Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Dental supplies distributors allegedly conspired to boycott low cost competitors, (Feb 2, 2016)

By Linda O’Brien, J.D., LL.M.

Three major distributors of dental supplies engaged in a conspiracy to boycott state dental associations, dental supplies distributors, and dental supplies manufacturers that do business with new low cost distributors in order to foreclose competition, according to a complaint filed in the federal district court in Brooklyn, New York (Dresnin v. Patterson Companies, Inc., February 1, 2016).

Patterson Companies, Henry Schein, Inc., and Benco Dental Supply Company are the three largest distributors of dental supplies in the United States. Stanford Dresnin has a private dental practice in Philadelphia, Pennsylvania.

The complaint states that dental supplies are routinely purchased by dental practices and laboratories for consumption in their daily operations. Because these purchasers require many different supplies from different manufacturers, they generally opt to purchase their supplies from distributors that offer a full range of supplies, giving customers the ability to “one stop shop,” a convenience for which the distributors have traditionally charged a premium. These higher prices have left economic opportunities for lower cost distributors to enter the market.

Many state dental associations have been actively interested in sponsoring or partnering with new distributors as a benefit to their members. In 2013, a new distributor, SourceOne, created an online dental supplies distribution platform that offered dental supplies at lower prices in partnership with the Texas Dental Association (TDA). Even though they were direct competitors, the defendant distributors agreed to thwart the success of new competitors through unlawful threats and boycotts of entities that dealt with the new competitors, the complaint alleges.

According to Dresnin’s complaint, the defendants threatened manufacturers and other distributors to discontinue supplying new lower-priced competitors with dental supplies. If the manufacturers did business with those competitors, the defendants would not sell or promote the manufacturers’ products. Also, the defendants pressured state dental associations to cease doing business with these lower-priced competitors by threatening to boycott annual meetings and trade shows of the associations.

The market for the distribution of dental supplies allegedly exhibits characteristics that increase its susceptibility to an anticompetitive conspiracy among distributors. The complaint also asserts that there is a high concentration among firms in the market, there are barriers to entry, and there is stable or constant demand. Patterson Companies, Henry Schein, and Benco Dental Supply have increased list prices for dental supplies every year since 2005 even when the economic recession in 2009 caused demand to fall by over two percent, the complaint states.

The anticompetitive conduct, Dresnin claims, has increased the defendants’ collective market power and enabled them to maintain prices above competitive levels. Additionally, the group boycotts have discouraged other potential competitors from partnering with manufacturers and state dental associations to compete with the defendants. This misconduct has reduced competition in the dental supplies market, reduced consumer choice, and caused purchasers of dental supplies to pay artificially inflated prices, the complaint also alleges.

The plaintiff asserts that the alleged unlawful agreements to boycott are an unreasonable restraints of trade in violation of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:16-cv-00497-NGG-CLP.

Attorneys: Marc H. Edelson (Edelson & Associates, LLC) for Stanford Dresnin.

Companies: Patterson Companies, Inc.; Henry Schein, Inc.; Benco Dental Supply Company

News: Antitrust NewYorkNews