In an initial decision, Chief Administrative Law Judge D. Michael Chappell has held that two of three respondents named in a Federal Trade Commission (FTC) complaint violated United States antitrust laws by conspiring to refuse to provide discounts to, or otherwise serve, buying groups representing dental practitioners.
The FTC’s February 2018 administrative complaint named the nation’s three largest dental supply companies: Benco Dental Supply Company, Henry Schein, and Patterson Companies. These full-service dental distributors control more than 85% of all distributor sales of dental products and services nationwide, the FTC reports, adding that the US market for dental products is valued at approximately $10 billion.
Chappell held that Benco and Patterson were part of the conspiracy, but Schein was not. The FTC has demonstrated “that Respondents Benco and Patterson conspired to refuse to offer discounted prices or otherwise compete for the business of buying groups and that such an agreement is a per se violation of Section 5 of the FTC Act,” Chappell wrote in his decision.
Chappell added that the evidence fails to prove a conspiracy involving Schein and dismissed the complaint against the company. He also dismissed another violation in the FTC’s complaint alleging that Benco invited a fourth competing distributor to join the conspiracy.
Buying groups seek to leverage their bargaining skills and collective purchasing power of the individual practices to negotiate lower prices. According to the FTC’s complaint, the respondents deprived solo and small-group dental practices of the benefits of participating in buying groups that purchase dental supplies from national, full-service distributors.
The initial decision is subject to review by the full FTC on its own motion or at the request of any party. It will become the decision of the FTC 30 days after it is served upon the parties unless a party files a timely notice of appeal, and thereafter files a timely appeal brief, or the FTC places the case on its own docket for review or stays the effective date of the decision.
“We have publicly denied these allegations from the very start of this matter,” said Stanley M. Bergman, chairman of the board and CEO of Henry Schein. “Henry Schein has always been committed to doing business in an ethical manner wherever we operate, and our team looks forward to continuing to serve our customers and suppliers with the excellence that is expected of us.”
“We strongly disagree with any finding against Patterson and believe the facts demonstrate the company’s independent decision-making in a highly competitive industry. We are evaluating all of our legal options, including appealing to the full commission to review the facts of the matter,” Patterson said in a statement.
Chappell’s non-binding initial recommendation to the FTC does not include a monetary fine or penalty and does not recommend imposing an outside monitor, Patterson notes, nor does the company anticipate that this matter will have a material adverse effect on its financial condition or on the results of its operations.
“Patterson takes compliance very seriously and maintains the highest levels of integrity and ethical standards while partnering with all types of customers to support their businesses and provide outstanding care to their patients,” Patterson said.
“In the wake of the judge’s initial decision, members of organized dentistry across the country, particularly solo practitioners, can rest assured that the Dentists Supply Company (TDSC) has their best interests at heart, for their practices and patients,” said TDSC CEO Jim Wiggett.
“Association member dentists created TDSC to help them stay competitive by offering negotiated savings and direct access to dental supplies from authorized vendors through tsdc.com,” Wiggett said.
“TDSC looks forward to continuing our partnerships with dental suppliers in the supply and equipment industry. Our relationships are built on trust, service, and value to ensure we deliver consistent, competitive supply prices to our customers nationwide,” said Wiggett.