FTC sues nation's 3 largest dental supply companies

February 13, 2018

Article

The complaint names Benco Dental Supply Company, Henry Schein, Inc. and Patterson Companies, Inc.

The Federal Trade Commission filed a complaint against the nation’s three largest dental supply companies, alleging that they violated U.S. antitrust laws by conspiring to refuse to provide discounts to or otherwise serve buying groups representing dental practitioners. These buying groups sought lower prices for dental supplies and equipment on behalf of solo and small-group dental practices seeking to gain discounts by aggregating and leveraging the collective purchasing power and bargaining skills of the individual practices. The complaint also alleges an FTC Act Section 5 violation against Benco for inviting a fourth competing distributor to join the conspiracy.

The alleged agreement among Benco, Henry Schein and Patterson deprived independent dentists of the benefits of participating in buying groups that purchase dental supplies from national, full-service distributors. As full-service dental distributors, Benco, Henry Schein and Patterson 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 reportedly 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. The dental practices that would have benefited from the discounts achieved by these buying groups were reportedly small businesses comprised of solo or small groups of dentists.

Benco and Henry Schein allegedly entered into an agreement refusing to provide discounts to or compete for the business of buying groups. The complaint details communications between executives of the two companies evidencing the agreement as well as attempts to monitor and ensure compliance with the agreement. The complaint also asserts that Patterson joined the agreement. The complaint charges Benco, Henry Schein and Patterson of conspiring in violation of Section 5 of the FTC Act.

The complaint also alleges that on multiple occasions, Benco invited Burkhart Dental Supply – a regional distributor and the fourth largest full-service distributor in the United States – to refuse to provide discounts to buying groups. As a result of this conduct, the complaint separately charges Benco with a Section 5 invitation to collude count.

Based on the agreement among the distributors, the complaint contends that Benco, Henry Schein and Patterson unreasonably restrained price competition for dental products in the United States; distorted prices and undermined the ability of independent dentists to obtain lower prices and discounts for dental products; deprived independent dentists of the benefits of vigorous price and service competition among full-service, national dental distributors; unreasonably reduced output of dental products to dental buying groups; and eliminated or reduced the competitive bidding process for sales to these buying groups. This case reflects the commission’s ongoing efforts to ensure competition in the healthcare industry.

The commission vote to issue the administrative complaint was 2-0. The administrative trial is scheduled to begin on Oct. 16, 2018.

Henry Schein issued a statement denying the FTC anti-trust allegations.

"Based on the FTC's press release, the company is being accused of participating in a conspiracy to refuse to provide discounts to, or compete for, the business of buying groups," the statement reads. "Contrary to the FTC's allegations, the company was a leader in supplying buying groups, has consistently done business with buying groups, has a dedicated team to serve buying groups, and never entered into an agreement with others to refuse to do business with buying groups. Based on the FTC's original definition of buying groups, the company does business with more than 100 buying groups. Even under a narrower definition recently advanced by the FTC, the company has done business, and continues to do business, with the very groups it is now accused of boycotting. The company believes that the allegations as described in the press release are meritless and intends to defend itself vigorously. The company does not anticipate that this matter will have a material adverse effect on our financial condition or results of operations.

"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. It is why we have been named to FORTUNE's list of the World's Most Admired Companies for 17 consecutive years and why we have been named to Ethisphere's List of the World's Most Ethical Companies annually since 2012."

Patterson Companies also issued a statement, saying the complaint is "without merit."

"The company believes that the allegations as described are meritless and intends to defend itself vigorously," the statement says. "The complaint seeks injunctive relief and does not seek monetary damages. The company does not anticipate that this matter will have a material adverse effect on our financial condition or results of operations.

"Patterson maintains the highest levels of integrity and ethical standards and has a 140 year history of partnering with all types of customers to grow their businesses and provide outstanding care to their clients."