The National Association of Animal Breeders, Inc., or NAAB – a non-profit trade association whose members compete to sell dairy cattle semen to U.S. dairy farms for artificial insemination of dairy cows – has agreed to refrain from adopting rules that unreasonably stifle competition among its members.
The agreement between the FTC and the association resolves a complaint by the agency alleging that NAAB adopted rules that violated the FTC Act by restraining competition for buying dairy bulls for use in artificial insemination. There are approximately 9.3 million dairy cows in the United States, and U.S. dairy farmers rely on the fertilization services provided by NAAB member breeders.
According to the complaint, in 2006, NAAB and the U.S. Department of Agriculture signed a cooperative research and development agreement, known in the industry as a CRADA, under which the association provided partial funding for the USDA to develop a new technology for genetic testing of dairy bulls used in artificial insemination. Under the agreement, NAAB had exclusive access to the new technology developed by USDA through February 2013. The new technology analyzes the genetic makeup of a dairy bull to produce the Genomic Predicted Transmitting Ability, or GPTA, of the bull. The GPTA consists of information about the commercially relevant traits, such as milk yield, that the bull is expected to transmit to its daughters. It is the best indicator of a dairy bull’s commercial value for transmitting genetic traits.
The complaint alleges that in 2008, NAAB’s Board of Directors adopted a resolution that remained in effect for five years and required that only NAAB members could obtain GPTAs. It also required that any member seeking to obtain a dairy bull’s GPTA have an interest in the bull, specifically by owning, leasing, having an agreement to purchase at least a 30 percent interest, or having an exclusive marketing agreement for the bull.
According to the complaint, the NAAB rules dampened competition in the sale of dairy bulls for semen production by requiring NAAB members to have an ownership interest in a dairy bull to obtain its GPTA and impeded NAAB members from selling GPTAs to non-members. By requiring NAAB members to acquire an interest in the bull to obtain its GPTA and by requiring non-members to sell bulls without knowing the GPTA, the resolution distorted the market. Access to the GPTA information would have tended to drive the price of a bull toward a value that more accurately reflects its ability to yield higher producing dairy cows, according to the complaint.
Under the proposed consent order, NAAB is required to stop restraining the ability of its members to obtain, disclose, provide, use or sell any technology or information resulting from research projects that the association is a party to or conducts. The order also bars the association from restraining price-related competition among its members relating to the sale or acquisition of bulls or bull semen. NAAB is required to implement an antitrust compliance program and to meet certain compliance and reporting standards.
Details about the case are set forth in the analysis to aid public comment for this matter. The Commission vote to accept the consent agreement containing the proposed consent order for public comment was 2-0.
The FTC will publish the consent package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through Sept. 19, 2017, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $40,654.
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