This presentation by the United States was made during the break-out Session 2, “Techniques and evidence for assessing exclusive dealing and bundling” in the discussion “Economic analysis and evidence in abuse cases” held at the 20th meeting of the OECD Global Forum on Competition on 7 December 2021. More papers and presentations on the topic can be found out at oe.cd/eac.

1. United States v. Dentsply
Deborah Minehart
Economist, U.S. Department of Justice
OECD Global Forum on Competition
Virtual Event, December 7, 2021
The views expressed are those of the author and are not purported
to reflect those of the U.S. Department of Justice

2. Background
 Dentsply International is the largest
manufacturer of prefabricated artificial teeth
 1999: US DOJ filed case against Dentsply
 Exclusive dealing with distributors (“dealers”)
 Competing manufacturers denied access
 Monopoly maintained
 Relevant Markets:
 Prefabricated teeth in the US
United States v. Dentsply International, Inc., 277 F. Supp. 2d 387 (D. Del. 2003)

3. Dentsply’s Position
in the Market
 75-80% of manufacturing
 Teeth sold exclusively
through independent
dealers
 Sales to 7000 dental labs

4. Challenged Conduct:
Exclusive Dealing
 Dentsply’s longstanding policy: If a dealer
sold a rival brand, then they could not also
sell Dentsply’s products
 Dentsply did, in fact, terminate non-complying
dealers
 Alleged Effect: Denial of access to dealers
prevents manufacturers from entering and
growing, thereby lessening consumer choice
and raising price

5. Effect of Exclusivity on
Dealers
 Dentsply offered a variety of teeth not
available elsewhere
 Sale of Dentsply teeth was an important
source of profits for dealers
 All large, effective dealers sold Dentsply teeth

6. Effect of Exclusivity on
Manufacturers
 Only small dealers available for distribution
 Smaller dealers provided less service and
promotion
 Creating own dealers would be expensive
 Manufacturing rivals instead sell directly to
labs

7. DOJ Argument: Direct Sale not
Effective Competition
 Direct sale has higher costs
 Distribution through large multi-product dealers
can achieve economies of scale and scope
 Dealers offer valuable services
 One-stop shopping
 Handling of returned teeth
 Dentsply did not sell direct

8. Documentary Evidence
 “Block competitive
distribution points.
Do not allow
competition to
achieve toeholds
in dealers.
 Tie-up dealers.
 Do not ‘free-up’ key
players.”
United States v. Dentsply International, Inc., 277 F. Supp. 2d 387 (D. Del. 2003)

9. Quote from a Dentsply
Manager
 “You don’t want your competition with your
distributors, you don’t want to give the distributors
an opportunity to sell a competitive product. And you
don’t want to give your end user, the customer,
meaning a laboratory and/or a dentist, a choice. He
has to buy Dentsply teeth. That’s the only thing
that’s available. The only place you can get it is
through the distributor and the only one that the
distributor is selling is Dentsply teeth. That’s your
objective.”
United States v. Dentsply International, Inc., 277 F. Supp. 2d 387 (D. Del. 2003)

10. Dentsply’s Defense Arguments
 Exclusivity necessary to get distributors to focus
sales effort on Dentsply teeth
 Without exclusivity, dealer might promote Dentsply
teeth, then substitute cheaper teeth
 Some dealers preferred to stock only Dentsply teeth
 Competitors had small market shares because they
did not offer products that buyers were interested in
buying and failed to promote their products
effectively

11. 11
LOWER COURT: NO MONOPOLIZATION
 Market power: none
 High market shares alone not enough to show market power
 Direct sales are a viable alternative
 There has been entry
 Anticompetitive effects: none
 Competition can thrive via direct distribution or through
partnerships with existing dealers
 Dentsply contracts with dealers are “at will” contracts
 Rivals failed to gain share as a result of their own bad business
decisions
 Procompetitive effects: none
 Dentsply’s rationale was pretextual

12. APPEALS COURT: MONOPOLIZATION
 Market power: Dentsply had it
 Market shares
 Market shares establish market power
 High and stable for a long time
 Power to exclude
 Dentsply’s exclusionary policies are the reason for rivals’ lack of
success
 Rivals unable to convince dealers to drop Dentsply
 Power to control price
 “The picture is one of a manufacturer that sets price with little
concern for its competitors, something a firm without a monopoly
would have been unable to do.”
12

13.  Anticompetitive effects:
 Dealers provide benefits that cannot be provided by direct
sales
 Direct sales pose little threat to Dentsply
 Dentsply policy limits customer choice
 Dentsply policy inhibited entry
 District Court’s theory that rivals could steal away
distributors not realistic
 Low penetration of rivals refutes the theory
 Dentsply policy created strong economic incentive for
dealers to reject competing lines
 Procompetitive effects: none
13
APPEALS COURT: MONOPOLIZATION