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Southern District Of Indiana Grants Motion To Dismiss Sherman Act Claims In Pet-Retail Antitrust Case
10/21/2025On October 7, 2025, Judge James Patrick Hanlon of the United States District Court for the Southern District of Indiana granted in part and denied in part a brand name manufacturer of topical flea-and-tick products’ (the “Company” or defendant) motion to dismiss relating to defendant’s alleged “no generics” agreements with major pet specialty retailers. Spradlin v. Elanco Animal Health, Inc. No. 1:24-cv-01299 (S.D. Ind. Oct. 07, 2025). Plaintiff, who purchased defendant’s branded products at pet retailers, claimed exclusive deals and loyalty discounts between pet retailers and defendant shut out generic flea-and-tick products from pet specialty stores in violation of federal and state antitrust laws. This conduct allegedly reduced competition, increased prices, and resulted in fewer choices for consumers. Plaintiff only sued the brand manufacturer, rather than the pet retailers. However, under the Sherman Act, only purchasers who bought a product directly from the relevant antitrust violator have a valid claim against the violator. Plaintiff sought to avoid dismissal by arguing a “hub and spokes” conspiracy, but the Court found no direct evidence, nor plus factors to circumstantially infer such a conspiracy.
Indirect purchasers, those who purchase from an intermediary, ordinarily may not recover Sherman Act damages against the original supplier, except under a limited “hub-and-spokes” exception. In these scenarios, the “hub” is a central coordinating party, and indirect purchasers buy from a “spoke.” The spoke can be distributors or retailers that have entered into a conspiracy with the “hub.” Purchasers buying from a “spoke” in such a situation are then considered direct purchasers rather than indirect purchasers.
For the purposes of a “hub-and-spokes” conspiracy, plaintiff must plausibly allege that the pet retailors both coordinated with defendant and each other. Here, plaintiff argued that pet retailers collectively formed the spoked “rim” through the coordinated acceptance of no-generics terms. Defendant countered that, at most, the complaint showed pet retailers independently negotiated similar deals incentivized by retailer-specific bundles and discounts, not inter-retailer coordination.
In the Court’s view, the alleged parallel “no generics” agreements and equivalent agreement terms created an inference that pet retailers must have known that other pet retailers similarly situated entered into comparable agreements with defendant. Still, mere allegations that the pet retailers entered into substantially similar agreements, absent evidence of coordination, are insufficient to plead a “hub-and-spokes” conspiracy, as conscious or interdependent parallel conduct is not unlawful. Instead, so-called “parallel plus” behavior must be asserted to plausibly plead a “hub-and-spokes” conspiracy through circumstantial evidence alone.
According to plaintiff, pet retailers engaged in “parallel plus” behavior by allegedly acting against economic self-interest by foregoing sales of generic branded flea and tick products, which they would not have done absent knowing other retailers would act similarly. However, the pet retailers received loyalty discounts that could be significantly more valuable than the revenue from selling generics. As such, the Court found that the discounts could rationally explain each pet retailer’s independent decision-making, and thus, were not necessarily acting against their self-interest. The Court determined that absent allegations of inter-retailer coordination or conduct contrary to self-interest, the complaint did not cross the “parallel plus” threshold constituting a “hub-and-spokes” conspiracy. As a result, plaintiff remained an indirect purchaser barred from seeking damages under the Sherman Act.
For the state-law claims, which permit indirect purchasers to recover damages, the Court held plaintiff adequately pleaded a relevant market, topical imidacloprid products sold by pet retailers, and found plaintiff’s allegations sufficient to proceed.
This decision underscores the Seventh Circuit’s stringent approach to “hub-and-spokes” conspiracy pleading. Retailer-facing exclusivity or loyalty programs, even when widely adopted, do not themselves imply a horizontal “rim” without factual allegations of inter-retailer coordination or conduct contrary to self-interest.
For businesses considering bundled discounts and/or exclusivity provisions, the opinion highlights the continued viability of such legitimate business arrangements when they address rational retailer incentives, absent widespread coordination.
