generic
even

by

One Corteva manager allegedly

said of this pattern , "[O]ur team truly has done an A+ job blocking
generics."

(Id.

<JI

138.)

Finally,

a

generic manufacturer of

acetochlor that was priced "substantially below Corteva 's prices"
allegedly

made

"little

headway"

because

major

distributors

declined to purchase the generic due to Corteva's loyalty program.
(Id.

CJ[

14 8 . )

At this preliminary stage,

t he court must accept

these plausible factual allegations as true and draw all reasonable
64

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 64 of 88

inferences in Plaintiffs'

favor.

Through this lens,

Defendants

have not demonstrated that the widespread failure of generics to
enter the market is due to competition on the merits rather than
plausibly anticompetitive conduct by Defendants.
Finally,

Plaintiffs have plausibly alleged anticompetitive

conduct and injury .

In Kolon, the Fourth Circuit, in reviewing a

Sherman Act§ 2 claim on motion to dismiss, held that an allegation
of dominant market share and exclusionary conduct was sufficient
at the pleading stage.

637 F.3d at 452 (citing Advanced Health-

Care Servs., Inc. v. Radford Cmty. Hosp., 910 F.2d 139 , 147 (4th
Cir . 1990)).

While the court also held that pleading a percentage

of market foreclosure is not necessary, Plaintiffs have pleaded a
foreclosure
market."

of

"approximately

(Doc. 81

70%

or more

of

each

applicable

171); see Microsoft, 253 F . 3d at 70 (finding

~

substantial 40 - 50% of market foreclosure under Sherman Act § 2
claim) .

Under

all

of

the

antitrust

statutes,

Plaintiffs'

allegations of substantial foreclosure are plausible and,

at a

minimum, "turn[] on a factual dispute ill suited for the pleadings
stage."

F.T.C .

(D.D . C . 2020) .
argument

v.

Surescripts,

LLC,

424

F.

Supp.

3d 92,

104

Moreover, for the reasons noted above, Syngenta's

that

Plaintiffs

have

not

alleged

anticompetitive

conduct because they have not alleged predatory pricing - likewi se
fails.

To t he extent these arguments apply under the rule of

reason, they appear to speak to "whether an otherwise unacceptable
65

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 65 of 88

level

of

market

efficiencies. "

foreclosure

Chuck' s Feed,

is

justified

by

procompetitive

81 0 F.2d at 1294 ;

(Doc . 100 at 34

(framing price reduc t ions as procompetitive) . )

Simply put ,

the

court is not equipped at this stage and on this record to weigh
the

merits

of

this

procompetitive

justification

against

the

plausible allegations of market foreclosure .
Pl aintiffs have a l so sufficiently al l eged antitrust injury.
They claim harm to farmers , growers,

and generic manufacturers,

and that Defendants ' conduct "may substantially lessen competition
or

tend

to

[m]arkets. "

create

or

maintain

(Doc. 1 49 <JI<JI 164 - 66 . )

monopolies

in

the

[r]elevant

Specifically, Plaintiffs a llege

that generic manufacturers have been substantially foreclosed from
the most efficient channel of distribution (id. 11 170 - 71); that
the structure of the payments over an extended period of time, and
across multiple crop- protection produc t s containing the same AI ,
make it l ess likely that discounts will pass on to end-consumers
(id. 11 173-75) ; that distributors have "omitted generic products
from their price lists ,

refused customer reques t s for generics ,

declined generic companies '

offers to supply, and systematical ly

steered retailers and farmers toward branded products" (id . <JI 177);
that the l oyal ty programs have caused generics to exi t

or never

enter the market (id . <JI1 182-85); and that the loyalty programs
have

stunted innovation

alleges that Defendants '

(id .

11

186- 89) .

The

complain t

also

internal analyses acknowledge that the
66

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 66 of 88

loyalty

programs

lead

to

supracompetitive

prices

for

end-

(Id. ~i 1 94-200.)

consumers.
In sum,
neither

are

depends

on

Defendan t s '

contention that their loyalty programs

anticompetitive
further

factual

nor

cause

anticompetitive

development .

At

this

injury

stage ,

the

complaint plausibly alleges both. 10
3.

Claims Against Syngenta Corporation and Syngenta
Crop Protection AG

Syngenta
cognizably

argues

connect

that
Syngenta

"Plaintiffs '

a l legations

Corporation

or

do

not

Syngenta

Crop

(Doc .

100 at

Protection AG to the challenged rebate program ."
44 . )

two

Consequently, Syngenta contends ,
entities

Corporation ,

should
Syngent a

be

dismissed .

the claims a gainst those
(Id . )

maintains t hat more

is

As

to

Syngenta

requ ired t han an

allegation that Syngenta is a "single enterprise " and that one
person is the president of both Syngenta Corporation and Syngenta
Crop Protection, LLC .

(Id . at 44-45.)

And as to Syngenta Crop

Protection AG, Syngenta argues that Plaintiffs ' "vague al l egations
of high-level oversight and strategic guidance" are insufficient

10

Plaint iff FTC argues that i t s sect ion 5 claim is a "standalone" claim .
In part icular, the FTC argues that the price- cost
(Doc . 150 at 45.)
test should not apply to i t s section 5 c l aim, regardless of how the court
rules on t he Sherman Act and Cl ayt on Act claims.
(Id. a t 47.) Because
Plaint iffs plausibly allege violat ions of t he Sherman Act and Clayt on
Act , the court will deny Defendants ' motion to dismiss Plaint iff FTC ' s
section 5 c l aim for the same reasons as for the Sherman Act and Cl ayton
Act clai ms . Therefore , whether or not the court may f i nd i t necessar y
to pa r se distinct ions bet ween the statu tes a t a l a t er s t age in this
action, i t need not do so now .

67

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 67 of 88

in light of Plaintiffs '

"conce[ssion] that the global parent is

not responsibl e for ' impl ementation ' of post-patent strategies in
individual countries . "
Plaintiffs
Corporation ' s

(Id. at 45.)

respond
shared

that

senior

their

allegations

leadership

with

of

Syngenta

Syngenta

Crop

Protection, LLC, and management of contacts with Corteva regarding
the mesotrione and metolachlor supply agreements suffice to state
claims against Syngenta Corporation .
at 65-66 . )

(Doc. 150 at 65-66 ; Doc. 11 2

Further, Plaintiffs contend that they have stated a

claim against Syngenta Crop Protection AG because it "directs and
oversees" the LLC ' s post-patent strategy, "reviews , modifies, and
approves

Syngenta' s

U.S.

budget,

which includes

sales

targets

based on Syngenta' s loyalty program, " and was " directly involved
in

the

negotiation

Corteva .

of"

the

mesotrione

supply

agreement

with

(Doc. 150 at 66.)

To be sure, Plaintiffs do not a llege a conspiracy between the
Syngenta entities.

Parents and subsidiaries, as well as sister

subsidiaries , are "incapable" of conspiring with one another under
Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton
Act.

Copperweld Corp . v . Independence Tube Corp . ,

768 , 777 (1984)

(parent-subsidiary under Sherman Section 1); Lenox

MacLaren Surgical Corp. v. Medtronic,
(10th Cir .

2017)

("[S] ubsidiaries

under

of the

Sherman Act. .

§

1

467 U. S . 752,

Inc.,

are

84 7 F. 3d 1221,

1234

incapable

of conspiring

[W] e

conclude

also

that

68

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 68 of 88

Copperweld' s

§ 2.");

reasoning with respect to

Advanced

Health-Care

1

§

Servs.,

910

applies equally to
F.2d

at

1 46,

152

(extending Copperweld to sister subsidiaries under Sherman Section
1 and Clayton Section 3).

Instead, "[t]he coordinated activity of

a parent and its wholly owned subsidiary must be viewed as that of
a single enterprise[ . ] "

Copperweld, 467 U.S. at 771.

In Lenox MacLaren, the Tenth Circuit affirmed on other grounds
but wrote at length on the district court's error in treating each
corporate affiliate as a separate entity rather than a
enterprise."

847

F.3d at

1230-39.

The

court

"single

observed that

requiring each corporate affiliate to independently satisfy every
element of an antitrust violation "would be difficult to justify"
because the Supreme Court and other courts have sealed off access
to the claim of conspiracy between corporate affiliates .
1236 (citing Copperweld, 467 U. S . at 776- 77) .

Id . at

Moreover, the court

reasoned that Copperweld must foreclose sophisticated corporations
from

"spread[ing]

its

anticompetitive

scheme

over

multiple

subsidiaries , such that no one entity met all the requirements for
individual antitrust liability."

Id.

But the Lenox MacLaren court

was careful to cabin the reach of the single-enterprise theory by
emphasizing Copperweld' s restriction of intra-enterprise liability
only

to

"coordinated

activity"

of

affiliates.

Id.

at

1237

(emphasis in original).
Indeed,

"[a] nti trust

law doesn't

recognize guilt

by mere

69

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 69 of 88

association ,

imputing

corporate

liability

to

any

affiliated

company unlucky enough to be a bystander to its sister company ' s
alleged misdeeds."

SD3, LLC v. Black & Decker (U.S . ) Inc . ,

F.3d 412, 422 (4th Cir. 2015).

801

"[I]n the antitrust context, courts

have held that absent allegations of anticompetitive conduct by
the parent, there is no basis for holding a parent liable for the
alleged antitrust violation of its subsidiary."

Arnold Chevrolet

LLC v.

(E.D.N.Y.

Tribune Co.,

418 F.

Supp .

2d 172,

178

2006)

(citing Invamed. Inc. v. Barr. Lab'ys, Inc., 22 F. Supp. 2d 210,
219 (S.D.N.Y. 1998); see also United States v. Bestfoods, 524 U.S.
51, 61 (1998)

("It is a general principle of corporate law deeply

ingrained

our

in

economic

and

legal

systems

that

a

parent

corporation . . . is not liable for the acts of its subsidiaries."
(internal

quotation marks

omitted)).

Accordingly,

claims may

properly be dismissed against parent corporations where "at least
as to them,

the 'complaint was vague, never explained its case,

and lumped [them] together without sufficient detail.'"
Decker,

801 F . 3d at 423

F.3d 951 ,

958

(7th Cir.

Black &

(quoting Bates v . City of Chicago,
2013)).

Here ,

726

the complaint defines

"Syngenta" as "Syngenta Crop Protection AG, Syngenta Corporation,
and

Syngenta

Notwithstanding

Crop

Protection,

LLC."

(Doc.

149

<JI

this

definition,

Plaintiffs

still

must

allege

1.)

sufficient independent but coordinated activity for each named
corporate affiliate.

Black & Decker, 801 F . 3d at 422 .
70

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 70 of 88

While the
adopting

Lenox MacLaren court ultimately refrained from

either

party ' s

proposed

definition

activity, " the court considered as tests

(1)

of

"coordinated

"[w] hen the parent

controls, dictates or encourages the subsidiary's anticompetitive
conduct"; and (2) "that each defendant must have played a

' role'

-

of

or

'participated'

in

enterprise as a whole."
Co. v. Molychem,
2005)).

the

anticompetitive

conduct

the

Id. at 1237-38 (quoting Climax Molybdenum

L.L . C.,

414 F .

Supp.

2d 1007,

1012

(D.

Colo.

Plaintiffs appear to endorse the "controls, dictates, or

encourages" test.

(Doc. 150 at 65-66 (citing Intellectual Ventures

I LLC v. Cap. One Fin. Corp., Case No. 1 4-1 11 , 2016 WL 1 60263, at
*5

(D . Md.

2015) ;

Channel Commc'ns ,
2004)).)

Nobody in Particular Presents,

Inc., 311 F. Supp. 2d 1048, 1068- 70

Syngenta

articulation

of

Inc. v . Clear

does

the

not

take

a

standard

and

relied

questioned about it at the hearing.

position
on

on

its

(D. Colo.

the

proper

briefs

when

(See Doc. 1 00 at 44-45; Doc.

130 at 23; Doc. 157 at 98:18-23 . )
At least at the time of the complaint ,

the same individual

served as t he president of both Syngenta Corporation and Syngenta
Crop Protection, LLC .
t hat

(Doc . 149 'J[ 35 . )

Syngenta Crop Protection AG has

Further, Plaintiffs allege
"directed,

approved Syngenta 's sales and marketing strategy,
loyalty program."

(Id .

'J[

36.)

AG allegedly has " reviewed ,

overseen ,

and

including its

Moreover, Syngenta Crop Protection
modified,

and approved" Syngenta' s

71

Case 1:22-cv-00828-TDS-JEP Document 160 Filed 01/12/24 Page 71 of 88

U.S. budget , which includes the sales targets associated with Key
AI, and provides "generic defense" strategy to be "tailored for
(Doc. 81 i 36 (quoting Syngenta

implementation in each count ry ."
Crop

Protection

Finally,

AG ' s

Plaintiffs

global
allege

post-patent
that

strategy

executives

of

handbook).)

Syngenta

Crop

Protection AG were "directly involved in the negotiation" of the
Syngenta-Corteva mesotrione supply agreement ,

t hat

Syngenta Crop

Protection AG is t he Syngenta entity that signed the agreement,
and that

a

Syngenta Corporation executive

"manages

contacts with Corteva regarding the agreement."
Based on t hese allegations,
that

the

complaint

activity. "

As a

fails

result ,

to

Syngenta' s

(Doc. 149 1 111.)

Syngenta has not demonstrated
plausibly

allege

"coordinated

the motion to dismiss

Syngenta Crop

Protection AG and S

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