United States v. Dentsply International, Inc.

399 F.3d 181 (2005)

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Nature of the Case

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Facts

D manufactures artificial teeth for use in dentures and other restorative appliances and sells them to dental products dealers. The dealers, in turn, supply the teeth and various other materials to dental laboratories, which fabricate dentures for sale to dentists. The relevant market is the sale of prefabricated artificial teeth in the United States. D has long dominated the industry consisting of 12-13 manufacturers and enjoys a 75% - 80% market share on a revenue basis, 67% on a unit basis, and is about 15 times larger than its next closest competitor. D has operated under a policy that discouraged its dealers from adding competitors' teeth to their lines of products. D ordered its dealers that they 'may not add further tooth lines to their product offering' under its Dealer Criterion 6. None of the dealers have given up the popular D teeth to take on a competitive line. D thought about going direct but feared dealer retaliation. D has had a reputation for aggressive price increases in the market and has created a high price umbrella. Its artificial tooth business is characterized as a 'cash cow' whose profits are diverted to other operations of the company. A report in 1996 stated its profits from teeth since 1990 had increased 32% from $16.8 million to $22.2 million. P brought suit. P sought an injunction for violations. The Court found that D's business justification for Dealer Criterion 6 was pretextual and designed expressly to exclude its rivals from access to dealers. But, because other dealers were available and direct sales to laboratories was a viable method of doing business, it concluded that d had not created a market with supra-competitive pricing. The court held that P failed to prove that D's actions 'have been or could be successful in preventing 'new or potential competitors from gaining a foothold in the market.'' P appealed; a monopolist that prevents rivals from distributing through established dealers has maintained its monopoly by acting with predatory intent and violates Section 2.