Dental Suppliers Settle Price Fixing, Anti-Compete Lawsuit
While it has denied allegations that it conspired with competitors to formulate a price fixing scheme and adversely affect firms that didn’t agree with this strategy, Patterson Cos. said in a securities filing it has set aside $28.3 million to settle its portion of a class-action lawsuit filed against it and its two largest competitors in federal court in New York. The lawsuit seeks to represent a class of up to 142,000 dental practices, orthodontists’ offices, and dental labs that have bought products from the three distributors since 2008.
The lawsuit contends that Henry Schein Inc. of New York, the world’s largest dental supplier, illegally worked a deal with the second largest supplier, Patterson Co. and third largest, Benco Dental, to come up with a price fixing plan. Schein controls 41 percent of the U.S. market, while Patterson has 34 percent. Schein has set aside $38.5 million to settle the case. Benco Dental has ten percent of the market and has agreed to settle for $13.2 million.
“Patterson emphatically denies any wrongdoing,” a spokesperson for Patterson said. “We made a business decision to resolve the matter and avoid the distraction, time, expense, and resources required to litigate so that we may focus on what we do best — serving our customers.”
“We categorically and emphatically deny any wrongdoing, and we have made a business decision in the best interests of the company to engage in settlement discussions to avoid long, distracting litigation and the additional use of resources,” said Stanley M. Bergman, chief executive officer, Henry Schein. “We have a long history of serving customers with integrity and honesty, and we have earned our reputation for doing business ethically in a competitive business environment.”
“The lawsuit ran contrary to our nine-decade history of bringing choice and innovation to dentists across the United States. In agreeing to the settlement, we’re able to dedicate all efforts to our customer-focused mission,” said Chuck Cohen, managing director, Benco Dental.
Plaintiffs attorney Eric Cramer of Berger Montague said the parties are looking forward to presenting the price fixing settlement to a federal judge for final approval.
“We are pleased to have resolved this case against Henry Schein, Patterson, and Benco for $80 million on behalf of the proposed nationwide class of dentists and dental labs,” Cramer said. “The settlement, if approved, would provide immediate cash payouts to the members of the proposed class as recompense for their having allegedly been overcharged by the defendant dental product distributors.”
Dental distributors currently realize a profit margin of 35 percent, which has grown every year for the past thirteen years. At the same time, the U.S. dental-supply distribution industry has seen numerous lawsuits since 2012 alleging illegal anticompetitive conduct. The settlements announced in the past week would resolve the allegations in 35 individual cases pending in the Eastern District of New York in addition to the class action suit.
The dentists involved in the litigation claimed they paid more than they should have, and contend Schein, Patterson, and Benco jointly set their prices so buyers paid the same amount “no matter who they buy it from” and therefore “we all get paid,” quoting an e-mail from a Schein regional manager. The companies also allegedly agreed not to “poach” one another’s customers, and to block the entry of distributors willing to offer lower prices.
The Federal Trade Commission filed a complaint against the three companies in February 2018 indicating they illegally agreed not to do business with group purchasing organizations who buy supplies on behalf of smaller dental offices. That case is still ongoing.