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FTC complaint alleges collusion among top dental suppliers

Monday, May 14, 2018

 

 
 

Benco Dental Supply Company, Henry Schein Inc. and Patterson Companies Inc. were named in a complaint filed recently by the Federal Trade Commission. The FTC alleges that the three dental suppliers — the nation’s largest — violated federal antitrust laws by conspiring to refuse to provide discounts to buying groups representing solo and small-group dental practices.

“The alleged agreement among Benco, HenrySchein and Patterson deprived independent dentists of the benefits of participating in buying groups that purchase dental supplies from national, full-service distributors,” the FTC stated in a news release.

The complaint has garnered national media attention and negatively impacted the share pricesof publicly traded Patterson and Henry Schein shortly after the FTC’s announcement. An article in the Minneapolis Star Tribune reported, “The FTC allegations come as the companies battle similar claims in a spate of private antitrust lawsuits filed since 2012.”

The three companies collectively control more than 85 percent of the $10 billion in dental products and services sold by distributors annually in the U.S., according to the FTC. All three companies have publicly denied the charges and have vowed to fight the matter. Henry Schein in a news release stated, “Henry Schein has a long history of serving customers with integrity and honesty, and we have earned our reputation for doing business the right way.” Patterson called the allegations “meritless.”

After reviewing the evidence, including emails and other internal and inter-firm communications dating as early as 2012, the FTC charged that “The Distributors feared that Buying Groups would drive down prices and threaten their profit margins, and they sought to prevent independent dentists from obtaining greater bargaining power through Buying Groups.”

Entering into a horizontal agreement to restrain price competition is a violation of Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices in or affecting commerce. By entering into such an agreement, Benco, Henry Schein and Patterson distorted prices, “unreasonably reduced output of dental products to dental buying groups” and “eliminated or reduced the competitive bidding process for sales to these buying groups,” the FTC complaint alleges.

Benco is also charged separately for inviting the nation’s fourth largest dental supply company to join the agreement to stop providing discounts to buying groups, but the company declined to participate.

An administrative trial is scheduled to begin in October.

CDA will update members about the FTC’s antitrust case as information becomes available.

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