Patterson Companies (PDCO) and Henry Schein, Inc. (HSIC) Securities Lawsuit Investigation

On February 12, 2018, the FTC announced that it filed a complaint against the nation’s three largest dental supply companies, Benco Dental Supply, Henry Schein, and Patterson Companies, alleging that they violated United States 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.

According to the FTC, 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. The FTC’s complaint details communications between executives of the two companies evidencing an agreement to refuse to provide discounts or compete for the business of buying groups, as well as attempts to monitor and ensure compliance with the agreement. The FTC’s complaint also asserts that Patterson joined the agreement.

The FTC’s complaint also alleges that on multiple occasions, Benco Dental Supply 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.

Based on the agreement among the distributors, the FTC’s 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.

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 control more than 85 percent of all distributor sales of dental products and services nationwide.

The United States market for dental products is valued at approximately $10 billion, and, according to the FTC, the dental practices that would have benefited from the discounts achieved by these buying groups were small businesses comprised of solo or small groups of dentists.