The Federal Trade Commission and 13 states sued Friday to block Covetrus from buying MWI, a $3.5 billion deal between two national veterinary suppliers. The agency says losing a major distributor would make it harder for clinics to negotiate on everyday supplies and could ultimately raise prices for pet owners.
The FTC is asking a federal court in New York for a permanent injunction. The commission voted 2-0 to authorize the case. Arizona, Arkansas, California, Colorado, Maine, Michigan, Minnesota, Nebraska, New York, North Carolina, Ohio, Oregon and Texas joined the complaint. The lawsuit challenges a proposed sale, and the price effects are allegations the agency will have to establish in court.
What the distributors sell to clinics
Covetrus and MWI sell veterinary medicines, vaccines, surgical supplies and items such as gloves and gauze. They serve practices with a single veterinarian as well as companies that operate hundreds of clinics. Their distribution networks allow them to deliver quickly and offer discounts and rebates that smaller competitors struggle to match, the FTC says.
The agency alleges that clinics have used the online purchasing platform Vetcove to compare prices and use one distributor's offer when negotiating with the other. It points to Covetrus lowering prices and offering rebates through its VetSuite program in response to MWI. Those negotiations happen before a pet owner sees a bill. The FTC says the deal could narrow clinics' choices on both price and service, and that some of the added cost could reach customers.
The commission alleges harm in two markets, one for veterinary clinic distribution and another for distribution to large corporate accounts. It says specialty sellers and manufacturers can supply some of the same goods, while the two companies compete across a much broader range of products.
What the companies agreed to in February
In their February agreement announcement, Covetrus and MWI parent Cencora said the combination could improve logistics and reduce costs by bringing distribution, pharmacy services and practice software together. The agreement valued MWI at $3.5 billion. Cencora would receive $1.25 billion in cash, $800 million in preferred equity and $1.45 billion in common equity, leaving it with a 34.3% noncontrolling common equity stake in the combined company.
The companies said closing depended on regulatory approvals. Cencora later disclosed in a securities filing that the FTC requested additional records on May 20. Friday's suit takes the dispute to the U.S. District Court for the Southern District of New York.
