Federal Trade Commission v. Cardinal Health, Inc.

In the United States, manufacturers’ prescription drugs were distributed to consumers in different ways. One of these ways involved wholesale distributors, which would purchase drugs from manufacturers and sell them to retailers like pharmacies and hospitals. There were also other channels of distribution, such as purchasing direct from manufacturers, mail ordering by consumers, and self-warehousing by retailers. Roughly 58.5 percent of the drug-distribution market was through wholesale distribution, while the other channels of distribution made up about 41.5 percent of the market. As to wholesale distribution, however, only four wholesalers (the wholesalers) (defendants) had national reach in the drug wholesale market. The four wholesalers sought to engage in two mergers, which would result in only two wholesalers with national reach. They sought to do so, they later claimed, because of market pressures from the nonwholesale drug-distribution channels. In response to these planned mergers, the Federal Trade Commission (FTC) (plaintiff) brought two suits under the Federal Trade Commission Act, seeking a preliminary injunction to block the mergers. The district court consolidated the cases and held a lengthy evidentiary hearing. The FTC claimed that under Section 13(b) of the Federal Trade Commission Act, because the agency was likely to succeed on the merits of several Clayton Act claims and because the balance of the equities favored preliminary injunctive relief, the injunction should be granted. The FTC claimed that the relevant market for this analysis was only the wholesale drug market, while the four wholesalers argued that the market was the entire drug-distribution market (i.e., both the wholesalers and the other channels of drug distribution).