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In a settlement that could have a substantial impact on horse breeding, the American Quarter Horse Association has agreed to allow the registration of multiple offspring of the same top-quality mare, produced by embryo transfer. The settlement came after a week of trial in a suit against the association brought by quarter horse breeders. Floyd v. American Quarter Horse Ass’n., No. 87-598C (Potter Co., Texas, Dist. Ct.). In embryo transfer, fertilized embryos are removed from a mare through a procedure known as “flushing.” They are then placed in another mare to be brought to term. Theoretically, a mare could have numerous foals in the same year, despite the fact that the gestation period of a horse is 11 months. Rule 212 of the association prevented the registration of more than one genetic foal per year, negating the benefits of embryo transfer. Breeder Kay Floyd and a group of other exhibitors and association members sued the Quarter Horse Association, claiming that its enforcement of Rule 212 constituted a violation of the Texas Free Enterprise and Antitrust Act of 1983. Specifically, the breeders alleged that the rule limited the supply of registered quarter horses and thus was an unlawful, anti-competitive limitation on output. The breeders’ attorney, Robert Garner of Amarillo, Texas’ Garner, Stein & Dean, noted that a registered foal is two to six times more valuable than a nonregistered horse. Garner said his clients sustained at least $12 million in damages, including at least $9 million in diminished value to their horse and at least $3 million in lost profits. However, Garner said, his clients’ main goal was to get the rule changed. “The rule is wrong. It’s just a bad rule,” Garner asserted, adding that the rule limited the supply and increased the price of high-quality horses. HELPFUL OR HARMFUL? However, Barry Stone of Amarillo’s Smith & Stone, counsel for the association, disagrees. Stone said that the rule was a legitimate means by which a private association protected the goals for the sport, including the health of the horses. An association veterinary expert, Glenn Blodgett, said the embryo transfer procedure could harm a mare’s reproductive health. In addition, the association argued that Rule 212 did not constitute an antitrust violation. The association retained Harvard economist Joseph Kalt to analyze the antitrust implications of the rule. Kalt found that the embryo transfer rule did not violate antitrust law, in part, because there were many mares from highly-sought bloodlines who were never bred in some years. Under Kalt’s antitrust analysis, these mares represented sources of competitive entry into the market, thus preventing an antitrust problem. As part of the settlement, the association agreed to abolish the rule and pay the breeders’ lawyers $550,000 but paid no damages. After the judge made a ruling against it, Stone said, continuing the fight was not worth it for the association. However, he maintained that there was no restraint of trade and that the association would have prevailed eventually.

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