Markets Wired

In an Initial Decision announced today, Chief Administrative Law Judge D. Michael Chappell has held that two of three respondents named in a Federal Trade Commission complaint violated U.S. 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, Inc., and Patterson Companies, Inc. As full-service dental distributors, these companies offer gloves, cements, sterilization products and a range of other consumable supplies, as well as equipment, such as dental chairs and lights. Collectively, the big three control more than 85 percent of all distributor sales of dental products and services nationwide. The U.S. market for dental products is valued at approximately $10 billion.

Judge 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,” Judge Chappell wrote in the decision.

Judge Chappell added that the evidence fails to prove a conspiracy involving Schein, and dismissed the complaint against Schein. Judge Chappell also dismissed another violation in the FTC’s complaint, which alleged 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 Appeals Process. The Judge’s Initial Decision is subject to review by the full Federal Trade Commission on its own motion, or at the request of any party. The Initial Decision will become the decision of the Commission 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 Commission places the case on its own docket for review or stays the effective date of the decision.

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