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FTC proposes independent monitor for Henry Schein

The federal complaint seeks no monetary penalties in antitrust case, but would also require compliance reports.

The Henry Schein Inc. building on Duryea Road

The Henry Schein Inc. building on Duryea Road in Melville, Wednesday, Dec. 31, 2014. Photo Credit: Steve Pfost

Henry Schein Inc. and two other suppliers of dental products would be required to document communications with competitors, submit compliance reports and pay for an independent monitor under the proposed remedies of a Federal Trade Commission antitrust complaint made public Thursday.

The FTC on Monday charged that Melville-based Henry Schein, Benco Dental Supply Co. of Pittston, Pennsylvania, and Patterson Companies Inc. of St. Paul, Minnesota, conspired to boycott or refuse to offer discounts to dentists’ buying groups.

In a government filing Wednesday, Henry Schein denied the charges, as it did after the FTC announced the case. The company said that, based on one definition of buying groups, it does business with more than 100.

Buying groups are formed to lower the prices for dental supplies and equipment for solo and small-group dental practices.

The complaint seeks no monetary penalties, but calls for a “cease and desist” order barring the companies from “distorting prices” and undermining the ability of independent dentists to obtain lower prices. The remedy period would be effective for 15 years.

Shares of Henry Schein closed Thursday down 0.1 percent to $68.38. The stock has fallen about 19 percent in the past 12 months.

Included in complaint unveiled Thursday are alleged communications among the three companies that the FTC says control 85 percent of sales of dental products and services through distributors and 61 percent through all sales channels.

The FTC allowed the companies to redact proprietary information from the complaint and the names of the employees involved in the conversations.

The complaint says that Henry Schein embarked on a strategy of refusing “to provide discounts to, or compete for, the business of new buying groups” after communicating with Benco before July 2012.

On Oct. 1, 2013, a Benco executive called his counterpart at Henry Schein and “reaffirmed Benco’s commitment against buying groups,” according to the complaint. After the call, neither distributor bid on a buying group contract, the document said.

In May 2015, the complaint said, a Benco employee rejected a buying group and said in an internal email: “The best part about calling these [buying groups] is I already KNOW that Patterson and Schein have said NO.”

An administrative law judge will decide whether to sanction the companies after a trial scheduled to begin on Oct. 16.

Henry Schein is the nation’s largest supplier of dental products and equipment, and the largest publicly traded Long Island company based on 2016 revenue. The company also distributes products to the offices of medical and animal health practitioners.

In statements released Tuesday, Patterson described the charges as “meritless” and Benco said it expects to “resolve this issue in a way that clarifies the integrity of our people and processes.”

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