Petition for Writ of Certiorari — Dentsply International, Inc. v. United States

6

The trial court also analyzed Dentsply’s conduct under

Sherman §2 and found that the government’s claim of

actual anticompetitive effects lacked evidentiary support

every bit as much as its Clayton §3 claim of probable

anticompetitive effects, if not more so. Two primary

reasons were given for this part cf the court’s decision.

First, the trial court found that Dentsply lacks the

ability to exclude competitors from the market that both

parties acknowledged to be the relevant one. This

determination was grounded on many of the same finc‘ngs

that supported the trial court’s unchallenged dismissal of

the government’s Sherman § 1 and Clayton § 3 claims (.<¢.,

direct selling to labs is viable; Dentsply’s rivals can reach

the market though their own dealer networks, as well as

through non-Dentsply dealers; rivals are free to lure away a

Dentsply dealer, and Dentsply’s rivals have failed to gain

market share because of low product appeal and lack of

aggressive marketing). In addition, the court found that

Dealer Criterion 6 did not prevent the entry of two new

rivals. (Pet. App. 36a-37a (FOF 46-52)). Heraeus Kulzer

GmbH, a German company, and Davis Schottlander of

England both entered the U.S. market and became active

market participants; both were fully aware of Dealer

Criterion 6 at the time of entry and were undeterred by it

(Pet. App. 36a-37a, 58a (FOF 46-52, 136)).

Second, the trial court found that the government failed

to prove that Dentsply controls prices. The evidence

showed that Dentsply teeth are generally priced between

its two largest rivals, Vident (Vita’s exclusive US

distributor) and Ivociar. (Pet. App. 85a (FOF 224-25)). The

government provided no evidence that Dentsply has

established a market of supra-competitive pricing. (Pet.

App. 141la-42a (Law 30)). If anything, the trial court found,

Dentsply has reduced the price that laboratories pay for

Trubyte teeth in response to the price competition from its

7

competitors. ((Pet. App. 91a (FOF 243), 153a-54a) (Dentsply

offered rebates to customers in response to volume discount

programs offered by Vident and Ivoclar and ‘ncreased price

rebates in response to entries of Heraeus Kulzer and

Schottlander)).!

Accordingly, the trial court concluded that “because

direct distribution is viable, non-Dentsply dealers are

available, and Dentsply dealers may be converted at any

time, the DOJ has failed to prove that Dentsply’s actions

have been or could be successful in preventing ‘new or

potential competitors from gaining a foothold in the

market(.]"”” (Pet. App. 143a (Law 35)) (quoting LePage’s v

3M Co., 324 F.3d 141, 159 (3d Cir. 2008), cert. denied, 124 S.

Ct. 2932 (2004)).

B. Third Circuit Decision

The government appealed only the Sherman §2

determination. In reversing, the Third Circuit panel

determined that it was not precluded by the trial court’s

undisturbed dismissal of the government’s Clayton § 3 claim

(on insufficient evidence of probable anticompetitive effects)

from examining for itself whether Dealer Criterion 6 could

still be found to have an actual anticompetitive effect under

Sherman § 2.

That examination departed from the trial court in two

important respects. First, it used as the benchmark for

“foreclosure,” not access of Dentsply’s rivals to the market

! The court also found that Dealer Criterion 6 did not prevent existing

rivals from expanding their output. In January 2002, Ivociar expanded its

tooth offering with two new lines of teeth featuring American moulds

(Pet. App. 94a (FOF 251)). And Mr. James Swartout of Myerson LLC, a

tooth manufacturer that distributes teeth though Dentsply’s largest

dealers, testified that Myerson’s Trinidad plant has “the capability of

producing three times as many teeth as we do today, without any

additional investments in capital.” (Pet. App. 149a-5la)

8

for end-user purchasers (the agreed line of commerce at

trial), but, instead, the rivals’ access to those dealers who

are under Dentsply’s Dealer Criterion 6. Second, it held to

be “clear error” the trial court’s finding that the availability

of end-user direct sales was a viable alternative method of

distribution, imposing instead a burden that the alternative

means be “effective” channels. For this conclusion, the

panel relied largely on a market share analysis and

determined that the much smaller shares of Dentsply’s

rivals gave them no real prospect to “pose a real threat” to

Dentsply’s market position. (Pet. App. 19a). Thus, the

panel concluded, direct distribution was not as effective as

distribution through Dentsply’s 23 authorized dealers and

therefore not a viable option for Dentsply’s rivals.

REASONS FOR GRANTING THE WRIT

The Third Circuit’s Finding of a Sherman Act § 2

Violation is Erroneous and Conflicts with Decisions in

Six Other Circuits

For over 40 years, it has been settled federal] antitrust

law that a seller of a good may condition sales on an

agreement by purchasers not to deal in the good of another

so long as the practical effect of that arrangement does not

“foreclose competition in a substantial share of the line of

commerce affected.” Tampa Electric Co. v. Nashville Coal

Co., 365 U.S. 320, 327 (1961). The Third Circuit’s decision

below is to the contrary, and breaks sharply with six other

federal courts of appeals in the methodology it uses to assess

the practical effect of Dentsply’s policy limiting their

authorized dealers’ ability to add the goods of rival

manufacturers.

In Tampa Electric, this Court considered the

enforceability of a requirements contract pursuant to which

the petitioner committed to buy at least 225,000 tons of

respondent’s coal annually for a 20-year term. Tampa

9

Electric, 365 U.S. at 322. Nashville Coal Company refused

to perform the contract, claiming it was illegal. Jd. at 323.

Tampa Electric brought suit to enforce the contract, but the

trial court dismissed the claim, holding that the contract

violated the antitrust laws, and the Sixth Circuit affirmed.

Id. at 324.

This Court reversed, holding that the court of appeals’

analysis was too limited. To assess the practical effect of the

exclusive contract, this Court held that a trial court first

must identify the “line of commerce, i.¢., the type of goods,

wares, or merchandise,” that is the subject of the exclusive

dealing arrangement. Tampa Electric, 365 U.S. at 327.

Next, the Court directed that the “area of effective

competition in the known line of commerce must be charted

by careful selection of the market area in which the seller

operates, and to which the purchaser can practicably turn

for supplies.” Jd. The threatened foreclosure of competition

is to be measured in relation to the market affected, the

Court held. Jd. at 329.¢

Since Tampa Electric, six different federal circuits have

considered exclusive dealing in the context of an

arrangement between a manufacturer and a

distributor/reseller. Unlike the court below, each of those

circuits utilized the framework outlined in Tampa Electric

and considered the full range of distribution options to

which rivals could practicably turn to reach the ultimate

customers of the line of commerce involved.’ See, e.g., CDC

2 Under that analysis, the Court determined that the requirements

contract encompassed less than 1% of the coal used in the relevant

geographic market and therefore that it did not constitute a substantial

foreclosure. Tampa Electric, 365 U.S. at 333-34

3 The Third Circuit’s decision in LePage's considered the

anticompetitive effect of 3M’s exclusive dealing arrangements with high

volume mass merchants. The Sherman § 2 violation that was found by the

trial court, and affirmed on appeal, rested principally on the finding that

PE ae ee ee

10

Techs., Inc. v. IDEXX Labs., Inc., 186 F.3d 74 (2d. Cir.

1999); Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157

(9th Cir. 1997); U.S. Healthcare, Inc. v. Healthsource, Inc.,

986 F.2d 589 (Ist Cir. 1993); Seagood Trading Corp. v

Jerrico, Inc., 924 F.2d 1555 (11th Cir. 1991); Ryko Mfg. Co

v. Eden Servs., 823 F.2d 1215 (8th Cir. 1987); Roland Mach

Co. v. Dresser Indus., 749 F.2d 380 (7th Cir. 1984).4

These six appellate courts all held that an exclusive

dealing arrangement cannot cause an anticompetitive effect

unless it forecloses rivals from reaching a substantial share

of end-user purchasers in the affected line of commerce. In

U.S. Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 5839,

596 (Ist Cir. 1993), the First Circuit rejected an antitrust

challenge under Sherman § 1 and § 2 to an exclusive dealing

clause in contracts between physicians and defendant’s

HMO subsidiary. The court explained that, although this

Court had “once said that a ‘substantial’ percentage

foreclosure of suppliers or outlets would violate section 1,”

the Court’s “Tampa decision effectively replaced any such

quantitative test by an open-ended inquiry into competitive

impact.” Jd. at 595. Recognizing that the number of doctors

or dealers tied to the defendant HMO by the exclusive

agreement was “significant,” the appeals court nonetheless

found no anticompetitive effects since rivals were in no way

foreclosed from bidding for defendant’s doctors or attracting

new doctors of their own. /d.

3M’s rivals could not reach the ultimate consumers of transparent tape

directly. See, e.g., Lorain Journal Co. v. United States, 342 U.S. 143, 154

56 (1951) (finding violation under Sherman § 2 where rivals were excluded

from end-user customers). Here, by contrast, it is not the end-user

market that is foreclosed to Dentsply’s rivals, but only the handful of

dealers who sell Dentsply’s artificial tooth line. To find a Sherman § 2

violation in such circumstances is neither compelled by LePage’s, nor

permitted by the precedents of this Court and other federal courts of

appeals

4 These are the precise cases upon which the trial court relied to guide

its analysis. (Pet. App. 137a-39a (Law 11, 17

1]

This is also the teaching of the Ninth Circuit in Omega

Environmental, Inc. v Gilbarco, Inc., 127 F.3d 1157 (9th Cir.

1997). The court of appeals there specifically admonished

against measuring the competitive impact of exclusive

dealing arrangements based on the loss of intermediary

sales to those dealers already under contract. “The focus on

this subset of the relevant market is misplaced,” it stated.

127 F.3d at 1162-63. Rather, the pertinent antitrust inquiry

looks to whether “competitors can reach the ultimate

consumers of the product by employing existing or potential

alternative channels of distribution.” /d. Gilbarco involved

a manufacturer of petroleum dispensing equipment who

announced it would do business solely with distributors

selling only Gilbarco’s dispensers. /d. at 1161. Plaintiffs

were former Gilbarco dealers who were terminated when

Gilbarco learned they intended to sell the dispensers of

Gilbarco’s rivals. On appeal from a jury verdict in plaintiffs’

favor, the Ninth Circuit vacated and entered judgment in

favor of the defendant Gilbarco. /d. Insofar as is relevant

here, the court of appeals held that, in assessing the

foreclosure imposed by the exclusive dealing arrangement,

one must consider all “existing” or “potential” alternative

channels of distribution, including direct sales and

distributors in related businesses. /d. at 1162-63. Noting

that manufacturers in the market made “direct sales to end-

users,” the court held that the existence of alternative

channels of distribution “eliminate[s] substantially any

foreclosure effect Gilbarco’s policy might have.” /d. at 1163.

The Ninth Circuit found that the “competitors are free to

sell directly, to develop alternative distributors, or to

compete for the services of the existing distributors,” and

held that “[a)ntitrust laws require no more.” /d.

The Second Circuit reached the same conclusion in CDC

Techs., Inc. v. IDEXX Labs., Inc., 186 F.3d 74 (2d Cir. 1999),

affirming the district court’s rejection of a Sherman Act

challenge to an exclusive dealing agreement in the face of

12

undisputed evidence of direct sales and alternative

distributors. In the trial court, CDC had urged that the

focus of the foreclosure inquiry should concentrate on

“distributor outlets.” CDX Techs., Inc. v. IDEXX Labs.,

Inc., 7 F. Supp. 2d 119, 121 (D. Conn. 1998). It was,

however, the “anticompetitive effect on the end-users in the

relevant market,” that the district court held to be

dispositive. Jd. The Second Circuit agreed, holding that

“outlet foreclosure” cannot establish adverse competitive

effects in the face of undisputed evidence that CDC could

reach the ultimate customer by direct sales and by

recruiting other distributors. 186 F.3d at 80-81.

The Seventh, Eighth and Eleventh Circuits are all to

similar effect. See Roland Mach. Co. v. Dresser Indus., 749

F.2d 380, 394-95 (7th Cir. 1984) (exclusive dealership

arrangement causes no foreclosure as a matter of law where

defendant’s rival possessed the resources to access the

market through direct sales or by attracting its own

distributors); Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215,

1233-35 (8th Cir. 1987) (no foreclosure where there is “no

evidence that a substantial segment of equipment buying

market will deal only with Ryko distributors, or that

exclusive dealing provisions have any impact on the ability

of Ryko’s competitors to make sales presentations to any

potential customer through their own distributors or

through direct sales representation”); Seagood Trading Co.

v. Jerrico, Inc., 924 F.2d 1555, 1572-73 (llth Cir. 1991)

(exclusive distributor arrangement not violative of Sherman

$1 or §2 where plaintiffs could access the market by

attracting alternative distributors).

In condemning Dentsply’s exclusive dealing

arrangement here, the Third Circuit deviates in several

material respects from the Tampa Electric analysis

consistently employed by its sister circuits. First, it faults

the trial court’s acceptance of the market in which to

13

measure the effect of Dealer Criterion 6, ruling that sales to

dental dealers should be included as well as sales to dental

labs because “Dentsply sells only to dealers.”© (Pet. App.

6a). The court below then focuses its foreclosure inquiry on

the fairly obvious foreclosure of Dentsply’s rivals from

selling to those 23 dealers who sold Dentsply teeth under

Dealer Criterion 6, stating “{t)his is the part of the real

market that is denied to the rivals.” (Pet. App. lla). It will,

however, always be the case that an exclusive dealing

arrangement forecloses the participating dealers from use

by competitors. Thus, as the Ninth Circuit noted, the focus

on this market “subset” is badly “misplaced.” Gilbarco, 127

F.3d at 1157. Rather, it is the end-user customers (here, the

dental labs) who are all-important, because, in the words of

the Second Circuit, “[cjompetition is not adversely affected

if, despite an exclusive dealership agreement, ‘competitors

can reach the ultimate consumer of the product by

employing existing or potential channels of distribution.”

United States v. Visa U.S.A. Inc., 344 F.3d 229, 242 (2d Cir.

2003) (citations omitted), cert. denied, 125 S.Ct. 45 (2004).

The Third Circuit, unlike its sister circuits, did not

properly consider all existing or potential alternative

channels of distribution. It completely ignored, for example,

that Dentsply’s rivals could reach end-user purchasers of

artificial teeth through dealers not carrying Dentsply teeth

and thus not captured by the exclusive dealing

arrangement. The trial court made specific findings in this

regard—in particular that Dentsply’s rivals had, in some

”’ The Third Circuit’s double counting of sales to dealers and labs

directly conflicts with the Tenth Circuit’s decision in Westman

Commission Co. v. Hobart International, Inc., 796 F.2d 1216 (10th Cir.

1986). There, the court held that it is error to “focus[] on the system of

product distribution rather than the market facing the consumer of

restaurant equipment.” 796 F.2d at 1220. Rather, the court said, “[a}ny

definition of line of commerce which ignores the buyers and focuses on

what the sellers do, or theoretically can do, is not meaningful.” /d. at 1221

(citations omitted)

14

instances, their own dealer networks (Pet. App. 57a, 59a-60a

(FOF 129, 136-39)) and that there were available to

Dentsply’s rivals “hundreds” of tooth dealers (Pet. App. 60a

(FOF 140))}—and these findings remained undisturbed on

appeal. As determined by the First, Second, Seventh,

Eighth, Ninth and Eleventh Circuits, these readily available

alternative distribution channels are themselves more than

sufficient to defeat the government’s Sherman § 2 claim, and

the Third Circuit’s total disregard of them was clear legal

error.

The court below compounded its error with the

determination that direct distribution of teeth to dental

laboratories, though available and used by Dentsply’s rivals

as an alternative to dealer distribution, was not as

“effective” as distributing through authorized Dentsply

dealers and thus not a “viable” option for Dentsply’s rivals.

(Pet. App. 18a-19a). This comparative analysis, too, is in

sharp conflict with other federal courts of appeals. The

Ninth Circuit in Gilbarco flatly rejected the argument that

the alternative distribution option must be fully

substitutable for distributors bound by the exclusive dealing

arrangement in order for that alternative to refute market

foreclosure. There, the plaintiffs complained that direct

sales, or potential distributors not yet carrying equipment

at issue, were “inadequate substitutes” for t' defendant’s

existing distributors. Gilbarco, 127 F.3d at 1103. “[AJimost

all of the 500 existing distributors” with “proven finances,

abilities and customer relationships” were restricted by

defendant’s arrangements, the plaintiffs argued. Jd. The

Ninth Circuit rejected plaintiffs’ substitutability argument,

stating that “(t]he short answer is that the antitrust laws

were not designed to equip ([Gilbarco’s rivals) with

Gilbarco’s legitimate competitive advantage.” /d.

Accord Seagood Trading, 924 F.2d 1555, 1572-73 (“The

plaintiffs then are asking us to equip them with LJS’

15

competitive advantage. This is not a function of the

antitrust laws. The antitrust laws are not intended to

support artificially firms that cannot compete on their

own.”); Roy B. Taylor Sales, Inc. v. Hollymatic, Corp., 28

F.3d 1379, 1383 (5th Cir. 1994) (“[a]lternative distributors

did not have to be robust to compete, they merely had to

exist”); see also Verizon Communications Inc. v. Law

Offices of Curtis V. Trinko, 540 U.S. 398, 415-16 (2004)

(refusing to find an exception to the rule that there is no

duty to aid competitors and noting that the Sherman Act

“does not give judges carte blanche to insist that a

monopolist alter its way of doing business whenever some

other approach might yield greater competi. »)n”).

Rather than following this jurisprudence, the Third

Circuit panel undertook to measure what it regarded as the

relative ineffectiveness of selling directly to dental labs by

reference to the comparatively smaller market shares of

Dentsply’s two leading rivals, Ivoclar and Vita. (Pet. App.

19a). Because it found these shares to be too “miniscule” to

“pose a real threat” to Dentsply’s market position, the court

below held that the trial court’s “viability” conclusion was

clearly erroneous. (Pet. App. 18a-19a).

Yet, current market positions of competing firms

provide no basis to reach any different conclusion about the

lack of market foreclosure in the present case. As found by

the trial court, and nowhere disputed by the appeals panel,

the large market share of Dentsply was the result of its

superior business acumen, aggressive marketing and a more

attractive product line. (Pet. App. 63a-68a, 99a-110a (FOF

6 This faulty legal analysis is further confounded by the fact that Vita

uses an alternate dealer network to sell its teeth to dental labs. (Pet.

App. 57a-58a (FOF 129-32)). Further, Ivoclar, which only sells direct, has

a market share larger than any other Dentsply rival, including those

rivals who are able to sell through Dentsply’s dealers. (Pet. App. 9a).

16

148-68, 269-303)). The niuch smaller market shares of

Dentsply’s rivals—as also found by the tria) court and

nowhere disputed on appeal—were, by comparison, a

consequence of less sophisticated business skills, more

lackadaisical marketing efforts and inferior product lines

(Pet. App. 9la-99a (FOF 244-68)).

Disparity in market shares was, therefore, plainly not a

reflection of Dentsply’s Dealer Criterion 6. To be sure, the

exclusive dealer arrangement provided Dentsply a network

of some 23 dealers of tooth products out of “hundreds” of

dealers in the market (Pet. App. 60a (FOF 140))—all 23 of

which were undeniably free to leave Dentsply at any time

and work for any of its rivals (Pet. App. 53a, (FOF 110-11)),

but it in no way foreclosed rivals from selling to end-user

customers directly, as some did, or from building and using

their own dealer relationships, as did those and others. (Pet.

App. 57a, 59a-60a (FOF 129, 136-40)). Dealer Criterion 6

thus cannot properly be said to have had any Sherman § 2

anticompetitive effects, even if Dentsply’s distributors are

among the best available, and as a result provided Dentsply

with a “competitive advantage not shared by its rivals.”

Gilbarco, 127 F.3d at 1163 (“the antitrust laws were not

designed to equip (Gilbarco rivals] with Gilbarco’s legitimate

competitive advantage.”’).

The ruling below is thus entirely at odds with

established precedent. In redirecting this Court's

“foreclosure” inquiry in Tampa Electric—consistently

followed by other federal circuits—from a focus on the range

of market alternatives practicably available to rivals to a

reliance only on rivals’ lack of access to a select number of

distributor outlets, the Third Circuit has effectively

condemned as presumptively unlawful al! exclusive dealer

arrangements that heretofore have been judicially

recognized as presumptively lawful, and regarded generally

as having decidedly pro-competitive benefits. See, ¢.g.,

17

Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1233-35 (8th

Cir. 1987); Roland Mach Co. v. Dresser Indus., 749 F.2d 380,

395 (7th Cir. 1984); In re Beltone Elec. Corp., 100 F.T.C. 68,

215-18 (1982). If, moreover, those arrangements are used by

firms with sizeable market shares, it is the view of the court

below that such conduct is per se unlawful, since, no matter

what the explanation, the smaller market shares of the rival

firms remove all prospects of their ability “to pose a real

threat” to the dominant firm’s market position. The Third

Circuit's holding that Dentsply must, therefore, release its

authorized dealers to Dentsply’s closest competitors runs

counter to this Court’s teaching in 7rinko, that firms with

high market shares can indeed refuse to “share the source of

their advantage” with rivals. 540 U.S. at 407-08.

The decision below is all the more disturbing for its

seeming indifference to the trial court’s unchallenged

determination that no probable anticompetitive effects were

discernable from Dentsply’s Dealer Criterion 6, and that it

thus did not violate Clayton § 3. By electing to nonetheless

re-examine the same evidence under Sherman § 2, and then

finding actual anticompetitive effects arising out of conduct

held to pose not even a probability, the Third Circuit again

disregarded Tampa Electric’ and broke ranks with every

7 Characterizing the Court’s disposition of the Sherman § 2 claim ir

Tampa Electric as dictum, the pane) below pointed to the Third Circuit's

decision in LePage’s for support to entertain the Sherman § 2 appeal here

(Pet. App. 25a-26a). In LePage's, the Third Circuit proceeded to review

the evidentiary basis for a jury’s general verdict of monopolization under

Sherman § 2, notwithstanding that the jury had also returned a general

verdict of no liability under Clayton §3, which was not appealed

Whether the Sherman §2 review can arguably be undertaken in such

circumstances because a jury's genera) verdict does not reveal the precise

basis for either determination, it does not follow that the more

particularized Findings and Conclusions of a trial judge following an

extended Bench Trial can be so easily second-guessed. Here, the

evidence of conduct and its impact on commerce were fully set forth in the

trial court’s comprehensive decision. Tampa Electric teaches that, in

such circumstances, an explained finding of no probable anticompetitive

18

other circuit court of appeals to have been presented with

the two antitrust claims. Compare CDC Techs., 186 F.3d at

79 (noting “the conclusion that a contract does not violate § 3

of the Ciayton Act ordinarily implies the conclusion that the

contract does not violate the Sherman Act”); Gilbarco, 127

I’.3d at 1167 n.13 (“If an exclusive dealing arrangement does

not fall within the broader proscription of §3 of the Clayton

Act[,} it follows that it is not forbidden by [$§]1 and 2 of the

Sherman Act”); Ryko Mfg., 823 F.2d at 1233 n.16 (“The

parties did not extensively address the Section 1 claim in

this appeal, but our resolution of the Clayton Act claim

disposes of the issue. If a contract is not prohibited by ‘the

broader proscription of § 3 of the Clayton Act it follows that

it is not forbidden by those o. the [Sherman Act].”’); see also

Amplex of Md., Inc. v. Outboard Marine Corp., 380 F.2d

12, 116 (4th Cir. 1967) (same, quoting Tampa Electric).

Plenary review by this Court is, therefore, required to

correct the errors below and resolve the Third Circuit’s split

with six of its sister circuits over the proper scrutiny and

treatment of exclusive dealer arrangements under the

federal antitrust laws.

CONCLUSION

The petition for a writ of certiorari should be granted.

effects under Clayton § 3 is dispositive as well of the Sherman § 2 claim on

appeal. That principle has full application here

Dated: September 14, 2005

Of Counsel:

Brian M. Addison

Dentsply International, Inc.

Susquehanna Commerce Ctr.

221 West Philadelphia Street

York, PA 17405

(717) 845-7511

Respectfully submitted,

Wm. Bradford Reynolds

Counsel of Record

Howrey LLP

1299 Pennsylvania Ave.

Washington, DC 20004

(202) 783-0800

Margaret M. Zwisler

Eric J. McCarthy

Charles R. Price

Latham & Watkins LLP

555 Eleventh St., N.W.

Washington, DC 20004

202) 637-2200

Richard A. Ripley

Bingham McCutchen LLP

1120 20” Street, N.W.

Washington, DC 20036

(202) 778-6101

Counsel for Petitioner

Dentsply International, Inc.

APPENDIX

la

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

UNITED STATES of America,

Appellant

Vv.

DENTSPLY INTERNATIONAL, INC.

No. 03-4097.

Argued: Sept. 21, 2004.

Decided: Feb. 24, 2005.

Before MCKEE, ROSENN and WEIS, Circuit Judges.

OPINION

WEIS, Circuit Judge:

In this antitrust case we conclude that an exclusivity

policy imposed by a manufacturer on its dealers violates

Section 2 of the Sherman Act. We come to that position

because of the nature of the relevant market and the

established effectiveness of the restraint despite the lack of

long term contracts between the manufacturer and its

dealers. Accordingly, we will reverse the judgment of the

District Court in favor of the defendant and remand with

directions to grant the Government’s request for injunctive

relief.

The Government alleged that Defendant, Dentsply

International, Inc., acted unlawfully to maintain a monopoly

in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2;

entered into illegal restrictive dealing agreements

2a

prohibited by Section 3 of the Clayton Act, 15 U.S.C. § 14;

and used unlawful agreements in restraint of interstate

trade in violation of Section 1 of the Sherman Act, 15 U.S.C.

§1. After a bench trial, the District Court denied the

injunctive relief sought by the Government and entered

judgment for defendant.

In its comprehensive opinion, the District Court found

the following facts. Dentsply International, Inc. is a

Delaware Corporation with its principal place of business in

York Pennsylvania. [It 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.

Because of advances in dental medicine, artificial tooth

manufacturing is marked by a low or no-growth potential.

Dentsply 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. The other

significant manufacturers and their market shares are:

Ivoclar Vivadent, Inc 5%

Vita Zahnfabrik 3%

* Myerson LLC 3%

* American Tooth Industries 2%

* Universal Dental Company 1%-2%

Heraeus Kulzer GmbH

Davis, Schottlander & Davis, Ltd.

* These companies sell directly to dental

laboratories as well as to dealers.

3a

Dealers sell to dental! laboratories a full range of metals,

porcelains, acrylics, waxes, and other materials required to

fabricate fixed or removal restorations. Dealers maintain

large inventories of artificial teeth and carry thousands of

products, other than teeth, made by hundreds of different

manufacturers. Dentsply supplies $400 million of products

other than teeth to its network of 23 dealers.

There are hundreds of dealers who compete on the basis

of price and service among themselves, as well as with

manufacturers who sell directly to laboratories. The dealer

field has experienced significant consolidation with several

large national and regional firms emerging.

For more than fifteen years, Dentsply has operated

under a policy that discouraged its dealers from adding

competitors’ teeth to their lines of products. In 1993,

Dentsply adopted “Dealer Criterion 6.” It provides that in

order to effectively promote Dentsply-York products,

authorized dealers “may not add further tooth lines to their

product offering.” Dentsply operates on a purchase order

basis with its distributors and, therefore, the relationship is

essentially terminable at will. Dealer Criterion 6 was

enforced against dealers with the exception of those who

had carried competing products before 1993 and were

“grandfathered” for sales of those products. Dentsply

rebuffed attempts by those particular distributors to expand

their lines of competing products beyond the grandfathered

ones.

Dentsply’s five top dealers’ sell competing

grandfathered brands of teeth. In 2001, their share of

Dentsply’s overall sales were

Zahn

Patterson

Darby

Benco

DLDS

TOTAL... 83%

16,000 dental laboratories fabricate restorations and a

subset of 7,000 provide dentures. The laboratories compete

with each other on the basis of price and service. Patients

and dentists value fast service, particularly in the case of

lost or damaged dentures. When laboratories’ inventories

cannot supply the necessary teeth, dealers may fill orders

for walk-ins or use over-night express mail as does

Dentsply, which dropped-shipped some 60% of orders from

dealers.

Dealers have been dissatisfied with Dealer Criterion 6,

but, at least in the recent past, none of them have given up

the popular Dentsply teeth to take on a competitive line.

Dentsply at one time considered selling directly to the

laboratories, but abandoned the concept because of fear that

dealers would retaliate by refusing to buy its other dental

products.

In the 1990’s Dentsply implemented aggressive sales

campaigns, including efforts to promote its teeth in dental

schools, providing rebates for laboratories’ increased usage,

and deploying a sales force dedicated to teeth, rather than

the entire product mix. Its chief competitors did not as

actively promote their products. Foreign manufacturers

were slow to alter their designs to cope with American

preferences, and, in at least one instance, pursued sales of

porcelain products rather than plastic teeth.

Dentsply 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

oa

“eash 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.

The District Court found that Dentsply’s business

justification for Dealer Criterion 6 was pretextua] and

designed expressly to exclude its rivals from access to

dealers. The Court however concluded that other dealers

were available and direct sales to laboratories was a viable

method of doing business. Moreover, it concluded that

Dentsply had not created a market with supra competitive

pricing, dealers were free to leave the network at any time,

and the Government failed to prove that Dentsply’s actions

“have been or could be successful in preventing ‘new or

potential competitors from gaining a foothold in the

market.” United States v. Dentsply Int'l, Inc., 277

F.Supp.2d 387, 453 (D.Del.2003) (quoting LePage’s, Inc. v.

3M, 324 F.3d 141, 159 (8d Cir.2003)). Accordingly, the Court

concluded that the Government had failed to establish

violations of Section 3 of the Clayton Act and Sections 1 or 2

of the Sherman Act.

The Government appealed, contending that a

monopolist that prevents rivals from distributing through

established dealers has maintained its monopoly by acting

with predatory intent and violates Section 2. Additionally,

the Government asserts that the maintenance of a 75%—

80% market share, establishment of a price umbrella,

repeated aggressive price increases and exclusion of

competitors from a major source of distribution, show that

Dentsply possesses monopoly power, despite the fact that

rivals are not entirely excluded from the market and some of

their prices are higher. The Government did not appeal the

rulings under Section 1 of the Sherman Act or Section 3 of

the Clayton Act.

Dentsply argues that rivals had obtained a share of the

relevant market, that there are no artificially high prices

and that competitors have access to all laboratories through

6a

existing or readily convertible systems. In addition,

Dentsply asserts that its success is due to its leadership in

promotion and marketing and not the imposition of Dealer

Criterion 6.

I. STANDARD OF REVIEW

We exercise de novo review over the District Court’s

conclusions of law. See Allen-Myland, Inc. v. IBM Corp., 33

F.3d 194, 201 (3d Cir.1994). See also United States v.

Microsoft, 253 F.3d 34, 50 (D.C.Cir.2001). However, we will

not disturb its findings of fact unless they are clearly

erroneous. See SmithKline Corp. v. Eli Lilly and Co., 575

F.2d 1056, 1062 (3d Cir.1978).

Il. APPLICABLE LEGAL PRINCIPLES

Section 2 of the Sherman Act, 15 U.S.C. § 2, provides

that “[e]very person who shall monopolize, or attempt to

monopolize, or combine or conspire with any other person ...

to monopolize any part of the trade” is guilty of an offense

and subject to penalties. In addition, the Government may

seek injunctive relief. 15 U.S.C. § 4.

A violation of Section 2 consists of two elements: (1)

possession of monopoly power and (2) “... maintenance of

that power as distinguished from growth or development as

a consequence of a superior product, business acumen, or

historic accident.” Eastman Kodak Co. v. Image Technical

Servs., Inc., 504 U.S. 451, 480, 112 S.Ct. 2072, 119 L.Ed.2d

265 (1992) (citing United States v. Gri:.,rell Corp., 384 US.

563, 571, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966)). “Monopoly

power under § 2 requires ... something greater than market

power under § 1.” Eastman Kodak Co., 504 U.S. at 481, 112

S.Ct. 2072.

To run afoul of Section 2, a defendant must be guilty of

illegal conduct “to foreclose competition, gain a competitive

advantage, or to destroy a competitor.” Jd. at 482-83, 112

S.Ct. 2072 (quoting United States v. Griffith, 334 U.S. 100,

107, 68 S.Ct. 941, 92 L.Ed. 1236 (1948)). See generally

Lorain Journal Co. v. United States, 342 U.S. 143, 72 S.Ct.

7a

181, 96 L.Ed. 162 (1951). Behavior that otherwise might

comply with antitrust law may be _ impermissibly

exclusionary when practiced by a monopolist. As we said in

LePage’s, Inc. v. 3M, 324 F.3d 141, 151-52 (3d Cir.2003), “a

monopolist is not free to take certain actions that a company

in a competitive (or even oligopolistic) market may take,

because there is no market constraint on a monopolist’s

behavior.” 3 Areeda & Turner, Antitrust Law 4 813, at 300-

02 (1978).

Although not illegal in themselves, exclusive deaiing

arrangements can be an improper means of maintaining a

monopoly. United States v. Grinnell Corp., 384 U.S. 563, 86

S.Ct. 1698, 16 L.Ed.2d 778 (1966); LePage’s, 324 F.3d at 157.

A prerequisite for such a violation is a finding that monopoly

power exists. See, eg., LePage’s, 324 F.3d at 146. In

addition, the exclusionary conduct must have an anti-

competitive effect. See id. at 152, 159-63. If those elements

are established, the monopolist still retains a defense of

business justification. See id. at 152.

Unlawful maintenance of a monopoly is demonstrated

by proof that a defendant has engaged in anti-competitive

conduct that reasonably appears to be a significant

contribution to maintaining monopoly power. United States

v. Microsoft, 253 F.3d 34, 79 (D.C.Cir.2001); 3 Phillip E.

Areeda & Herbert Hovenkamp, Antitrust Law, ¢ 65lc at 78

(1996). Predatory or exclusionary practices in themselves

are not sufficient. There must be proof that competition, not

merely competitors, has been harmed. LePage’s, 324 F.3d at

162.

Ill. MONOPOLY POWER

The concept of monopoly is distinct from monopoly

power, which has been defined as the ability “to control

prices or exclude competition.” Grinnell, 384 U.S. at 571, 86

S.Ct. 1698; see also United States v. E.J. du Pont de

Nemours and Co., 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264

(1956). However, because such evidence is “only rarely

available, courts more typically examine market structure in

8a

search of circumstantial evidence of monopoly power.”

Microsoft, 253 F.3d at 51. Thus, the existence of monopoly

power may be inferred from a predominant share of the

market, Grinnell, 384 U.S. at 571, 86 S.Ct. 1698, and the size

of that portion is a primary factor in determining whether

power exists. Pennsylvania Dental Ass'n v. Med. Serv.

Ass'n of Pa., 745 F.2d 248, 260 (3d Cir.1984).

A less than predominant share of the market combined

with other relevant factors may suffice to demonstrate

monopoly power. Fineman v. Armstrong World Indus., 980

F.2d 171, 201 (3d Cir.1992). Absent other pertinent factors,

a share significantly larger than 55% has been required to

established prima facie market power. /d. at 201. Other

germane factors include the size and strength of competing

firms, freedom of entry, pricing trends and practices in the

industry, ability of consumers to substitute comparable

goods, and consumer demand. See Tampa Elec. Co. v.

Nashville Coai Co., 365 U.S. 320, 81 S.Ct. 623, 5 L.Ed.2d 580

(1961); Barr Labs. v. Abbott Labs., 978 F.2d 98 (3d Cir.1992);

Weiss v. York Hosp., 745 F.2d 786, 827 n. 72 (3d Cir.1984).

A. The Relevant Market

Defining the relevant market is an important part of the

analysis. The District Court found the market to be “the

sale of prefabricated artificial teeth in the United States.”

United States v. Dentsply Int'l Inc., 277 F.Supp.2d 387, 396

‘D.Del.2008). Further, the Court found that “[t]he

manufacturers participating in the United States artificial

tooth market historically have distributed their teeth into

the market in one of three ways: (1) directly to dental labs;

(2) through dental dealers; or (3) through a hybrid system

combining manufacturer direct sales and dental dealers.”

Finding of Fact 13.’ The Court also found that the “labs are

the relevant consumers for prefabricated artificial teeth.”

FF61.

‘ The District Court’s Findings of Fact will be referred to as “FF”

hereafter.

Ya

There is no dispute that the laboratories are the

ultimate consumers because they buy the teeth at the point

in the process where they are incorporated into another

product. Dentsply points out that its representatives

concentrate their efforts at the laboratories as well as at

dental schools and dentists. See Dentsply int'l Inc., 277

F.Supp.2d at 429- 34.

During oral argument, Dentsply’s counsel said, “the

dealers are not the market ... [t]he market is the dental labs

that consume the product.” Transcript of Oral Argument at

47. Emphasizing the importance of end users, Dentsply

argues that the District Court understood the relevant

market to be the sales of artificial teeth to dental

laboratories in the United States. Although the Court used

the word “market” in a number of differing contexts, the

findings demonstrate that the relevant market is not as

narrow as Dentsply would have it. In F F238, the Court said

that Dentsply “has had a persistently high market share

between 75% and 80% on a revenue basis, in the artificial

tooth market.” Dentsply sells only to dealers and the

narrow definition of market that it urges upon us would be

completely inconsistent with that finding of the District

Court.

The Court went on to find that Ivoclar “has the second-

highest share of the market, at approximately 5%.” FF239.

Ivoclar sells directly to the laboratories. Therefore, these

two findings establish that the relevant market in this case

includes sales to dealers and direct sales to the laboratories.

Other findings on Dentsply’s “market share” are consistent

with this understanding. FF240-243.

These findings are persuasive that the District Court

understood, as do we, the relevant market to be the total

sales of artificial teeth to the laboratories and the dealers

combined.

Dentsply’s apparent belief that a relevant market

cannot include sales both to the final consumer and a

middleman is refuted in the closely analogous case of Allen-

a eee eS eee es me mmaeemmaaaacaaaaaaaaaaaaaacaaacaaaacaaaamaccasaaaaal

10a

Myland, Inc. v. IBM Corp., 33 F.3d 194 (3d Cir.1994). In

that case, IBM sold mainframe computers directly to the

ultimate consumers and also sold to companies that leased

computers to ultimate users. We concluded that the

relevant market encompassed the sales directly to

consumers as well as those to leasing companies. “... to the

extent that leasing companies deal in used, non-IBM

mainframes that have not already been counted in the sales

market, these machines belong in the relevant market for

large-scale mainframe computers.” /d. at 203.

To resolve any doubt, therefore, we hold that the

relevant market here is the sale of artificial teeth in the

United States both to laboratories and to the dental dealers.

B. Power to Exclude

Dentsply’s share of the market is more than adequate to

establish a prima facie case of power. In addition, Dentsply

has held its dominant share for more than ten years and has

fought aggressively to maintain that imbalance. One court

has commented that, “(ijn evaluating monopoly power, it is

not market share that counts, but the ability to maintain

market share.” United States v. Syufy Enters., 903 F.2d

659, 665-66 (9th Cir.1990).

The District Court found that it could infer monopoly

power because of the predominant market share, but

despite that factor, concluded that Dentsply’s tactics did not

preclude competition from marketing their products directly

to the dental laboratories. “Dentsply does not have the

power to exclude competitors from the ultimate consumer.”

United States v. Dentsply Int'l, Inc., 277 F.Supp.2d 387, 452

(D.Del.2003).

Moreover, the Court determined that failure of

Dentsply’s two main rivals, Vident and Ivoclar, to obtain

significant market shares resulted from their own business

decisions to concentrate on other product lines, rather than

implement active sales efforts for teeth.

lla

The District Court’s evaluation of Ivoclar and Vident

business practices as a cause of their failure to secure more

of the market is not persuasive. The reality is that over a

period of years, because of Dentsply’s domination of dealers,

direct sales have not been a practical alternative for most

manufacturers. It has not been so much the competitors’

less than enthusiastic efforts at competition that produced

paltry results, as it is the blocking of access to the key

dealers. This is the part of the real market that is denied to

the rivals.

The apparent lack of aggressiveness by competitors is

not a matter of apathy, but a reflection of the effectiveness

of Dentsply’s exclusionary policy. Although its rivals could

theoretically convince a dealer to buy their products and

drop Dentsply’s line, that has not occurred. In United

States v. Visa U.S.A., 344 F.3d at 229, 240 (2d Cir.2003), the

Court of Appeals held that similar evidence indicated that

defendants had excluded their rivals from the marketplace

and thus demonstrated monopoly power.

The Supreme Court on more than one occasion has

emphasized that economic realities rather than a formalistic

approach must govern review of antitrust activity. “Legal

presumptions that rest on formalistic distinctions rather

than actual market realities are generally disfavored in

antitrust law .. in determining the existence of market

power ... this Court has examined closely the economic

reality of the market at issue.” Eastman Kodak Co. v.

Image Technical Servs., Inc., 504 U.S. 451, 466-67, 112 S.Ct.

2072, 119 L.Ed.2d 265 (1992). “If we look at substance

rather than form, there is little room for debate.” United

States v. Sealy, Inc., 388 U.S. 350, 352, 87 S.Ct. 1847, 18

L.Ed.2d 1238 (1967). We echoed that standard in Weiss v

York Hosp., 745 F.2d 786, 815 (3d Cir.1984). “Antitrust

policy requires the courts to seek the economic substance of

an arrangement, not merely its form.” /d.

The realities of the artificial tooth market were candidly

expressed by two former managerial employees of Dentsply

12a

when they explained their rules of engagement. One

testified that Dealer Criterion 6 was designed to “block

competitive distribution points.” He continued, “Do not

allow competition to achieve toeholds in dealers; tie up

dealers; do not ‘free up’ key players.”

Another former manager said:

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.

These are clear expressions of a plan to maintain

monopolistic power.

The District Court detailed some ten separate incidents

in which Dentsply required agreement by new as well as

long-standing dealers not to handle competitors’ teeth. For

example, when the DLDS firm considered adding two other

tooth lines because of customers’ demand, Dentsply

threatened to sever access not only to its teeth, but to other

dental products as well. DLDS yielded to that pressure.

The termination of Trinity Dental, which had previously

sold Dentsply products other than teeth, was a similar

instance. When Trinity wanted to add teeth to its line for

the first time and chose a competitor, Dentsply refused to

supply other dental products.

Dentsply also pressured Atlanta Dental, Marcus

Dental, Thompson Dental, Patterson Dental and Pearson

Dental Supply when they carried or considered adding

competitive lines. In another incident, Dentsply recognized

DTS as a dealer so as to “fully eliminate the competitive

l3a

threat that [DTS locations] pose by representing Vita and

[voclar in three of four regions.”

The evidence demonstrated conclusively that Dentsply

had supremacy over the dealer network and i* was at that

crucial point in the distribution chain that monopoly power

over the market for artificial teeth was established. The

reality in this case is that the firm that ties up the key

dealers rules the market.

In concluding that Dentsply lacked the power to

exclude competitors from the laboratories, “the ultimate

consumers,” the District Court overlooked the point that the

relevant market was the “sale” of artificial teeth to both

dealers and laboratories. Although some sales were made

by manufacturers to the laboratories, overwhelming

numbers were made to dealers. Thus, the Court’s scrutiny

should have been applied not to the “ultimate consumers”

who used the teeth, but to the “customers” who purchased

the teeth, the relevant category which included dealers as

well as laboratories. This mis-focus led the District Court

into clear error.

The factual pattern here is quite similar to that in

LePage’s, Inc. v. 3M, 324 F.3d 141 (3d Cir.2003). There, a

manufacturer of transparent tape locked up high volume

distribution channeis by means of substantial discounts on a

range of its other products. LePage’s, 324 F.3d at 144, 160-

62. We concluded that the use of exclusive dealing and

bundled rebates to the detriment of the rival manufacturer

violated Section 2. See LePage’s, 224 F.3d at 159. Similarly,

in Microsoft, the Court of Appeals for the D.C. Circuit

concluded that, through the use of exclusive contracts with

key dealers, a manufacturer foreclosed competitors from a

substantial percentage of the available opportunities for

product distribution. See Microsoft, 253 F.3d at 70-71.

The evidence in this case demonstrates that for a

considerable time, through the use of Dealer Criterion 6

Dentsply has been able to exclude competitors from the

l4a

dealers’ network, a narrow, but heavily traveled channel to

the dental laboratories

C. Pricing

An increase in pricing is another factor used in

evaluating existence of market power. Although in this case

the evidence of exclusion is stronger than that of Dentsply’s

control of prices, testimony about suspect pricing is also

found in this record.

The District Court found that Dentsply had a

reputation for aggressive price increases in the market. It

is noteworthy that experts for both parties testified that

were Dealer Criterion 6 abolished, prices would fall. A

former sales manager for Dentsply agreed that the

company’s share of the market would diminish should

Dealer Criterion 6 no longer be in effect In 1993,

Dentsply’s regional sales manager complained, “|wje need to

moderate our increases--twice a year for the last few years

was not good.” Large scale distributors observed that

Dentsply’s policy created a high price umbrella

Although Dentsply’s prices fall between those of I voclar

and Vita’s premium tooth lines, Dentsply did not reduce its

prices when competitors elected not to follow its increases

Dentsply’s profit margins have been growing over the

years. The picture is one of a manufacturer that sets prices

with little concern for its competitors, “something a firm

without a m nopol| would have been unable to do.”

Microsoft, 253 F.3d at 58. The results have been favorable

to Dentsply . but of no benefit to consumers

Moreover, even “if monopoly power has been acquired

or maintained through improper means, the fact that the

power has not been used to extract [a monopoly price]

provides no succor to the monopolist.” Microsoft, 253 F.3d

at 57 (quoth’¢ Berkey Photo, Inc Eastman Kodak, Co..

603 F.2d 2638, 274 (2d Cir.1979)). The record of long duration

of the exclusionary tactics and anecdotal evidence of their

make it clear that power existed and was used

l5a

effectively. The District Court erred in concluding that

Dentsply lacked market power

[V. ANTI-COMPETITIVE EFFECTS

Having demonstrated that Dentsply possessed market

power, the Government must also establish the second

element of a Section 2 claim, that the power was used “to

foreclose competition.” United States v. Griffith, 334 US.

100, 107, 68 S.Ct. 941, 92 L.Ed. 1236 (1948). Assessing anti

competitive effect is important in evaluating a challenge to a

violation of Section 2. Und hat Section of the Sherman

Act, it is not necessary that ai: competition be removed from

the market. The test is not total foreclosure, but whether

the challenged practices bar a substantial number of rivals

or severely restrict the market’s ambit. LePage’s, 324 F.3d

at 159-60; Microsoft, 253 F.3d at 69.

A leading treatise explains,

A set of strategically planned exclusive

dealing contracts may slow the rival's

expansion by requiring it to develop

alternative outlets for its products or rely at

least temporarily on inferior or more

expensive outlets. Consumer injury results

from the delay that the dominant firm

imposes on the smaller rival’s growth.

Herbert Hovenkamp, Antitrust Law { 1802c,

at 64 (2d ed.2002).

By ensuring that the key dealers offer Dentsply teeth

either as the only or dominant choice, Dealer Criterion 6 has

a significant effect in preserving Dentsply’s monopoly. It

helps keep sales of competing teeth below the critical level

necessary for any rival to pose a real threat to Dentsply’s

market share. As such, Dealer Criterion 6 is a solid pillar of

harm to competition See Le Page's, 324 F.3d 141, 159 (3d

Cir.2003) (“When a monopolist’s actions are designed to

prevent one or more new or potential competitors from

C

gaining a foothold in the market by exclusionary, Le

16a

predatory, conduct, its success in that goal is not only

injurious to the potential competitor but also to competition

in general.”’)

A. Benefits of Dealers

Dentsply has always sold its teeth through dealers.

Vita sells through Vident, its exclusive distributor and

domestic affiliate, but has a mere 3% of the market. Ivoclar

had some relationship with dealers in the past, but its direct

relationship with laboratories yields only a 5% share.

A number of factors are at work here. For a great

number of dental laboratories, the dealer is the preferred

source for artificial teeth. Although the District Court

observed that “labs prefer to buy direct because of potential!

cost savings attributable to the elimination of the dealer

middieman [,]” FF81, in fact, laboratories are driven by the

realities of the marketplace to buy far more heavily from

dealers than manufacturers. This may be largely attributed

to the beneficial services, credit function, economies of scale

and convenience that dealers provide to laboratories,

benefits which are otherwise unavailable to them when they

buy direct. FF71, 81, 84

The record is replete with evidence of benefits provided

by dealers. For example, they provide laboratories the

benefit of “one stop-shopping” and extensive credit services.

Because dealers typically carry the products of multiple

manufacturers, a laboratory can order, with a single phone

call to a dealer, products from multiple sources. Without

dealers, in most instances laboratories would have to place

individual calls to each manufacturer, expend the time, and

pay multiple shipping charges to fill the same orders.

The dealer-provided reduction in trar.coction costs and

time represents a substantial benefit, one that the District

Court minimized when it characterized “one stop shopping”

as merely the ability to order from a single manufacturer all

the materials necessary for crown, bridge and denture

construction. FF84. Although a laboratory can call a

17a

manufacturer directly and purchase any product made by it,

FF84, the laboratory is unable to procure from that source

products made by its competitors Thus, purchasing

through dealers, which as a class traditionally carries the

products of multiple vendors, surmounts this shortcoming,

as well as offers other advantages

Buying through dealers also enables laboratories t

take advantage of obtaining discounts. Because they engage

in price competition to gain laboratories’ business, dealers

often discount manufacturers’ suggested laboratory price

for artificial teeth. FF69, 70. There is no finding on this

record that manufacturers offer similar discounts

Another service dealers perform is taking back tooth

returns. Artificial teeth and denture returns are quite

common in dentistry. Approximately 30% of all laboratory

tooth purchases are returned for exchange or credit. FF97

The District Court disregarded this benefit on the ground

that all manufacturers except Vita accept tooth returns

FF97. However, in equating dealer and manufacturer

returns, the District Court overlooked the fact that using

dealers, rather than manufacturers, enables laboratories to

consolidate their returns. In a single shipment to a dealer, a

laboratory can return the products of a number of

manufacturers, and so economize on shipping, time, and

transaction costs.

Conversely, when returning products directly to

manufacturers, a laboratory must ship each vendor's

product separately and must track each exchange

individually. Consolidating returns yields savings of time,

effort, and costs.

Dealers also provide benefits to manufacturers, perhaps

the most obvious of which is efficien: y of scale. Using select

high-volume dealers, as opposed to directly selling to

hundreds if not thousands of laboratories, greatly reduces

the manufacturer’s distribution costs and credit risks

Dentsply, for example, currently sells to twenty three

dealers. If it were instead to sell directly to individual

18a

laboratories, Dentsply would incur significantly higher

transaction costs, extension of credit burdens, and credit

risks.

Although a laboratory that buys directly from a

manufacturer may be able to avoid the marginal costs

associated with “middleman” dealers, any savings must be

weighed against the benefits, savings, and convenience

offered by dealers.

In addition, dealers provide manufacturers more

marketplace exposure and sales representative coverage

than manufacturers are able to generate on their own.

Increased exposure and sales coverage traditionaily lead to

greater sales.

B. “Viability” of Direct Sales

The benefits that dealers provide manufacturers help

make dealers the preferred distribution channels--in effect,

the “gateways”"—to the artificial teeth market.

Nonetheless, the District Court found that selling direct is a

“viable” method of distributing artificial teeth. FF'71, 73, 74-

81, CL26. But we are convinced that it is “viable” only in

the sense that it is “possible,” not that it is practical or

feasible in the market as it exists and functions. The

District Court’s conclusion of “viability” runs counter to the

facts and is clearly erroneous. On the entire evidence, we

are “left with the definite and firm conviction that a mistake

has been committed.” United States v. Igbonwa, 120 F.3d

437, 440 (3d Cir.1997) (citations and internal quotations

omitted).

t is true that Dentsply’s competitors can sell directly to

the dental laboratories and an insignificant number do. The

undeniable reality, however, is that dealers have a

controlling degree of access to the laboratories. The long-

entrenched Dentsply dealer network with its ties to the

laboratories makes it impracticable for a manufacturer to

rely on direct distribution to the laboratories in any

19a

significant amount. See United States v. Visa U.S.A., 344

F.3d 229, 240 (2d Cir.2003).

That some manufacturers resort to direct sales and are

even able to stay in business by selling directly is

insufficient proof that direct selling is an effective means of

competition. The proper inquiry is not whether direct sales

enable a competitor to “survive” but rather whether direct

selling “poses a real threat” to defendant’s monopoly. See

Microsoft, 253 F.3d at 71. The minuscule 5% and 3% market

shares eked out by direct-selling manufacturers Ivoclar and

Vita, Dentsply’s “primary competitors,” FF26, 36, 239,

reveal that direct selling poses little threat to Dentsply.

C. Efficacy of Dealer Criterion 6

Although the parties to the saler transactions consider

the exclusionary arrangements to be agreements, they are

technically only a series of independent sales. Dentsply seils

teeth to the dealers on an individual transaction basis and

essentially the arrangement is “at-will.” Nevertheless, the

economic elements involved--the large share of the market

held by Dentsply and its conduct excluding competing

manufacturers—realistically make the arrangements here as

effective as those in written contracts. See Monsanto Co. v.

Spray-Rite Serv. Corp., 465 U.S. 752, 764 n. 9, 104 S.Ct.

1464, 79 L.Ed.2d 775 (1984).

Given the circumstances present in this case, there is no

ground to doubt the effectiveness of the exclusive dealing

arrangement. In LePage’s, 324 F.3d at 162, we concluded

that 3M’s aggressive rebate program damaged LePage’s

ability to compete and thereby harmed competition itself.

LePage’s simply could not match the discounts that 3M

provided. LePage’s, 324 F.3d at 161. Similarly, in this case,

in spite of the legal ease with which the relationship can be

terminated, the dealers have a strong economic incentive to

20a

continue carrying Dentsply’s teeth. Dealer Criterion 6 is

not edentulous. *

D. Limitation of Choice

An additional anti-competitive effect is seen in the

exclusionary practice here that limits the choices of products

open to dental laboratories, the ultimate users. A dealer

locked into the Dentsply line is unable to heed a request for

a different manufacturers’ product and, from the standpoint

of convenience, that inability to some extent impairs the

laboratory’s choice in the marketplace.

As an example, current and potential customers

requested Atlanta Dental to carry Vita teeth. Although

these customers could have ordered the Vita teeth from

Vident in California, Atlanta Dental’s tooth department

manager believed that they were interested in a local

source. Atlanta Dental chose not to add the Vita line after

being advised that doing so would cut off access to Dentsply

teeth, which constituted over 90% of its tooth sales revenue.

Similarly, DLDS added Universal and Vita teeth to

meet customers’ requests, but dropped them after Dentsply

threatened to stop supplying its product. Marcus Dental

began selling another brand of teeth at one point because of

customer demand in response to supply problems with

* In some cases which we find distinguishable, courts have indicated

that exclusive dealing contracts of short duration are not violations of the

antitrust laws. See, ¢.g., CDC Techs., Inc. v. IDEXX Labs., Inc., 186 F.3d

74, 81 (2d Cir.1999) (“distributors” only provided sales leads and sales

increased after competitor imposed exclusive dealing arrangements),

Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1163 (9th Cir.1997)

(manufacturer with 55% market share sold both to consumers and

distributors, market showed decreasing prices and fluctuating shares),

Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215 (8th Cir.1987) (manufacturer

sold its products through both direct sales and distributors); Roland

Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380 (7th Cir.1984) (contract

between dealer and manufacturer did not contain exclusive dealing

provision)

2la

Dentsply. After Dentsply threatened to enforce Dealer

Criterion 6, Marcus dropped the other line.

E. Barriers to Entry

Entrants into the marketplace must confront

Dentsply’s power over the dealers. The District Court’s

theory that any new or existing manufacturer may “steal” a

Dentsply dealer by offering a superior product at a lower

price, see Omega Environmental, Inc v Gilbarco, 127 F.3d

1157 (9th Cir.1997), simply has not proved to be realistic. To

the contrary, purloining efforts have been thwarted by

Dentsply’s longtime, vigorous and successful enforcement

actions. The paltry penetration in the market by

competitors over the years has been a refutation of theory

by tangible and measurable results in the real world.

The levels of sales that competitors could project in

wooing dealers were minuscule compared to Dentsply’s,

whose long-standing relationships with these dealers

included sales of other dental products. For example,

Dentsply threatened Zahn with termination if it started

selling Ivoclar teeth. At the time, Ivoclar’s projected $1.2

million in sales were 85% lower than Zahn’s $8 million in

Dentsply’s sales.

When approached by Leach & Dillon and Heraeus

Kulzer, Zahn’s sales of Dentsply teeth had increased to $22-

$23 million per year. In comparison, the president of Zahn

expected that Leach & Dillon would add up te $200,000 (or

less than 1% of its Dentsply’s sales) and Heraeus Kulzer

would contribute “maybe hundreds of thousands.”

Similarly, Vident’s $1 million in projected sales amounted to

5.5% of its $18 million in annual Dentsply’s sales.

The dominant position of Dentsply dealers as a gateway

to the laboratories was confirmed by potential entrants to

the market. The president of Ivociar testified that his

company was unsuccessful in its approach to the two large

national dealers and other regional dealers. He pointed out

that it is more efficient to seil through dealers and, in

22a

addition, they offered an entre to future customers by

promotions in the dental schools.

Further evidence was provided by a Vident executive,

who testified about failed attempts to distribute teeth

through ten identified dealers. He attributed the lack of

success to their fear of losing the right to sell Dentsply

teeth.

Another witness, the president of Dillon Company,

advised Davis, Schottlander & Davis, a tooth manufacturer,

“to go through the dealer network because anything else is

futile .. ([Djealers control the tooth industry. If you don’t

have distribution with the dealer network, you dor’t have

distribution.” Some idea of the comparative size of the

dealer network was illustrated by the Dillon testimony:

“Zahn does $2 billion, I do a million-seven. Patterson does

over a billion dollars, | do a million-seven. I have ten

employees, they have 6,000.”

Dealer Criterion 6 created a strong economic incentive

for dealers to reject competing lines in favor of Dentsply’s

teeth. As in LePage’s, the rivals simply could not provide

dealers with a comparable economic incentive to switch.

Moreover, the record demonstrates that Dentsply added

Darby as a dealer “to block Vita from a key competitive

distribution point.” According to a Dentsply executive, the

“key issue” was “Vita’s potential distribution system.” He

explained that Vita was “having a tough time getting teeth

out to customers. One of their key weaknesses is their

distribution system.”

Teeth are an important part of a denture, but they are

but one component. The dealers are dependent on serving

all of the laboratories’ needs and must carry as many

compenents as practicable. The artificial teeth business

cannot realistically be evaluated in isolation from the rest of

the dental fabrication industry.

A leading treatise provides a helpful analogy to this

situation:

23a

[Suppose that mens’s bow ties cannot

efficiently be sold in stores that deal

exclusively in bow ties* or even ties

generally; rather, they must be sold in

department stores where clerks can spread

their efforts over numerous products and the

ties can be sold in conjunction with shirts and

suits. Suppose further that a dominant bow

tie manufacturer should impose exclusive

dealing on a town’s only three department

stores. In this case the rival bow tie maker

cannot easily enter. Setting up another

department store is an unneeded and a very

large investment in proportion to its own

production, which we assume is only bow ties,

but any store that offers less will be an

inefficient and costly seller of bow ties. As a

result, such exclusive dealing could either

exclude the nondominant bow tie maker or

else raise its costs in comparison to the costs

of the dominant firm. While the department

stores might prefer to sell the ties of multiple

manufacturers, if faced with an “all-or-

nothing” choice they may accede to the

dominant firm’s wish for exclusive dealing.

Herbert Hovenkamp, Antitrust Law

q 1802e3, at 78-79 (2d ed.2002).

* The authors do not disclose whether the bow ties are blue

polka-dot patterns or other designs.

Criterion 6 imposes an “all-or-nothing” choice on the

dealers. The fact that dealers have chosen not to drop

Dentsply teeth in favor of a rival’s brand demonstrates that

they have acceded to heavy economic pressure.

This case does not involve a dynamic, volatile market

like that in Microsoft, 253 F.3d at 70, or a proven alternative

distribution channel. The mere existence of other avenues

of distribution is insufficient without an assessment of their

24a

overall significance to the market. The economic impact of

an exclusive dealing arrangement is amplified in the

stagnant, no growth context of the artificial tooth field.

Dentsply’s authorized dealers are analogous to the high

volume retailers at issue in LePage's. Although the dealers

are distributors and the stores in LePage’s, such as K-Mart

and Staples, are retailers, this is a distinction in name

without a substantive difference. LePage’s, 324 F.3d at 144.

Selling to a few prominent retailers provided “substantially

reduced distribution costs” and “cheap, high volume supply

lines.” /d. at 160 n. 14. The manufacturer sold to a few high

volume businesses and benefitted from the widespread

locations and strong customer goodwill that prominent

retailers provided as opposed to selling directly to end-user

consumers or to a multitude of smaller retailers. There are

other ways across the “river” to consumers, but high volume

retailers provided the most effective bridge.

The same is true here. The dealers provide the same

advantages to Dentsply, widespread locations and long

standing relationships with dental labs, that the high volume

retailers provided to 3M. Even orders that are drop-

shipped directly from Dentsply to a dental lab originate

through the dealers. This underscores that Dentsply’s

dealers provide a critical link to end-users.

Although the District Court attributed some of the lack

of competition to Ivoclar’s and Vident’s bad business

decisions, that weakness was not ascribed to other

manufacturers. Logically, Dealer Criterion 6 cannot be both

a cause of the competitors’ . wer promotional expenditures

which hurt their market positions, and at the same time, be

unrelated to their exclusion from the marketplace

Moreover, in Microsoft, in spite of the competitors’ self

imposed problems, the Court of Appeals held that Microsoft

possessed monopoly power because it benefitted from a

’

‘

oc

significant barrier to entry. Microsoft, 253 F.3d at 55

Dentsply’s grip on its 23 authorized dealers effectively

choked off the market for artificial teeth, leaving only a

25a

small sliver for competitors. The District Court erred when

it minimized that situation and focused on a theoretical

feasibility of success through direct access to the dental labs.

While we may assume that Dentsply won its preeminent

position by fair competition, that fact does not permit

maintenance of its monopoly by unfair practices We

conclude that on this record, the Government established

that Dentsply’s exclusionary policies and particularly Dealer

Criterion 6 violated Section 2

V. BUSINESS JUSTIFICATION

As noted earlier, even if a company exerts monopoly

power, it may defend its practices by establishing a business

justification. The Government, having demonstrated harm

to competition, the burden shifts to Dentsply to show that

Dealer Criterion 6 promotes a sufficiently pro-competitive

objective. United States v. Brown Univ., 5 F.3d 658, 669 (3d

Cir.1993). Significantly, Dentsply has not done so. The

District Court found that “Dentsply’s asserted justifications

for its exclusionary policies are inconsistent with its

announced reason for the exclusionary policies, its conduct

enforcing the policy, its rival suppliers’ actions, and dealers’

behavior in the marketplace.” F F356

Some of the dealers opposed Dentsply’s policy as

exerting too much control over the products they may sell,

but the grandfathered dealers were no less efficient than the

exclusive ones, nor was there any difference in promotional

support. Nor was there any evidence of existence of any

substantial variation in the level of service provided by

exclusive and grandfathered dealers to the laboratories

The record amply supports the District Court's

conclusion that Dentsply’s alleged justification was

pretextual and did not excuse its exclusionary practices

Vi. AVAILABILITY OF SHERMAN ACT

SECTION 2 RELIEF

One point remains. Relying on dicta in Tampa Electric

Nashville Coal Co., 365 U.S. 320, 81 S.Ct. 623, 5

26a

L.Ed.2d 580 (1961), the District Court said that because it

had found no liability under the stricter standards of Section

3 of the Clayton Act, it followed that there was no violation

of Section 2 of the Sherman Act. However, as we explained

in LePage’s v. 3M, 324 F.3d at 157 n. 10, a finding in favor of

the defendant under Section 1 of the Sherman Act and

Section 3 of the Clayton Act, did not “preclude the

application of evidence of ... exclusive dealing to support the

[Section] 2 claim.” All of the evidence in the record here

applies to the Section 2 claim and, as in LePage’s, a finding

of liability under Section 2 supports a judgment against

defendant

We pointed out in Allegheny County Sanitary

Authority v. EPA, 732 F.2d 1167, 1172-73 (3d Cir.1984), that

different theories may be presented to establish a cause of

action. A court’s refusal to accept one theory rather than

another neither undermines the claim as a whole, nor the

judgment applying one of the theories Here, the

Government can obtain all the relief to which it is entitled

under Section 2 and has chosen to follow that path without

reference to Section 1 of the Sherman Act or Section 3 of the

Clayton Act. We find no obstacle to that procedure

Accordingly, for the reasons set forth above, we will

reverse the judgment in favor of Dentsply and remand the

case to the District Court with directions to grant injunctive

relief requested by the Government and for such other

proceedings as are consistent with this opinion

27a

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE.

UNITED STATES OF AMERICA,

Plaintiff,

v.

DENTSPLY INTERNATIONAL, INC..,

Defendant.

No. Civ.A. 99-005-SLR.

Decided: Aug. 8, 2003.

OPINION

SUE L. ROBINSON, Chief Judge:

1. INTRODUCTION

On January 5, 1999, plaintiff United States of America

through the Department of Justice (“DOJ”) filed this action

against defendant Dentsply International, Inc. (“Dentsply”)

alleging violations of the antitrust laws. (D.I.1) Specifically,

the DOJ has asserted violations of sections 1 and 2 of the

Sherman Act, 15 U.S.C. §§1 and 2, and section 3 of the

Clayton Act, 15 U.S.C. § 14. (/d.) At issue are two aspects

of Dentsply’s business policies: (1) its agreements with

dealers that they will lose their Dentsply account if they add

a competing brand of teeth; and (2) its agreements with new

dealers to drop some, or all, competing tooth brands in order

to obtain the Dentsply account in the first place. (D.I. 460 at

17)

The court has jurisdiction over this matter pursuant to

15 U.S.C. §§ 4 and 25, and 28 U.S.C. §§ 1331, 2201 and 2202.

23a

The following are the court’s findings of fact and conclusions

of law pursuant to Fed.R.Civ.P. 52(a).

Il. FINDINGS OF FACT

A. Background

1. This case concerns the manufacture, distribution and

sale of prefabricated artificial teeth in the United States

The relevant product market for purposes of this case is the

sale of prefabricated artificial teeth in the United States.

(GX 445 at 6-8)

2. Artificial teeth today are manufactured in either

porcelain or plastic. In order to match the different

characteristics of a person’s mouth, they are made in

thousands of different shades and moulds (“mould” is the

correct spelling within the tooth industry). Teeth are made

in different grades of quality, commonly known as

“premium,” “mid-line,” “economy,” and “sub-economy.”

(D.1. 417 at 81-84; D.1. 432 at 2101)

3. The shade of an artificial tooth is the coloring of the

tooth. The mould of an artificial tooth is the actual form or

shape of the tooth. Choosing the correct tooth mould is

critica] to ensuring that the denture patient chews correctly

and maintains his or her proper bite. (D.1. 432 at 2100-03)

4. The market broadly classifies artificial tooth moulds

as either “European” or “American.” (/d. at 2125-26)

5. Premium artificial teeth combine superior aesthetics

with extreme durability. Economy artificial teeth offer less

wear resistance and aesthetics than premium artificial teeth

and are priced significantly less. Sub-economy artificial

teeth offer even less wear resistance and aesthetics. (/d. at

2105-06, 2115-16, 2250-51)

6. Artificial teeth are manufactured for use in dentures.

A denture is a removable prosthetic device comprised of

artificial teeth fixed in an acrylic or other base material to

replace some or all of a person’s natural teeth.

7. “Removable” appliances are ones that patients can

remove from their mouth themselves, clean them and piace

29a

them back in. This can include either full and partial

dentures. (D.1. 425 at 1206; D.1. 417 at 85)

8. “Fixed” appliances, by contrast, include crowns,

bridges, and implants. A crown is a single, individual tooth

restoration. A bridge is a restoration of at least three units

bridging a gap of at least one missing tooth. An implant

case is where a device is actually screwed into the bone.

(D.1. 417 at 85-86)

9. The term “combination case” refers to the use of both

fixed and removable appliances. (D.1. 425 at 1208)

10. Dental laboratories purchase almost all of the

artificial teeth suid in the United States and use the teeth to

make dentures. Labs buy artificial teeth on cards

containing six (for anteriors) or eight (for posteriors) teeth.

A full denture, i.e., one that replaces all natural teeth,

requires 28 teeth from a total of four tooth cards. When

fabricating a partial denture, a dental lab may only use a

portion of the teeth on a card. The remaining teeth on the

tooth cards are known as “broken sets.” (D.I. 368, Ex. 1,

Stipulation 74 13-16)

ll. Labs fabricate dentures according to the

prescription, impression and any other information provided

to the lab by the dentist. (D.I. 417 at 81; D.1. 425 at 1211-17)

A denture prescription may contain a number of

parameters, including a shade designation, a mould

designation, a specific brand or a combination of these three

items. (D.I. 432 at 2141; D.I. 448 at 2332-33) However, only

10% of dentists specify by name the brand of teeth to be

used. (/d.)

B. Distribution of Artificial Teeth

12. Participants in the artificial tooth market fall into

one of four categories: (1) manufacturers; (2) dealers; (3)

dental laboratories; and (4) dentists. (D.1. 417 at 80-81)

13. The manufacturers participating in the United

States artificial tooth market historically have distributed

their teeth into the market in one of three ways: (1) directly

30a

to dental labs; (2) through dental dealers; or (3) through a

hybrid system combining manufacturer direct sales and

dental! dealers.

1. Manufacturers

14. There are currently 12-13 known foreign and

domestic manufacturers of artificial teeth that sell their

products in the United States. (D.1. 417 at 83; D.1. 432 at

2111-12) The manufacturers sell artificial teeth in some or

ali of the subeconomy, economy, mid-line and premium

segments. (D.1. 417 at 82-84) For purposes of this case,

eight manufacturers are particularly relevant.

a. Dentsply International

15. Dentsply International, Inc. (“Dentsply”) was

founded in 1899 and is headquartered in York,

Pennsylvania. (D.1. 368, Ex. 1, Stipulation 74 1-2) Dentsply

manufactures a range of professional dental products that

are marketed, distributed and sold throughout the United

States. (D.I. 368, Ex. 1, Stipulation 4 3) Dentsply’s total net

sales in 2001 were approximately $1.1 billion. (D.I. 454 at

3447)

16. Dentsply’s artificial teeth are developed, designed,

sold, and marketed by its Trubyte Division (“Trubyte”),

located in York, Pennsylvania. Dentsply manufactures

artificial teeth in the premium (under the names “Portrait,”

“TruBlend,” “Bioblend” and “Bioform”), mid-range

(“Biotone”) and economy (“New Hue” and “Classic”)

segments. (D.I. 368, Ex. 1, Stipulation 44 8-9; D.I. 432 at

2108, 2116-17) Dentsply does not compete in the

subeconomy tooth segment. (/d. at 2250-51)

17. Dentsply sells 14 different full lines of artificial teeth

in the United States. (D.I. 432 at 2100) Dentsply currently

offers 16,000 tooth Stock Keeping Units (“SKUs”). (/d. at

2093)

18. Through its Trubyte Division, Dentsply also

manufactures and markets professional denta! products

used by dental labs to make dentures and other removable

dla

dental prosthetics. (D.I. 368, Ex. 1, Stipulation ¢ 6) These

dental products include acrylics, dental equipment, gypsums

and wax. (D.I. 432 at 2080, 2093-94) Dentsply’s complete

Trubyte product offering currently totals 19,000 total SKUs

(Id. at 2093)

19. Dentsply manufactures 1.1 million individual teeth

per week. (Id. at 2096-97) Dentsply manufactures

approximately 10,000 shade and mould combinations. (/d. at

2101; D.I. 368, Ex. 1, Stipulation 4 10) In total, Dentsply

manufacturers 106,000 different types of tooth units. (D.1.

432 at 2101, 2114)

20. Dentsply sells its artificial teeth exclusively to

independent dealers. Dentsply does not own the dealers it

has authorized to distribute Trubyte teeth. (D.1. 368, Ex. 1,

Stipulation 44 17-18)

21. Dentsply has been the dominant tooth manufacturer

in the United States market for a long time. (D.I. 454 at

3447)

22. In 2001, Dentsply’s gross tooth sales to dealers were

$60.6 million. Net sales, taking into account broken sets and

other tooth returns, totaled $40.4 million. (DX 1650; D.I. 432

at 2253-56) Dentsply also sells lab merchandise products

through its Trubyte Division. Teeth, however, represent

approximately 80% of the division’s revenue. (/d.)

b. Ivoclar Vivadent, Inc.

23. Ivoclar Vivadent AG, headquartered in

Liechtenstein, is a manufacturer and marketer of dental

restorative materials, including artificial teeth. (D.1. 423 at

982-83)

24. Ivoclar Vivadent’s U.S. subsidiary, Ivoclar

Vivadent, Inc. (“Ivoclar’”), is based in Amherst, New York

and is responsible for marketing Ivoclar teeth in the United

‘ For ease of reference, the court will refer to “Dentsply” when

discussing corporate conduct, and will refer to “Trubyte” only when

referring to corporate products at issue in this cas«

32a

States market. (/d.) Ivoclar’s president is Robert Ganley.

He has been involved in the sale of Ivoclar teeth in the

United States market since 1986. (/d.)

25. Ivoclar sells a number of different lines of artificial

teeth. Among its premium plastic teeth are the Antaris and

Postaris teeth, which were introduced by Ivoclar in the

1990s. (/d. at 984, 1013)

26. Ivoclar is one of Dentsply’s two primary competitors

in the tooth market. (D.1. 450 at 2683-84; D.1. 454 at 3461;

D.1. 432 at 2249-50)

27. lvociar has sold teeth directly to dental labs since at

least 1986. (D.1. 423 at 983, 991, 1006) Indeed, except for

two brief periods during the late 1980s and early 1990s in

which Ivoclar experimented with two geographically limited

wholesale arrangements, Ivociar has distributed teeth

directly to dental labs since 1978. Similarly, Ivociar sells its

crown and bridge products and precious metals directly to

dental labs. (/d. at 989)

28. Today, Ivociar distributes its teeth to labs

throughout the United States through a single distribution

center located in Amherst, New York. (Jd. at 1098) During

the early 1990s, Ivoclar also distributed to labs from at least

two other distribution centers in Sacramento, California and

Atlanta, Georgia. (/d. at 1008) It consolidated its operation

into Amherst after a couple of years. (Jd. at 1009)

29. Ivoclar promotes and sells its artificial teeth through

a company sales force of approximately 30 sales

representatives. (/d. at 1079) Up to late 1998, the sales

force handled I[voclar’s entire product line of teeth and

crown and bridge products. (/d. at 987) In November 1998,

[voclar hired a former Dentsply representative as its first

sales representative devoted to removable products. (D.l1.

489 at 4350) Today Ivoclar has five representatives and a

regional manager dedicated to artificial teeth. ( D.1. 423 at

1078-79) Its main crown and bridge sales force still selis

teeth as well. (/d. at 1079)

33a

30. Dental labs that wish to order Ivoclar artificial

teeth, whether to restock their inventory or buy an SKU

that they do not stock, can either place the order when the

Ivoclar sales representative calls on the lab or by calling

Ivoclar’s toll free number. (/d. at 1085-86)

31. In 1994, Ivoclar sold and distributed artificial teeth

to 3,700 different dental labs nationwide. (DX 752 at 2; DX

1435; DX 1436) In 1998, Ivoclar sold artificial teeth directly

to approximately 2,886 dental labs. (DX 519-A) At the time

of trial Ivoclar sold teeth and crown and bridge products to

6,000 labs on a direct basis. (D.1. 423 at 1082)

32. Ivoclar has consigned teeth to dental labs as an

alternative to labs purchasing tooth stocks outright. (/d. at

1099) With a consignment, the lab gets a tooth inventory at

no initial cost to the lab; instead, the lab pays for the teeth

ordered to replenish the consigned teeth that it uses. (D.I.

419 at 345-46; D.1. 431 at 1985-86)

c. Vita Zahnfabrik; Vident

33. Vita Zahnfabrik (“Vita”) is a German manufacturer

of artificial teeth. (D.1. 419 at 221) Vita Zahnfabrik sells

teeth in the United States through an affiliated importer

and distributor named Vident. (Jd. 288-89) Vident is a

closely held California corporation owned, in part, by the

same family that owns Vita. Vident’s president is Wayne

Whitehill, who has been involved in the sale of Vita teeth

since they were first imported into the United States

market in the 1970s. (Jd. at 221-23)

34. Vident sells both porcelain and plastic (or “resin”)

teeth in the United States. The brand name of the resin

teeth is “Vitapan.” (/d. at 225) Vita manufactures teeth only

for the premium segment. (D.I. 419 at 226) Vita’s artificial

teeth are the European mould style. (D.I. 432 at 2126; D.I.

452 at 2924)

35. Vident has been the entity responsible for

marketing the Vita Classical Shade Guide in the United

States market since 1984. A shade guide is used by dentists

34a

to match the shade of an artificial tooth (or crown, bridge,

etc.) with the shade of a patient’s natural dentition. The

Vita Classical Shade Guide is the most popular shade guide

in the market, used by approximately 80-90% of the dentists

in the United States. (/d. at 230-32)

36. Vita, through its importer Vident, is the other

primary competitor to Dentsply in the United States tooth

market. (D.I. 450 at 2683-84; D.I, 454 at 3461, D.I. 432 at

2249-50)

d. Myerson LLC

37. Myerson LLC (“Myerson”) is a tooth manufacturer

based in Chicago, Illinois selling premium (Myerson,

Universal, Swissedent), economy (Kenson), and midline

teeth. At one time, Myerson was a free-standing division

within the Austenal Corporation (“Austenal”). In January

2002, Dentsply acquired Austenal, and Myerson became a

wholly separate company. Myerson’s president and chief

operating officer is James Swartout, who has been with the

company (and before that Austenal) since 1994. (D.I. 425 at

1291-95)

38. Myerson teeth have been sold in the United States

market since the company was founded in Cambridge,

Massachusetts in 1917. Dr. Myerson was a Professor of

Dentistry at Harvard Dental School, and hand carved

almost all of Myerson’s teeth. Myerson was a pioneer in

cross-linked resin technology and in the move from using

porcelain to plastic to manufacture artificial teeth. (/d. at

1293-95)

39. In fall 2001, Myerson acquired some select Universal

Dental Company tooth lines, which Myerson now

manufacturers and sells under the Universal brand. (/d. at

1295, 1340-41)

40. Myerson distributes its artificial teeth both through

dealers and directly to dental labs. (/d. at 1298-99) Dental

labs place tooth orders via telephone. (Jd. at 1301-02)

Myerson ships its artificial teeth directly to dental labs

-

30a

nationwide from its Chicago, Illinois location. (/d. at 1343)

Myerson also provides tooth consignments directly to labs.

(Jd. at 1351) Myerson also distributes its teeth through a

network of 12 dealers. (/d. at 1298) These dealers include

Dentsply’s largest dealer, Zahn. (/d.)

41. Austenal engaged in efforts to make it more

convenient for dental labs to purchase artificial teeth

directly. (/d. at 1355) By 1999, approximately 85% of

Austenal’s artificial tooth sales were direct to lab customers.

(/d. at 1351) Between 1990-1993, Austenal used no outside

sales representatives to promote teeth. In 1994, Austenal

used one or two representatives responsible for all product

lines, including teeth. (/d. at 1359-60) Myerson’s national

sales efforts are the responsibility of five sales

representatives and one manager. (/d. at 1292)

e. Other Manufacturers

42. American Tooth Industries (“ATI”) manufactures a

brand of teeth called Justi. (D.1. 420 at 540)

43. American Tooth Industries distributes artificial

teeth directly to dental labs such as National Dentex, one of

the country’s largest lab chains, and through a network of

Trubyte and non-Trubyte dealers. (D.1. 452 at 2899; DX

1599) ATI’s dealers include Dentsply’s largest Trubyte

dealer, Zahn, another large Trubyte dealer, Atlanta Dental

Supply (“Atlanta Dental”), and Arnold Dental Supply. (D.I.

420 at 620; DX 1599)

44. Universal Dental Company (“Universal”) is a

diminishing competitor in the market. (D.I. 432 at 2250) In

the fall of 2001, it sold some of its tooth lines to Myerson.

(D.1. 425 at 1295, 1340-42)

45. Universal distributes artificial teeth directly to

dental labs from one location in Montgomeryville,

Pennsylvania. (D.1. 489 at 4342) Universal also distributes

artificial teeth to dental labs through a network of dealers.

(DX 1599) Universal’s direct sales represented 30% of

Universal's total annual tooth sales. (/d. at 4340-41)

36a

46. Heraeus Kulzer GmbH, a German company,

manufactures artificial teeth. (D.1. 429 at 1834-35) Heraeus

Kulzer GmbH generates approximately $7 billion in annual

revenue. (/d. at 1870) Heraeus Kulzer GmbH has sold its

artificial teeth in Europe since the 1960s. (/d. at 1835) These

teeth are made utilizing European moulds. (/d. at i839) In

January 2000, Heraeus Kulzer GmbH introduced in the

United States, through its subsidiary Heraeus Kulzer, Inc.

(“Heraeus”), a mid-range tooth. (/d. at 1817-18) In

recognition of the differences between European and

American style artificial teeth, Heraeus Kulzer GmbH

specifically designed and manufactured its JelDent tooth

line based on U.S. preferences in moulds and shades. (/d. at

1837-39) In February 2002, Heraeus Kulzer GmbH

introduced into the U.S. market its JelDent Premium tooth

line, which it positioned as a premium tooth based on those

same preferences. (/d. at 1841-42)

47. Heraeus Kulzer GmbH sells and distributes its

JelDent tooth lines directly from its Armonk, New York

location through Heraeus. (D.I. 429 at 1843) Heraeus

entered the U.S. market with direct distribution in January

2000. (/d. at 1817, 1823) Prior to entry, Heraeus was fully

aware of the functions tooth dealers perform in the U.S.

market, and was unable to obtain distribution through

Trubyte dealers (/d. at 1818-23)

48. Heraeus sells and promotes its artificial teeth

through a sales force of 15 sales representatives. (/d. at

1832) These sales representatives are also responsible for

selling and promoting the entire line of Heraeus’s lab

products, including porcelain and precious metal alloys. (/d.

at 1832-33)

49. Heraeus has approximately 800 different Icb

customers for JelDent artificial teeth. (Jd. at 1852-53)

Dental labs that want to buy Heraeus Kulzer artificial teeth

can place the order when the Heraeus sales representative

calls on the lab, by calling Heraeus’s telephone number or

even using a Palm Pilot scanner. (/d. at 1844) Generally, the

37a

company will ship its artificial teeth overnight for next day

delivery depending on when the order initially was received.

(Id. at 1867-68)

50. In 2000, Heraeus’ actual sales were $470,000. (/d. at

1858-59) In 2001, Heraeus achieved U.S. tooth sales over

$730,000. (/d. at 1853) Heraeus’ goal is to become the second

leading tooth company in the United States. (/d. at 1869)

51. Heraeus also consigns its teeth to dental labs. In its

first year in the U.S. tooth market, Heraeus placed 102

tooth consignments in dental labs. (/d. at 1859-60)

52. Davis Schottlander & Davis Ltd. is an English

company that sells a premium, Vita-shaded tooth under the

brand name “Enigma.” It is distributed in the United

States by Dillon Company, Inc, which is also referred to as

Leach & Dillon. (D.1. 457 at 4079-88) Leach & Dillon began

marketing teeth in the United States in January 2001. (D.L.

457 at 4079)

2. Dealers

53. Dental dealers fall into two major categories:

laboratory dealers, which carry products for dental labs and

primarily service that custemer, and operatory dealers,

which carry products for dentists exclusively or in

combination with dental lab products. (D.I. 425 at 1313,

1373-74; D.L. 423 at 1138; D.1. 417 at 72; D.L. 432 at 2179-86)

Both operatory dealers and lab dealers may carry and sell

artificial teeth. (D.1. 432 at 2179-86; DX 1665.)

54. There are currently hundreds of dental dealers

operating in the United States. (D.I. 425 at 1313) Over the

past ten years, the market has experienced significant

consolidation resulting in several large dealers and the

geographic expansion of dealer territories as a result of the

development of lower-cost, reliable overnight shipping, as

well as the collateral emergence of mail order dealers. (D.I.

448 at 2577-78, 2597; D.1. 432 at 2186-87)

55. Dental laboratory dealers, like the ones to which

Dentsply sells its teeth, are dealers carrying the full range

38a

of products that dental labs use. (D.1. 417 at 101-02; D.1. 427

at 1482-83) These products can include artificial teeth,

metals, porcelains, acrylics, waxes, and anything else

necessary to fabricate fixed or removable restorations. (D.1.

417 at 93)

56. Lab dealers that sell artificial teeth vary in the size

and scope of their operations. In general, there are three

main types of tooth dealers—national, regional, and local.

(a) National tooth dealers, such as Zahn Dental Supply

(“Zahn”) and Patterson Dental (“Patterson”), sell teeth

nationwide through a network of tooth stock inventories

scattered throughout the country. (D.1. 417 at 244-45)

(b) Regional tooth dealers are those that are

particularly strong in certain regions of the country and

have multiple tooth stocks scattered throughout the states

in which they sell. (/d. at 245)

(c) Local, specialty tooth dealers typically operate

within a single state or single city. They almost always have

just one tooth stock. They are much smaller organizations

than national or regional dealers, carry a narrower range of

products, and have fewer resources such as catalogues and

sales representatives. (/d. at 245-46)

57. Due to the thousands of mould and shade

combinations of artificial teeth, most tooth dealers carry

large inventories of teeth. (D.1. 417 at 82) A dealer’s “tooth

counter” is a separate part of a laboratory dealer dedicated

almost entirely to handling teeth. (/d. at 104-05) Tooth

counters are extremely labor-intensive operations, requiring

the employment of friendly, detail-oriented customer

service personnel. (/d. at 126-27)

3. Dental Laboratories

58. There are approximately 16,000 labs that perform

fixed and/or removabie work in the United States. Of these,

approximately 7,000 fabricate dentures. (/d. at 86; D.1. 432

at 2247)

39a

59. The 7,000 labs that fabricate dentures are a very

heterogeneous group. (D.1. 432 at 2247) About 5,000 are

full-service labs, while approximately 2,000-3,000 labs only

fabricate dentures. (D.1. 420 at 511) The number of denture

labs in the United States has decreased steadily over the

past ten years, largely as a result of consolidation and the

emergence of large lab chains. (D.1. 448 at 2597-98)

(a) The large labs are those employing 25 or more

denture technicians. There are only approximately 500 labs

of this size (or only 7% of the total) in the country. (D.I1. 417

at 33)

(b) The mid-size labs employ between four and 25

technicians. There are approximately 700-800 mid-size labs

(or 11% of the total) in the country. (/d.)

(c) The remaining 82% are small labs, defined as labs

employing four or fewer technicians. (/d.)

60. Denture labs compete with each other on the basis

of price and service. (/d. at 89) Patients and dentists value

fast service, particularly in the case of lost or damaged

dentures. (/d. at 89-90)

61. Labs are the relevant consumer for prefabricated

artificial teeth because they choose the brand of tooth used

in a denture in the majority of cases. (D.I. 431 at 1911)

Dental labs represent the last purchaser of artificial teeth as

teeth standing alone. (D.1. 448 at 2514; D.I. 432 at 2163; D.L.

452 at 2937-40) All of the manufacturers who testified at

trial agreed that dental labs are the primary customers.

(D.1. 448 at 2514; D.|. 423 at 987-88; D.1. 419 at 228, 241-42;

D.1. 425 at 1351)

62. Dental labs maintain artificial tooth inventories for

use in fabricating dentures. (D.1. 431 at 1970, 1979; D.1. 448

at 2336; D.1. 450 at 2827; D.I. 453 at 3256-57) Ifa lab has the

brand of teeth in stock it needs to fabricate a denture, it will

pull the tooth cards from the inventory. (D.I. 431 at 1970;

D.1. 431 at 2038) If a lab does not have the teeth required in

stock, it must place an order from a dealer or manufacturer.

40a

(D.I. 431 at 1970; D.I. 450 at 2865) Labs will also place

periodic orders for teeth to replenish their tooth inventories.

(D.1. 448 at 2336)

63. Generally, the dentist only prescribes the tooth

shade and rarely specifies the tooth brand. (D.1. 425 at 1215-

16; D.1. 448 at 2332-33)

64. Through a labor intensive process, dental labs

transform the teeth into an integral component of a new

product. Denture fabrication comprises three stages: bite

rim and tray stage (2-3 working days); try-in or setup stage

(3-5 working days); and the finishing stage (3 working days).

(D.1. 431 at 1963-76) Artificial teeth enter the process during

the setup stage. Dental labs generally do not set artificial

teeth during the first three days of this process. (/d. at

1977-78)

65. On average a dental lab exchanges a denture case

with a dentist 3-4 times and dental labs require about 8-9

working days to fabricate a denture, excluding shipping

time. With the shipping time included, dental labs will

fabricate a new denture within 14 days. (/d. at 1976-77)

4. Dentists

66. There are approximately 140,000 dentists in the

United States. (D.1. 417 at 91) Of these, 40,000 work with

dentures. (D.1. 432 at 2144) Dentists receive their initial

training on dentures during dental school. (/d. at 2136) As

the demand for dentures has declined over the past 30

years, the demand for that training has diminished. (GX 101

at DPLY-A 37304-05; DX 1659 at DPLY-A 200187-88)

C. Dentsply’s Dealer Network Is Characterized

By Intra-Brand Competition

67. Dealers compete with one another to sel] Trubyte

teeth to dental labs. (D.I1. 417 at 94, 129, 137-38; D.I. 432 at

2189-90) Intra-brand competition is “common in the

industry.” (D.I. 425 at 1398-99) Dentsply dealers engage in

price competition to gain dental labs’ tooth business. (D.L.

432 at 2189-90) As a result of this competition, most dealers

4la

discount Dentply’s suggested lab price for artificial teeth.

(Id. at 2189)

68. Thomas Cavanagh of Frink Dental Supply (“Frink”)

testified that labs are “price sensitive,” and Frink faced

price competition from other Dentsply dealers. (D.1. 489 at

4365) As Mr. Cavanagh testified, these Dentsply dealers

were “driving prices down on teeth” in the market. (/d. at

4367) Frink either had to match the price discounts offered

by competitive Dentsply dealers or lose its lab customers’

business. (/d. at 4366-67)

69. In addition to Frink, other market participants

elaborated on the intra-brand competition thc occurs

among Dentsply dealers. Regis Vetrano of Dental

Laboratory Discount Supply (“DLDS”) testified that DLDS

competes against multiple Trubyte dealers. (D.I. 425 at

1430-31) Sidney Nordhauser of Darby Dental Supply

(“Darby”) testified that “[e]very supply house that is out

there is our competitor.” (D.1. 453 at 3429-30) Gerry

Mariacher of National Dentex testified that 33 of the 34

National Dentex labs across the country historically

purchased their Trubyte teeth from four or five different

Dentsply dealers until National Dentex reached a favorable

agreement with Zahn to supply all of their teeth. (D.1. 452

at 2951-52)

70. Price is one of the reasons that labs utilize more

than one dealer. (D.1. 425 at 1432-33; D.1. 431 at 2005; D.I.

420 at 656-57; D.I. 453 at 3277-78, 3286; D.1. 489 at 4174-75,

4177, 4369, 4373-74) DLDS sells teeth to Lord’s Dental

Studio at a 20% margin in order to get that business. (D.I.

425 at 1433) Mr. Vetrano testified that if DLDS did not sell

to Lord’s at that price, he believes that Lord’s would look to

another dealer for its tooth purchases. (/d.) Price also

constitutes a factor in Darby losing business to competitors.

(D.I. 453 at 3427-28) Darby’s competitors discount off

Dentsply’s suggested lab rate for artificial teeth; “to beat

competition,” Darby “discount[s] almost everything [it]

sell{s].” (/d. at 3430) Atlanta Dental lost the tooth business

42a

of labs due to price competition from Darby and Thompson

Dental Supply. (D.1. 420 at 654-55, 657) By offering National

Dentex a 20% discount below Zahn’s catalog price, Zahn was

able to win all of National Dentex’s Trubyte business, with

the exception of one lab. (D.1. 452 at 2951-43

D. Alternative Channels of Distribation

l. Selling Direct Is A Viable Method For The

Distribution Of Artificial Teeth

71. The DOJ’s expert economist, Dr. Reitman, concedes

that direct distribution is a “viable” method of distributing

artificial teeth. ().1. 427 at 1650) Dr. Reitman agreed that

Dentspiy’s rivals are “not foreclosed completely” from the

U.S. market for artificial teeth. (/d. at 1573) Dr. Reitman

further conceded that Dentsply’s rivals are “not foreclosed

from a substantial share of those labs” which, he

acknowledged, are the “immediate customers” in the

artificial tooth market. (/d. at 1649-50)

72. Labs have expressed an interest in obtaining

Trubyte teeth directly from Dentsply and not through

dealers. (D.1. 448 at 2541-43) Dentsply held a total of seven

lab advisory meetings between 1993-1999. (/¢.) According

to Dentsply’s lab advisory groups, dealers did not provide

sufficient services to warrant their profit margin

Additionally, the labs viewed themselves as Dentsply’s

primary customers—not the dealer. The labs also believed

they could purchase Trubyte teeth at a cheaper price if they

purchased directly rather than through a dealer. (/d. at

2532-33; DX 653

73. Many of the lab witnesses who testified at trial and

who were deposed in this case testified that they either

prefer to purchase teeth directly from manufacturers

because of the potential cost savings over purchasing

through dealers or would consider purchasing direct if cost

savings were available. (D.i. 448 at 2341, 2356-57; D.1. 431 at

2004; D.1. 459 at 2731-33, 2867; D.1. 452 at 2957-58; D.1. 453

at 3280-81; D.1. 489 at 4175-76, 4184-85, 4190-93, 4213, 4219

43a

4224-24, 4232-33, 4246-47, 4257-58, 4266-67, 4277, 4279, 4281,

4287, 4296-97, 4304-05, 4314)

74. Some labs prefer to buy direct to avoid dealer

“error” and “back orders,” while others appreciate the

technical assistance manufacturers provide. (D.I. 448 at

2356-57; D.1. 453 at 3280-81)

a. Tooth Manufacturers Do Not Require A

Network Of Tooth Stocks To Sell Teeth To

Labs

75. During the past 10 years, dealers have consolidated

the number of tooth stocks from which they fill orders for

teeth. (D.1. 432 at 2187, 2194; D.1. 448 at 2427-28, 2577; D.L.

417 at 105, 127-28; D.1. 420 at 492) Zahn has reduced the

number of company tooth stocks it uses to service its

nationwide customer base. (D.1. 420 at 477-478, 492; D.I. 432

at 2258-60) Darby has had eight different tooth stocks since

1990. At the time of trial, it had approximately 6 stocking

locations, but primarily serviced the entire United States

from one stock. (D.1. 489 at 4374-77; DX 25 at [VC 023966;

D.1. 457 at 4107-08; D.1. 432 at 2180)

76. Dr. Reitman agreed that “with the current

widespread availability of overnight express mail ... dental

labs can generally get teeth delivered the next day after

placing an order with the manufacturer or a dealer,

regardiess of where the shipper is located.” (D.1. 427 at

1687

77. The advent of Federal Express and other similar

delivery services facilitated this market consolidation

Phese types of delivery services have made a card of teeth a

very transportable iter, one that can be shipped over broad

geographies relatively cheaply and quickly. (D.I. 448 at

2429-30, 2577-78, D.1. 400 at 2775; D.1. 423 at 1099, D.1. 419

at 250; D.1. 489 at 4321-22; D.1. 425 at 1289-90; D.1. 453 at

3267) These tools empowered dealers to service their lab

customers’ needs from strategically placed stocks. (D.1. 448

at 2577-78; D.1. 454 at 3490

44a

78. Dealers can service the tooth needs of their lab

customers effectively throughout the United States with a

limited number of tooth stocks, in many instances just one.

(D.1. 420 at 504; D.I. 450 at 2770-71; D.1. 448 at 2426-27; D.I.

432 at 2276; D.I. 457 at 4107-08; D.I. 431 at 2070) Norman

Weinstock—the President of Zahn, Dentsply’s largest tooth

dealer—testified that a dealer “can deliver anywhere in the

United States out of one facility.” (D.1. 420 at 503-04)

79. It makes financial sense for dealers to consolidate

tooth stocks. The consolidation reduces expenses for

overhead and labor (trained tooth counter specialists)

associated with a tooth stock. (D.1. 448 at 2577-78) When

Darby purchased Dental Technician’s Supply (“DTS”), it

consolidated DTS’s New York stock with the existing Darby

tooth stock in New York. (D.I. 489 at 4375-76) Zahn

concluded that having multiple tooth stocks was inefficient.

(D.1. 420 at 501; DX 1549 at ZD00015) Mr. Weinstock

testified that he believes the consolidation of tooth stocks

was a smart business decision because it allowed Zahn to

reduce its inventory and increase the number of inventory

turns annually. (D.1. 420 at 488-495) Zahn made acquisitions

of several competitive tooth dealers during the recent past.

(/d. at 495-501) In each instance, Zahn closed the acquired

dealer’s tooth stock and elected to service those new lab

customers from Zahn’s remote tooth distribution centers.

(/d.)

80. With drop shipments, the lab places the tooth order

with the dealer. The dealer, in turn, submits the order to

Dentsply with the request to ship the order directly to the

lab. The dealer bills the lab at the price set by the dealer,

and Dentsply bills the dealer at the price set by Dentsply.

The teeth used to fill the order, however, come from

Dentsply’s York, Pennsylvania facility, not the particular

dealer’s inventory. The number of tooth orders Dentsply

drop-ships to labs has grown steadily during the relevant

time period. (D.I. 432 at 2194-2195) Today, approximately

60% of orders for Trubyte teeth that Dentsply dealers place

45a

are drop shipped. (Jd.; DX 1638) Patterson, which has more

local tooth stocks than any Dentsply dealer, represents

upward of 70% of Dentsply’s drop shipments. (D.1. 432 at

2187, 2196-97)

81. Even labs that purchase through dealers testified

that they would rather purchase teeth directly from

manufacturers if they could obtain a price discount D1

489 at 4175-76, 4213, 4257-58, 4279, 4297, 4281, 4325-26) Labs

prefer to buy direct because of potential cost savings

attributable to elimination of the dealer middleman. (D.I

448 at 2341, 2356-57; D.I. 431 at 2003-04; D.1. 450 at 2857;

D.I. 452 at 2957-58; D.I. 453 at 3280-81) Betsy Harris of

Atlanta Dental testified that “the majority” of labs tha’

receive a better price from direct selling manufacturers will

choose to buy direct instead of through a dealer. (D.1. 420 at

626-28) For that very reason, Atlanta Dental does not like

to compete with ATI for the sale of ATI artificial teeth to

labs. (/d.)

b. Manufacturers Have Replicated Or Could

Replicate The Dealer Function

2. One perceived benefit of dealers the DOJ cites is

local availability of teeth (D.1. 460 at 9963-64) Lab

witnesses testified that they do not necessarily purchas¢

teeth from the nearest dealer. (D.1. 425 at 1260, 1267-. 68:

D.I. 452 at 2954) Dentsply tracks for each of its dealers the

dollar value of tooth shipments from a particular dealer

tooth stock in a report called “zip-to-ship.” (D.1. 432 at 2187

2188; DX 1589) The data shows that there is no direct

relation in terms of sales of artificial teeth between where a

dealer maintains a tooth stock and where it does not have a

tooth stock. (/d. at 2188) Zahn testified that it sells $829,000

worth of teeth in Pittsburgh, where it does not have a tooth

stock. (D.1. 420 at 486) This is higher than the tooth sales

for either Patterson or Benco Dental. two Trubvte dealers

that do have tooth stocks near Pittsburgh. (/d. at 486-87:

DX 1589 at 9-10

46a

83. Dentsply obtains monthly reports from its dealers

reflecting the dealers’ sales into each state where the

dealers sold teeth. (DX 1674) Dentsply dealers make

substantial sales in geographic areas remote from their

tooth stock locations. (/d.) Zahn and Darby, Dentsply’s

fastest growing dealers, make substantial sales in states

where they have no stocks. (D.1. 420 at 482, 506)

84. The DOJ also cites “one-stop shopping” as a

purported benefit that dealers provide to dental labs. (D.I.

460 at 4 76) The benefit the DOJ identifies is reducing the

number of vendors labs use (not eliminating all but one) by

purchasing multiple products from vendors. (/d.) Other

manufacturers offer this sort of one-stop shopping to their

lab customers. With just one phone call, a lab can order

from Ivoclar all materials necessary for crown and bridge

and denture construction (including artificial teeth,

porcelain, cerarnics, precious metals, gypsum, waxes, stone,

supplies and equipment). (D.1. 423 at 1084-85; D.I. 420 at

522; D.1. 453 at 3281) A lab also can call Vident directly and

purchase porcelains, metals, equipment, artificial teeth and

implant accessories. (D.1. 419 at 221, 224) Similarly,

Heraeus offers one-stop for labs to purchase precious

metals, teeth, porcelain, gypsum and investment. (D.1. 429

at 185))

85. In any case, labs tend to purchase their dental

products from multiple dealers and multiple direct selling

manufacturers. (D.I. 431 at 2008-10; D.1. 448 at 2357-58; D.1

453 at 3262-63, 3267, 3284-85; D.1. 450 at 2831; D.I. 452 at

2955-57, D.1. 420 at 511-12; D.1. 425 at 1270-72) Additionally,

a Zahn-sponsored focus group revealed that Zahn’s lab

customers purchase from several other dealers. (D.1. 420 at

512-13

86. Another service performed by dealers is handling

accounts receivable. (D.I. 460 at ¢ 84) Some tooth dealers

manage the accounts receivable for lab tooth purchases.

D.1. 417 at 134-35; D.1. 423 at 1134) The accounts receivable

function involves invoicing the lab customer for teeth

47a

purchased, collecting payment, providing credit and at times

extending credit terms. (D.I. 417 at 134-35)

87. Manufacturers already manage the accounts

receivable for lab non-tooth purchases, ie., crown and

bridge materials and precious metal alloys. Ivoclar manages

the receivables on all of its products for nearly 6,000 labs.

(D.1. 423 at 1081-83) Until the creation of Myerson in 2002,

Austenal sold crown and bridge materials directly to

thousands of dental labs. (DX 1301; DX 1302; D.I. 425 at

1298-99, 1369-70) Heraeus also sells precious metals and

porcelains directly to labs. (D.1. 429 at 1833, 1836) These

manufacturers, therefore, already are responsible for

managing voluminous accounts receivable.

88. The evidence shows that even the biggest tooth

dealers do not carry precious metals because of the accounts

receivable issue. (D.1. 420 at 509)

89. The DOJ also touts the management of dental lab

inventories as a valuable dealer service. (D.I. 460 at 74 71-

73) Some tooth dealers help manage the tooth inventories

that labs keep on site. (D.1. 425 at 1309)

90. Many labs prefer to manage their tooth inventories

in-house. (D.I. 429 at 1843; D.1. 453 at 3277-78, 3314-15) The

labs that testified at trial on this issue all managed their own

tooth inventories. (D.1. 453 at 3264, 3269, 3279-80, 3314-15;

D.1. 452 at 2962; D.I. 450 at 2836-37; D.I. 431 at 1987-89,

1996-98; D.1. 448 at 2340-44)

91. Dentsply’s largest dealer, Zahn, calls upon just 40%

of its active accounts with 18 sales representatives. (D.I.

420 at 474-75) There is no evidence that the Zahn sales

representatives service the tooth inventories of any of these

accounts, much less the other 60% of Zahn’s lab customers

they do not call on. Darby manages approximately 28% of

its lab customers’ inventories. (D.1. 453 at 3422-23)

92. The DOJ also claims dealers offer “same day”

delivery of artificial teeth (D.1. 460 at 4966-69) The

evidence shows that labs generally do not require same day

48a

receipt of teeth. (D.I. 431 at 2015, 2061; D.1. 448 at 2394; D.I.

450 at 2774, 2834, 2866; D.1. 452 at 2953-54; D.I. 453 at 3325-

26, 3288; D.1. 425 at 1284, 1439; D.1. 423 at 1171)

93. Mr. Weinstock testified that dental labs have a

“mistaken perception” of the need to have local tooth stocks

and that Zahn successfully has demonstrated that it can

“deliver anywhere in the United States out of one facility.”

(D.1. 420 at 504) Many of Zahn’s tooth customers receive

teeth the day after they place the order. (/d. at 504-06)

Zahn is unable to provide much of the country with same

day delivery. (/d. at 479-81)

94. Tooth consignments placed in dental labs constitute

a tooth stock from which labs can fulfill their daily tooth

needs. (/d. at 488, 566-67) Many manufacturers offer tooth

consignments to labs.

95. In “emergency” situations, when labs absolutely

must have a tooth on a same-day basis, they sometimes

choose to order their teeth from a dealer and pick those

teeth up from a walk-up counter. (D.1. 457 at 4143; D.I. 425

at 1381) The only example provided at trial of an

emergency-type situation was the repair of a denture. (D.1.

453 at 3288, 3311; D.I. 457 at 4096) In these situations,

however, labs commonly find that they can repair dentures

with the teeth that they keep in stock. (D.1. 453 at 3326; D.I.

431 at 2012)

96. Labs pick up teeth a very small percentage of the

time. (D.1. 450 at 2772-73; D.1. 420 at 479-80, 539; D.1. 453 at

3289, 3322-23, 3429)

97. The DOJ identifies the handling of tooth returns as

another dealer service. (D.I. 460 at 479) Approximately

30% of all lab tooth purchases are returned for

exchange/credit, either in full cards (for less popular SKUs)

or partial cards called “broken sets” (where the lab

fabricates a partial denture and does not use all the teeth on

a particular card). (D.1. 452 at 2168; D.1. 419 at 366; D.1. 417

at 81) Although the terms of their respective policies vary,

49a

all manufacturers except Vita accept tooth returns. (D.l

432 at 2167- 68, D.I. 43] at 1941-42; D.I. 423 at 998; D.1. 425

at 1298; D.1. 419 at 366-67) Vita does not permit Vident to

return teeth that it accepts from labs and its sub-dealers

Id. at 366

98. The DOJ notes that dealers offer prompt, accurate

and reliable delivery D.1. 460 at € 74-75) Direct-selling

manufacturers currently offer overnight delivery on tooth

orders. (D.1. 419 at 250, D.1. 423 at 1099; D.1. 429 at 1867-68;

D.1. 457 at 4094

c. Ivoclar And Vident Have Made Business

Decisions To Sell Directly To Labs

i. lvoelar

99. Ivoclar acknowledges that selling directly to dental

labs is an effective method of distribution that provides

Ivoclar with “some advantages” versus dealer distribution

(D.1. 423 at 1006-07, 1119-20)

100. The dental lab owners who testified at trial

purchase artificial teeth directly from Ivoclar and generally

indicated that they are satisfied with this method. (D.1. 453

at 3319-20, 3325; D.1. 452 at 2913, 2959; D.1. 448 at 2344

101. Ivoclar, for a brief period, appointed Frink Dental

as an |voclar dealer

(a) At the time, Ivoclar was selling its teeth to labs at

one price Contemporaneously with its appointment of

Frink as a tooth distributor, Ivoclar “instituted a price

increase” across ali of its tooth lines. (DX 17 at 27, D.1. 423

at 1032) Ivociar recognized that it would need to share its

profit margin with Frink and, thus, in order to maintain

profitability, Ivo.lar necded to increase its prices for

artificial teeth. (/d. at 1082-34; DX 17 at 27

(6b) On January 26, 1989, Ivoclar representatives met

with Tom Cavanagh. President of Frink. to discuss Mr

Cavanagh’s concerns regarding Frink’s agreement with

Ivoclar. (DX 9 at 1; D.1. 423 at 1039-40) Mr. Cavanagh was

concerned that promises made three months earlier (when

Wa

Ivoclar ap,ointed Frink) by Mr. Kevin Dillon, President of

Ivoclar NA at the time. would not be honored now that Mr

Dillon had left Ivoclar. (DX 9 at 1: D.!. 423 at 1040)

(c) Ivoclar had made a number of promises to Mr

Cavanagh in order to commit Frink to taking on the Ivoclar

line of teeth. Ivoclar had promised Frink that Ivociar

would, among other things: (1) advertise heavily and

include the Frink name and telephone numbers in a byline in

the advertisements; (2) provide Frink with various

advertising and promotional materials; (3) send twenty

Williams (Ivoclar’s precious metals and removable products

company) and Ivoclar sales representatives to Frink’s tri

state area to support the promotion of Ivoclar teeth; (4) hire

a technical representative for the Chicago area; (5) provide

free unlimited shade guides; (6) invite Frink’s sales force to

Liechtenstein for one week if Ivoclar sales in the first year

exceeded $1 million; (7) provide a battery-powered hand

piece for demonstrating the grinding qualities of Ivociar

teeth; (8) expand Ivociar’s dealer network through other

regional dealers; (9) offer clinics and seminars; (10) pay legal

fees relating to Frink’s investigation of “the Dentsply

antitrust situation”; (11) pay for local and regional

advertisements; and (12) guarantee payment if a customer’s

credit failed. (DX 9 at 1-3) Ivoclar believed it was necessary

to make these commitments in order to help Frink build and

promote Ivoclar’s artificial tooth vusiness. (D.1. 423 at 1041;

DX 9)

d) Ivoclar recognized that it lacked enough employees

to fulfill the commitments made to Frink. (DX 15) Mr.

Ganley shared that view and attributed some of Ivoclar’s

problems to a lack of personnel and a sales organization

dedicated to artificial teeth. (D.1. 423 at 1047-48; DX 17 at

41)

(e) lvoclar recognized that the “effectiveness of Frink”

as a dealer “is largely dependent upon the support which

Ivoclar USA provides.” (DX 17 at 41) Nevertheless, after

the January 1989 meeting, Ivoclar did not commit expressly

5la

to F'rink that it would provide the requested support. (DX 9

at 3; D.I. 423 at 1042) At trial, Mr. Ganley could not recall

whether many of the items promised to Frink, in fact, were

implemented. (D.1. 423 at 1042-44)

102. In July 1989, Ivoclar commissioned a task force to

establish a strategic marketing plan for its denture

products. (/d. at 1026-27) The task force found that Ivociar

unit sales were “steadily decreasing” and had taken a

“regressive” position in the U.S. marketplace due to the lack

of a General Manager and sales representatives in the field.

(DX 17 at 3-4; D.I. 423 at 1027) In fact, Ivoclar had “no sales

representatives in the field.” (DX 17 at 14) Further, it

lacked the “customer service to support growth.” (/d.)

Ivoclar recognized that “customers do not receive their

orders in a timely fashion.” (DX 17 at 11)

108. In 1995, Ivoclar had a business relationship with

DTS. (D.1. 453 at 3385) DTS, at the time, did not carry

Trubyte teeth. (/d. at 3397-98)

104. Ultimately, the business relationship between DTS

and Ivoclar deteriorated and ended by the mid-1990s. (D.I.

453 at. 3388-98)

105. DTS was the only non-Dentsply dealer that Ivociar

contacted regarding the distribution of its artificial teeth

between 1990 and 2002. (D.1. 423 at 1058) Ivoclar concluded

as early as 1989 that “dealers do not really provide sales

support, but only act as a distribution center and service to

tooth stocks.” (/d. at 1081; DX 17 at 12)

106. In 1990, less than a year following the Frink

experiment, Darby sought to become an Ivoclar dealer.

Darby proposed adding four distribution points to the

stocking locations that Ivoclar already had at the time.

These points were located in New York, Boca Raton, Dallas

and Chicago. In its analysis of Darby’s proposal, Ivoclar

determined that it was more profitable to sell directly to

dental labs. (D.1. 423 at 1101-03; DX 25 at IVC 023970) By

selling directly to the customer, Ivoclar concluded that it

2a

,

would “guarantee continuity and distribution methods.’

(/d.) Ivoclar ultimately rejected Darby’s proposal and chose

instead to continue with direct distribution. (/d.; D.1. 423 at

1061-65)

ii. Vident

107. In 1997, Vident analyzed the feasibility of adding a

large dealer, specifically Patterson, as a sub-dealer

Vident’s calculations took into account the need to give

Patterson the support that a national dealer requires,

including “at least” a 30% margin on Vita teeth that

Patterson would re-sell, marketing support, technical

support and educational programs. (D.1. 419 at 339-40, 350

All of these programs would have been in addition to what

Vident was currently offering its distribution network. (/d

Vident took into account the added expenses associated

with this incremental support. (/d.) Vident determined that

it would not sell teeth directly to dental labs if it distributed

Vita teeth through Patterson. As a result, its gross profit

margin would decrease due to the additional layer of dealer

margin. (D.I. 423 at 340- 42)

108. Vident also determined that it would need to offer

a large dealer like Patterson a volume discount year-end

bonus. (/d.) Because Vident would offer a bonus to

Patterson and do away with direct sales, it expected its

gross profit margin on artificial teeth to decrease if it sold

teeth through a national dealer like Patterson. (/d

2. Very Few Tooth Manufacturers Distribute

Their Teeth Exelusively Through Tooth

Dealers

a. Dentaply

109. During the early to mid 1990s, Dentsply sold

artificial teeth through 35 to 40 dealer: Some of these

dealers had one location, while others had multiple locations

(D.1. 448 at 2576-77) Today there are 23 authorized dealers

(D.1. 432 at 2178-79; DX 1665

53a

110. Dentsply does not have a contractual arrangement

with its authorized tooth dealers. (D.I. 423 at 1184-85; D.L.

448 at 2585; D.I. 450 at 2631) If Dentsply’s dealers do decide

to take on the teeth of a rival, they can either sel] their

Dentsply tooth inventory or send it back to Dentsply for full

credit. (D.1. 420 at 700; D.1. 489 at 4346)

111. There is no dispute that when Dentsply authorizes

a dealer to carry its teeth, that relationship operates on a

purchase order basis. Thus, an authorized Dentsply dealer

is free to stop buying Trubyte teeth at any time without

penalty from Dentsply. (D.1. 448 at 2585; D.I. 423 at 1184)

Mr. Weinstock acknowledged that Zahn could “stop selling

Trubyte teeth altogether ... tomorrow.” (D.1. 420 at 543)

112. Dentsply has analyzed the advisability and

feasibility of selling its Trubyte teeth directly to labs. (D.1

448 at 2534; D.1. 454 at 3471)

113. In 1996, there were market factors that caused

Dentsply to question whether its Trubyte business could

continue to “grow or be stable long term.” (D.1. 448 at 2593)

Christopher Clark analyzed these market factors, and the

Trubyte Division's Strategic Options, in the 1996 Trubyte

Division Long Range Plan. Mr. Clark authored and

submitted the Long Range Plan to Dentsply’s senior

management in spring 1996. (/d. at 2592; GX 101)

114. Mr. Clark’s Long Range Plan identified five “key

trends” that were “negatively impacting” the Trubyte

Division's “ability to protect (its) business long term.” (GX

101 at DPLY-A 37304-05) First, Dentsply faced price

pressure from direct selling manufacturers “whose

distribution system does not require a 35% dealer margin.”

id.) As a result of this price pressure, larger labs sought to

purchase Trubyte teeth at lower prices. (D.1. 448 at 2595)

Second, dentists exhibited a reduced interest in dentures

due, in part, to “decreased denture training in schools” and

‘lack of perceived profitability.” (GX 101 at DPLY-A 37304;

L).1. 448 at 2595) Third, dealers showed a declining interest

in the tooth business “due to low perceived profit syility.”

d4a

(GX 101 at DPLY-A 37305; D.I. 448 at 2596) Dealer

disinterest represented a “significant business risk” to

Dentsply because dealers potentially could return the

estimated $15 million in dealer tooth inventories to

Dentsply, which would mean negative sales and negative

gross nargin Id.) Fourth, there was increasing

consolidation in the market among dealers and labs. (GX

101 at DPLY-A 37305) As a result of the lab consolidation,

Dentsply “felt the competitive pressure” from its larger lab

customers. (/d.; D.1. 448 at 2597) Fifth, denture patients

held a “negative view” of dentists and of dentures. (GX 10]

at DPLY-A 37305; D.1. 448 at 2597) Dentsply’s research

showed over 60% of denture wearers expenenced problems

with their dentures. (GX 101 at DPLY-A 37305) Yet, these

patients exhibited “little to no interest in ongoing dental

care” and did not seek to replace their dentures. (/d.)

115. In his 1996 Trubyte Division Long Range Plan, Mr

Clark considered and analyzed strategic options for the

Trubyte Division in light of these market factors. (GX 101)

116. The first strategic choice was to maintain the

status quo. (GX 101 at DPLY-A 37305-06) The Long Range

Plan recommended against this strategy and recognized it

as a “SIGNIFICANT BUSINESS RISK TO DENTSPLY.”

Id.) The Plan concluded that if Dentsply did not address the

market conditions and invest in the future, the Trubyte

business would “begin trending down.” (/d.; D.I. 450 at

2605)

117. The second strategic choice was to protect, defend,

and enhance the Trubyte Division. (GX 101 at DPLY-A

37306-13; D.1. 450 at 2610) The second choice was actually a

combination of various strategies, all designed to ensure

“the long-term health of the tooth business.” Id.) This

optior included Dentsply ultimately moving to a “ld hlirect

[slelling” relationship with its lab customers. (GX 101 at

DPLY-A 37310

118. The Long Range Pian further concluded that the

services dealers provided to labs “certainly [were]

eee ee eae a

55a

replicable.” (D.I. 450 at 2611) The Plan acknowledged that

in switching to a direct-selling distribution system, Dentsply

would have to overcome five hurdles by: a) writing-off $15

million in deo!er inventory; b) learning more about its lab

customers and creating a database of this information; c)

examining sufficiency of field sales coverage and likely

increasing the size of the sales force; d) addressing the

impact of increased accounts receivable; and e) anticipating

competitive reaction from tooth companies who would

approach Dentsply’s dealer network. (GX 101 at DPLY-A

87344; D.1. 450 at 2611-14) The potential dealer backlash

Dentsply’s other divisions would face if it opted to sell teeth

direct served as another “significant concern.” (D.1. 450 at

2614-15)

119. Notwithstanding these hurdles, the Long Range

Plan concluded that it would “ultimately be necessary to

take the business direct.” (GX 101 at DPLY-A 37343)

120. Upon review of the 1996 Long Range Plan,

Dentsply’s senior management commissioned a more

detailed analysis of whether Dentsply should take its tooth

business direct. (D.I. 454 at 3472; D.I. 450 at 2615) This

analysis, which Mr. Clark also managed, was called Project

Black Jack. (D.1. 450 at 2616; D.I. 454 at 3472; DX 460-A)

Project Black Jack studied the feasibility and advisability of

taking all Trubyte’s business (teeth and mercharidise)

direct. (DX 460-A; D.1. 450 at 2616-17; D.I. 454 at 3476)

121. Project Black Jack confirmed the action points in

the 1996 Long Range Plan, i.e., the necessary infrastructure

for distribution, accounting and sales, and better

information about the labs and their tooth needs. (D.I. 454

at 3476-78) Project Black Jack also analyzed in detail the

financial viability of going direct. It determined that after

the initial $15 million write-off of returned inventory, selling

direct would be very profitable and provide for a good

return on investment for Dentsply. (D.1. 450 at 2612, 2618)

Assuming a price reduction of 10% below its suggested lah

rate (which would come from the 35 margin points that

56a

Dentsply would regain from its dealers), Dentsply could lose

nearly 14% of its cooth volume and still maintain its current

profitability on tooth sales. (/d. at 2618-20; D.1. 454 at 3519

20; DX 460-A at DPLY 107462)

122. Dentsply’s Chris Clark testified that Dentsply “did

not expect to lose market share by going direct.” (D.1. 450

at 2708) If anything, he agreed, Dentsply would “gain

market share by being able to sell directly and satisfy the

needs of [Dentsply’s}) customers directly.” (/d.)

123. Project Black Jack also identified dealer retaliation

as an additional risk underlying a change to a direct

distribution system. Retaliation would come in the form of

dealers converting lab customers to non-Dentsply dental

consumable products. In 1996, Dentsply sold through its

dealers approximately $300 million in dental consumables

manufactured by Dentsply’s divisions other than Trubyte.

(D.1. 454 at 3479) Dentsply feared that dealers would do

everything possible to convert this business in retaliation

for Dentsply competing against them for tooth sales. (/d. at

3479-80)

124. Dentsply’s concern reflects the experience of other

manufacturers that have distributed one product through

dealers and competed against those dealers with another

product. Kevin Dillon, president of Leach & Dillon, testified

that, based on his prior experiences, he faced this exact

concern in selling Enigma teeth directly. (D.1. 457 at 4092-

93)

125. In light of these risks and the needed

infrastructure improvements, Dentsply management

concluded that the Trubyte Division was not prepared to go

direct in 1996-1997. (D.1. 454 at 3478, 3480)

126. Dentsply’s largest dealer, Zahn Dental, has for

years recognized the possibility of Dentsply taking its

business direct. (D.I. 420 at 554) Several times Zahn has

asked for assurances from Dentsply’s senior management

that it would not take the business direct. (/d. at 555-57; DX

57a

1590) “[E]ven today” Zahn recognizes the “possibility” that

Dentsply might take the tooth business direct. (D.I. 420 at

127. Dealers like Zahn consider direct selling

manufacturers as competitors. (D.1. 420 at 553) Zahn will

not distribute a manufacturer’s teeth and also compete with

that manufacturer for tooth sales. (/d. at 549-53)

128. Although most of the risks associated with taking

Trubyte teeth direct have been resolved, Dentsply believes

one major issue remains. Dealer retaliation is still a real

threat. (D.1. 454 at 3484, 3504) Dealer retaliation on the

dental consumables side has become more daunting because

now Dentsply sells approximately $400 million in non-

Dentsply dental consumables through its dealers, instead of

$300 million. (Jd.) Mr. Miles testified that the threat of

dealer retaliation requires that a decision on direct sales

involve all of Dentsply’s Divisions, not just Trubyte. (/d. at

3485)

b. Vita/Vident

129. Vita has distributed its teetn exclusively through a

national dealer since at least 1968 by way cf a contractual

arrangement—first with Unitech from 1963-1984 and then

Vident since 1984. (D.I. 419 at 289-93) In its contract with

Vident, Vita committed that it will not appoint any other

distributor for Vita artificial teeth in the United States. (/d.

at 290-91) In consideration for this commitment, Vident

agreed that it would not distribute any products that

compete with Vita products. (/d.)

130. Vident’s President considers the exclusivity

agreement Vident has with Vita beneficial because it

permits Vident’s sales representatives to focus completely

on the Vita line of products. (/d. at 291-92)

131. Vident carries a large inventory of Vita teeth. (/d.

at 329) Vident sells and distributes artificial teeth directly to

dental labs from its Brea, California lecation. (/d. at 241-42,

248, 254, 288, 375-76; D.I. 453 at 3361-62) Vident offers

58a

overnight delivery from this single stock. (D.I. 419 at 329,

376) Like other dealers, Vident has a “long-standing

relationship” with dental labs. (/d. at 342)

132. Vident sells artificial teeth through a sales force of

15-16 people and a telemarketing department whose

responsibilities include Vita teeth. (Jd. at 229-30, 296-98,

328) Vident also consigns teeth to dental labs. (/d. at 253,

346)

133. Vident differs from other tooth distributors in that

Vident has appointed a number of sub-distributors, in effect

creating a network of sub-dealers. (Jd. at 302-03) These

firms purchase Vita teeth through Vident at prices

established by Vident. (/d. at 327) None are permitted to

buy teeth directly from Vita. (Jd. at 302) According to

Vident’s President, Wayne Whitehill, this network

currently encompasses 18 sub-dealers each with its own

inventory of Vita teeth. (/d. at 303) Fron 1985 until 1990

Vident did not utilize sub-dealers. (/d. at 301-02)

134. Vident reserves the right in agreements with sub-

dealers to sell to dental labs directly in the dealers’ sales

areas. These sub-dealers encounter direct competition from

Vident for the sale of Vita artificial teeth. (/d. at 247, 348)

Vident has a reputation for taking its sub-dealers’

customers, and selling to them directly. (D.I. 457 at 4089-90)

By doing so, Vident effectively has precluded its sub-dealers

from selling to certain large labs, such as Denta! Services

Group (“DSG”). (DX 508 at 19/3) Mr. Whitehill admitted in

his testimony that this hybrid distribution system has

created conflict between Vident and the Vident sub-dealers.

(D.1. 419 at 348)

135. The geographic distribution of Vident, its sub-

dealers and their respective tooth stocks closely mirrors the

tooth distribution locations of Zahn. (Jd. at 328-332; DX

1588) In fact, Mr. Whitehill of Vident testified that Vident is

just like Zahn in a lot of ways: both sell teeth to dental labs

through a sales force; Vident sells teeth through its

telemarketing division; both Vident and Zahn distribute

-

99a

catalogs to dental labs promoting teeth; both carry large

inventories of teeth; and both offer overnight delivery of

teeth. (/d. at 328-330) Mr. Weinstock of Zahn agreed with

the comparison. Like Zahn, Vident is a distributor and not a

manufacturer of teeth; both Zahn and Vident purchase from

a manufacturer and sell to somebody else. (D.1. 420 at 524-

25) Additionally, both Zahn and Vident do not sell precious

metals; thus a lab that needed to purchase teeth and

precious metals could not purchase both products from

either Zahn or Vident. (/d.)

c. Schottlander

136. Since it entered the United States tooth marke?* in

2001, Schottlander has distributed its Enigma artificial

teeth in the United States through Dillon Company, Inc.

(“Dillon” or “leach and Dillon”), a manufacturer and

distributor of dental lab products located in Rhode Island.

(D.I. 457 at 4079-88) Prior to entry, Schottlander and Dillon

attempted to gain distribution for Enigma teeth through

Dentsply dealers, but were unsuccessful. Schottlander

decided to enter the market, nonetheless, with Dillon as its

exclusive importer and distributor. (/d.)

137. As Schottlander’s national distributor, Dillon sells

and promotes Enigma artificial teeth directly to dental labs.

(Id. at 4090-92) Dillon also provides consignments of Enigma

teeth to dental labs. (/d.) Offering labs consignments is an

effective way to market teeth to dental labs, according to

Kevin Dillon of Leach and Dillon. (/d.) Leach and Dillon

uses consignments to compete effectively against Dentsply.

For instance, Leach and Dillon used a consignment to

displace Trubyte teeth that Zahn placed with Yankee

Dental Lab. (/d. at 4087-91)

138. Additionally, Lincoln Dental Supply takes orders

for Enigma teeth and has them drop-shipped from Leach

and Dillon to the end-user lab. (D.I. 450 at 2785) Lincoln's

sales of Enigma teeth doubled from 2000 to 2001. (/d. at

2788)

60a

d. Other Manufacturers

139. Austenal/Myerson, ATI, and Universal all use

dental dealers in addition to their respective direct sales.

Some of Dentsply’s largest dealers, Zahn, DLDS, and

Atlanta Dental, all carry these brands. (D.1. 425 at 1342-44;

D.I. 420 at 620, 622, 625; D.1. 425 at 1413, 1420; DX 1599; DX

1665; GX 160)

3. There Are Many Dealers Available To

Manufacturers

140. There are hundreds of dental dealers in the United

States. (D.1. 425 at 1313) Many of these dealers want to add

artificial teeth as a product line. (D.1. 448 at 2581-82; D.1. 432

at 2190; D.I. 450 at 2776-77; D.1. 453 at 3343-44)

141. Dentsply has rejected many dealer applicants

requesting to become authorized Trubyte tooth dealers

during the relevant time period. (D.1. 448 at 2581-82)

During Mr. Clark’s tenure at Dentsply as Director of Sales

and Marketing, 1992-1996, and then as Vice President and

General Manager, 1996-1998, he received at least one such

inquiry each month. (/d.) Steve Jenson, the Trubyte

Division’s current Vice President and General Manager,

testified that when he took over for Mr. Clark in 1997, he

received 4-6 requests monthly. At the time of trial,

according to Mr. Jenson, Dentsply received 1-2 requests

each month from dentai aistributors seeking to become an

authorized Dentsply dealer. (D.1. 432 at 2190; DX 1607; DX

1202, DX 1204)

142. There are no geographic or technological barriers

that limit available dealers to particular areas in the

country. (D.I. 432 at 2189) Dealers today have the capability

to serve broad geographic areas. Dealers that testified at

trial and in depositions on this issue demonstrated the

capability and willingness to ship teeth anywhere in the

United States. (D.1. 450 at 2773- 74; D.1. 448 at 2429-30; D.I.

431 at 2061-62; D.I. 417 at 104-05; D.I. 420 at 481, 504, 641-

42; D.1. 425 at 1429-30, 1438-39)

6la

143. For example, Jeff DiBlasi, Vice President and Sales

Manager of Lincoln Dental Supply (“Lincoln”), testified that

Lincoln is a national, full service dental lab supply house

headquartered in Cherry Hill, New Jersey. (D.1. 450 at 2756,

2758, 2762) Lincoln sells merchandise, equipment and

artificial teeth. (/d.) Lincoln employs 35 people, 16 of whom

call on accounts to sell products. (/d. at 2762) In 2000,

Lincoln’s total sales in dollars exceeded $9 million. In 2001,

Lincoln’s sales exceeded $10 million. Lincoln projected its

sales to exceed $12 million in 2002. (/d. at 2759-60) Lincoln’s

customers are primarily dental labs, dentists with in-house

labs and denturists (someone who performs the work of both

a laboratory and a dentist). (Jd. at 2761) Lincoln generates

demand through its sales representatives, catalogue and

sales flyers. (Jd. at 2764-67; DX 1612, DX 1613)

144. Lincoln currently distributes two lines of economy

artificial teeth—the New Shade Plus and Dual Form V-

Line. It also sells the Enigma line of teeth. It has

distributed artificial teeth for over 20 years and finds the

sale of teeth profitable. (/d. at 2767-68) Lincoln has about

400 tooth accounts located throughout the United States.

(Id. at 2773) Lincoln’s customers for teeth are full service

dental labs, denture centers and partial denture labs. (/d. at

2768-69) In 2001, Lincoln sold approximately $800,000 worth

of teeth, accounting for approximately 8%-10% of its total

sales. According to Mr. DiBlasi, Lincoln’s tooth sales are

growing. (/d.) Lincoln started selling the Enigma line of

teeth around 2000. Lincoln has approximately 50 customers

for Enigma teeth located throughout the United States. (/d.

at 2787) Leach and Dillon is Schottlander’s exclusive United

States distributor for Enigma teetn; Lincoln forwards

orders for the teeth to Leach and Dillon which drop-ships

the teeth to the lab. (/d. at 2767-68, 2785-86)

145. According to Mr. DiBlasi, Lincoln is capable and

available to sell other lines of artificial teeth, including

premium lines of teeth. (Jd. at 2775-76) Lincoln already sells

its products to high-end labs. It is equipped to sell premium

62a

teeth to these customers as well. (/d.) Lincoln wants to

expand its tooth offerings, with particular interest in

Trubyte and Vita teeth. (/d. at 2776-77) Dentsply has not

authorized Lincoln because Lincoln has not demonstrated

that it can provide Dentsply with incremental business.

(Id.) Mr. DiBlasi testified that he nearly reached an

agreement with Vident to become a Vita sub-dealer, but

backed out when he determined that Lincoln could only

obtain a 20% net margin on teeth, rather than the standard

30%-35% margin that toot.: dealers receive. (Jd. at 2782-83)

146. Jack Sileox, Ltd. is one of “hundreds of smal]

statewide dealers” available to sell artificial teeth. (D.I. 43]

at 2045; D.I. 429 at 1810) Mr. Silcox testified at trial. Jack

Sileox, Ltd. distributes artificial teeth, among other

products, to dental labs and to dentists with in-house labs

from its location in Central Ohio. (D.I. 431 at 2045-46) Jack

Silcox, Ltd. has about 700 active and semi-active dental lab

customers. (/d. at 2044-47) Most customers are located in

Ohio, but Jack Silcox, Ltd. sells to customers located

throughout the United States. (Jd. at 2059)

147. Jack Sileox, Ltd. began selling artificial teeth in the

1990s when ATI offered it a consignment of teeth. It has

been selling artificial teeth ever since and has found it to be

profitable. Jack Silcox, Ltd. currently distributes Justi,

Deritorium, Coral and Universal teeth. (Jd. at 2048-50) Mr.

Silecox testified that he was in discussion with Vident in

1996-97 to become a sub-dealer of Vita teeth. (/d. at 2062-

64) According to Mr. Silcox, an important part of that

discussion was a commitment by Vident that it would not

undersell Jack Sileox, Ltd. on Vita teeth. Mr. Silcox ended

the discussion because he believed that a lab account was

buying Vita teeth from Vident at a price close to what Jack

Sileox, Ltd. would have had to pay Vident for the same

teeth. (/d.)

WEEE PELE

63a

E. Dentsply Innovation In Artificial Teeth

1. Dentsply’s History Of Innovating Artificial

Tooth Products

148. Throughout its history, Dentsply has introduced

advancements in the artificial tooth market. (DX 119; D.lI

448 at 2525-26) Mr. Miles believes this “product innovation”

has been “one of the most important things” that has

allowed Dentsply to “initially develop and ultimately

maintain” its market share. (D.1. 454 at 3447-48)

149. At the turn of the 20th century, one of the founding

partners of Dentsply invented a way to fasten porcelain

teeth to dentures. (/d. at 3448) After that, Dentsply

proceeded to invent the first mould guide. (/d.) The mould

guide was important because it allowed a lab technician to

use “exact measurement(s]” when setting artificial teeth in a

denture to ensure that the teeth would fit the patient’s jaw

line. (/d.) Dentsply later introduced fluorescence into its

artificial teeth. Fluorescence makes artificial teeth appear

more “lifelike” and “translucent.” (/d. at 3448-49)

150. Dentsply’s next major innovation was moving the

artificial tooth market away from porcelain and towards

plastic. (/d. at 3449) Dentsply later developed an occlusion

system that made it easier to bring artificial teeth into

articulation (the bite between the upper and lower teeth).

(/d.)

151. In 1981, Dentsply invented IPN (interpenetrating

polymer network), which increased significantly the

wearability of plastic teeth and remains the “industry’s

standard worldwide” for premium artificial teeth. (/d. at

3449; D.I. 432 at 2106-08) Dentsply introduced IPN to

improve the wear resistance of its product offering. (D.I.

489 at 2489; D.I. 432 at 2107) It was a significant

advancement relative to conventional plastic teeth. (D.I.

448 at 2489-90; D.I. 432 at 2107) The “big difference” was

that IPN “totally changed the physical properties while

giving a more aesthetic tooth.” (D.I. 432 at 2106) IPN lines

64a

have a strong surface hardness. (D.1. 425 at 1229-30) The

Bioform tooth line was the first line Dentsply introduced in

IPN material. Bioform IPN teeth are easy to set because

they adhere well] to the acrylic used as the denture base.

(D.1. 432 at 2110)

152. Dentsply introduced TruBlend SLM in fall 1992.

(D.1. 448 at 2488) This too was introduced as a “superior

wear-resistant denture tooth.” (/d.) A study performed by

Dr. W.H. Douglas of the University of Minnesota

demonstrated that TruBlend SLM was 75%-90% more wear

resistant than Ivoclar and Vita. (/d. at 2489-90)

153. With TruBlend SLM, Dentsply became the first

tooth manufacturer to offer a lifetime guarantee on a tooth

for stain resistance, wear resistance and for fracture. (DX

119; D.I, 448 at 2491) At the time, Dentsply provided a five-

year guarantee on its IPN lines. Dentsply’s competitors did

not offer any wear guarantees for artificial teeth. (D.I. 448

at 2491) Ivoclar now offers a seven-year warranty. In

response, Dentsply extended its guarantee on IPN teeth to

ten years. (D.1. 432 at 2128)

154. TruBlend SLM became the “tooth of choice” for a

segment of dentists interested in “superior wear

resistance.” (D.1. 448 at 2491-92) These users tended to be

dentists who did more implants and high-end dentistry.

(Id.) Thus, TruBlend became “more niched” in its

acceptance, rather than mainstream. (/d.)

2. Development Of Dentsply’s Portrait IPN

Tooth Line

155. Christopher Clark, then the Trubyte Division’s

newly hired Director of Marketing, decided to figure out

why TruBlend was a niche product. He commissioned

market research to help him understand the brand equities

that existed in Trubyte’s product lines. (/d. at 2493-94) The

first study, performed in fall 1993, was the image and

attribute study. (/d.) Dentsply conducted a mail survey of

276 labs and asked the labs to evaluate the artificial teeth of

65a

Dentsply and its rivals for a number of attributes, including

wear re. stance, aesthetics, dentist demand, value and

shade/mould selection. (/d.; GX 71) Trubyte IPN teeth

“came in at or near the top of virtually all of those

attributes.” (D.I. 448 at 2494-95) In particular, dentists

ranked IPN very highly for wear resistance, ease of setup,

mould selection, and value for money. (/d.) Yet, Trubyte’s

Bioform and Bioblend IPN teeth ranked slightly below Vita

and Ivoclar for aesthetics. (/d.; GX 71 at 4) Based on the

overall results of the image and attribute study, Dentsply

concluded that Trubyte had very strong brand equity. (D.I.

448 at 2495)

156. Within months after completing the initial survey,

Dentsply conducted another survey isolated to measure just

the aesthetics of Trubyte teeth. Dentsply tested its own

teeth as well as its rivals on unmarked cards. (/d. at 2495-

96) The research showed Dentsply that Trublend SLM and

Trubyte’s economy teeth rated near the top for aesthetics,

superior to Vita and Ivoclar teeth. (/d. at 2496) In contrast,

Trubyte’s mainstream premium plastic tooth, the Bioform

IPN, rated below Vita and Ivoclar. (/d.; GX 71 at 3)

157. Dentsply conducted additional research on Vita

shades. More specifically, Dentsply looked at whether it

should offer a tooth line in Vita shades. (D.I. 448 at 2497)

The Vita Classical Shade Guide is the most popular shade

guide in the market for fixed prosthetics (crown and bridge

work). (/d. at 2380, 2497) Mr. Whitehill testified that

between 80-90% of dentists have Vita Classical Shade

Guides in their offices and use it frequently. (D.I. 419 at

231-321; D.l. 448 at 2497) The Vita shade guide gained

prominence only as recently as the early 1990s. (D.I. 417 at

98; D.I. 420 at 527) About 30-40% of dentists use the new 3D

shade guide. (D.I. 419 at 233)

158. Dentsply discovered that while 21% of dentist

prescriptions for dentures in 1993 were written using Vita

shade designations, 73% of these prescriptions were cross-

matched to Trubyte teeth. (D.I. 448 at 2498-99) The

66a

research further showed a fair degree of dissatisfaction with

the shade cross-matching capability of Trubyte’s Bioform

line. (/d.)

159. Dentsply’s additional Vita shade research revealed

that dentist prescriptions for Vita shades in removable cases

were growing by 10% annually. (GX 71 at 6) Mr. Clark

explained that in 1994 dentists were beginning to prescribe

more Vita shades for the growing number of partial and

combination cases. (D.1. 448 at 2498) To an increasing

degree, denture wearers no longer needed to replace all of

their natural teeth with a full denture because they were

keeping their natural teeth longer. Partial dentures or

combination cases are placed in the mouth next to a crown

and bridge restoration, which is usually in a Vita shade

(/d.)

160. Dentsply concluded that the combination of the

increase in Vita shades coupled with the disappointment

that some labs expressed about Dentsply’s cross-matching

to these shades would “become[) more injurious as partials,

implants and combination case usage grows.” (GX 71 at 10)

Dentsply believed it needed a new aesthetic tooth line in

Vita shades to address the growing partials market. (D.|

448 at 2497-2500)

161. Dentsply created a prototype of a new tooth

Research showed the aesthetics of the Trubyte prototypes

to be superior to existing competitive teeth. (D.1. 454 at

3452; GX 71) For example, the Trubyte prototype rated first

in aesthetics, over all other brands of teeth. (GX 71 at 3, 5;

D.I. 448 at 2508-09) The studies “showed ladoratories

preferred [Trubyte’s] prototype tooth to all other

competitors.” (D.1. 454 at 3452)

162. Once satisfied with the results of the market

research, Dentsply senior management approved funding to

onstruct a new line. (D.I. 448 at 2504-11) Within one year

after initiating this technical work on the new prototype,

Dentsply completed construction of Portrait, which it

launched in fall 1995. (/d. at 2513) Dentsply named the tooth

Gla

Portrait because the tooth was synonymous with the highly

aesthetic image Dentsply was trying to create with the

brand. (/d. at 2513-14)

163. Portrait improved aesthetics and, according to

industry participants at all levels, matched the Vita shade

guide even better than Vita’s teeth. (D.I. 448 at 2335, 2381,

2513; D.1. 420 at 528)

164. Portrait was a commercial success. Dentsply sold

in excess of $3 raillion of Portrait teeth by the end of 1995,

exceeding its target by over $600,000. (D.1. 448 at 2521-22)

In the first six to nine months, Dentsply also converted at

least 75 lab customers to Portrait teeth. (/d. at 2522)

Christopher Clark, former Vice President and General

Manager of the Trubyte Division, believes Dentsply “hit the

nail on the head” with its introduction of Portrait, having

introduced the first highly-wear resistant, aesthetic Vita

shaded tooth. (/d. at 2523)

165. Dentsply invested approximately two years and

$1.3 million in the development of Portrait. At the time,

Trubyte’s sister division, Detech, had just introduced a Vita

shaded IPN line in Germany called BioPlus. Dentsply

considered and rejected the suggestion to bring BioPlus to

the United States because of the higher manufacturing costs

in Geraany and BioPlus’s European moulds. (D.I. 448 at

2500-01) The investment in Portrait included funding for

tooth moulds, a CAD/CAM design station, shade guide

tolling, upgrade of a rotary moulding unit and injection

moulds to bring out the new tooth line. (/d. at 2510-12; DX

1572) Additionally, Dentsply invested in research and

development and introductory marketing sales support

(D.1. 448 at 2512)

3. Dentsply’s Recent Innovations In The Tooth

Manufacturing Process

166. Aside from product innovation, Dentsply has

invested in new manufacturing equipment to produce higher

quality and lower priced artificia] teeth. (DX 1596 at

68a

DPLY-A 200006, 200012) For example, around 1990

Dentsply developed the CAD/CAM concept for producing

tooth moulds. Dentsply has continued to upgrade the

CAD/CAM technology every three or four years. (D.I. 454

at 3454-55)

167. Dentsply spends more than $1] million dollars

annually maintaining and/or producing new moulds. (/d. at

8455) Dentsply also manufactures and designs new internal

moulding machines, called rotary moulding machines. (/d.)

The rotary machines have helped to automate the moulding

process for teeth and have reduced the cycle time by about

one-half that of a traditional moulding table. (/d.)

168. Dentsply also has made innovations in the

manufacturing process for teeth. The most recent example

is the development of the automatic knockout, a robotic

piece of equipment designed to remove artificial teeth from

moulds. This innovation allows for significant reduction in

cycle time for moulding teeth, thus lowering production

costs. (/d. at 3456-57; DX 1596 at DPLY-A 20006; DX 1627

at DPLY-A 200388)

F. Dentsply’s Dealer Criterion 6

1. Exclusive Dealer Policy

169. Dentsply’s Dealer Criterion 6 (“Dealer Criterion

6”) states, “[i)n order to effectively promote Dentsply/Y ork

products, dealers that are recognized as authorized

distributors may not ada further tooth lines to their product

offering.” (GX 31)

170. In 1993, David Ponl, Dentsply’s National Sales

Manager at the time, formalized Dentsply’s existing criteria

governing its dealers and reduced them to writing. (D.1. 431

at 1902-03; GX 31) The decision to create a finite set of

written criteria was based, in part, on “numerous inquiries

from companies seeking to become” dealers of Trubyte

Division products. (GX 31 at DS22520) Dentsply distributed

its written dealer criteria to all its dealers by letter dated

February 16, 1998. (GX 31 at DS22520)

69a

171. In all, Mr. Pohl put ten criteria in writing. (GX 31

at DS22521) These criteria required dealers or prospective

dealers to: (1) provide Dentsply with their financial

statements; (2) place an initial minimal order of $50,000 in

teeth and $10,000 in merchandise; (3) place initial orders of

$10,000 if they are merchandise-only dealers; (4) place

orders via the Bar Code Entry Order System; (5) submit a

written plan which indicates that incremental business will

be gained by Dentsply; (6) not add further tooth lines to the

product offering; (7) make payment within terms Dentsply

specified; (8) resell Trubyte products only to end-users such

as dental labs, dental schools and dentists; (9) report end-

user sales by zip-code on a monthly basis; and (10) limit drop

shipments to 10% per quarter. (GX 31 at DS22521)

172. Dentsply required dealers seeking initial

recognition to comply with all ten criteria. (GX 31 at

DS22520) Dentsply required its existing dealers to comply

with Dealer Criteria 6 through 10. (GX 31 at 22520) Though

Mr. Pohl reduced Dealer Criterion 6 to writing, he did not

formulate the policy, does not know why it was adopted in

the first place, and does not know when the policy started

within Dentsply. (D.1. 431 at 1902-03)

173. Mr. Miles, who served as Dentsply’s President and

Chief Operating Officer in 1990, testified that he does not

know who came up with the idea for Dealer Criterion 6, but

knows only that it originated within the Trubyte Division.

(D.I. 454 at 3509) Mr. Weinstock of Zahn testified that

Dentsply did not have a policy similar to Dealer Criterion 6

in place in 1982-83. (D.I. 417 at 141) According to Mr.

Weinstock, the absence of such a policy in 1982-83, when

Zahn first became a Dentsply dealer, is the reason Zahn is

able to carry so many competitive tooth brands today. (/d.)

174. In 1988, Dent =) *2rminated Frink Dental of Elk

Grove, Illinois as both, ‘: oth and merchandise dealer when

it began selling Ivoclar .veth. (D.1. 420 at 700-01; D.J. 429 at

1720)

70a

175. In publishing Dealer Criterion 6 in February 1993,

Dentsply expressly stated its refusal to do business with

dealers that added its rivals’ tooth lines. (GX 31) Dentsply

permitted dea

This text is long and has been trimmed here. Open the source document for the complete record.