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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0207%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2006
- **Citation:** 546 U.S. 1089

## Text

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 (.” — we =F
~~, °

76a

approached Zahn about carrying Vita teeth. Brian Binnie,
Vident’s National Sales Manager, and Vident’s General
Manager, who came out and spent a half day at Zahn in
Melville, New York, have spoken with Zahn, but Mr.
Weinstock has declined to even discuss taking on Vita teeth,
given Zahn’s agreement with Dentsply not to sell additional
tooth lines. Mr. Weinstock understands that Zahn is not
allowed to take on any tooth lines that it did not have when
Zahn took on the Trubyte line back in 1982 or 1983, and that
the only type of teeth Zahn can take on is a sub-economy
tooth, which is not something that Dentsply sells. This
agreement prevents Zahn from adding additional teeth in
competitive lines as long as Zahn carries Trubyte teeth. As
a result, if Zahn took on the Vita line, it would be giving up
$18 million of Trubyte tooth sales for a company’s line that
sells only a million dollars. (D.I. 417 at 180-85) Mr.
Weinstock testified, “I don’t think anybody in their right
mind would opt for taking a million dollars in sales
opportunity versus giving up $18 million in sales.” (Jd. at
184)
c. Atlanta Dental Supply (Vita)

199. In the early 1990s Atlanta Dental considered
adding Vita teeth to its product offering after Betsy Harris,
manager of Atlanta Dental’s tooth department, received
requests from current and potential customers asking
whether she could carry Vita teeth. (D.I. 420 at 599-600,
615) Ms. Harris believed that these customers were
interested in buying Vita teeth from Atlanta Dental rather
than from Vident in California because Atlanta Dental sold
them locally. (/d. at 599-600) Ms. Harris had initial
discussions with Vident about taking on the Vita line, and
they planned further discussions, after Ms. Harris had a
chance to review Vident product information and a sample
contract. (Jd. at 601-03; GX 296) Ms. Harris later met with
Vident ~epresentatives, and they decided to draw up a
contract for Atlanta Dental to acquire a $30,000 stock of
Vita teeth. (/d. at 603-04)

.

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200. Ms. Harris then talked to Bill Yacola of Dentsply to
find out what the consequences would be if Atlanta Dental
put in a competitive line—in particular, because of her
experience with Frink, Ms. Harris was concerned that she
ran the risk of losing her Trubyte line. (/d. at 606-07) After
checking with others at Dentsply, Mr. Yacola replied that if
Atlanta Dental took on Vita teeth Atlanta Dental would no
longer be able to sell Trubyte teeth. (/d. at 607-08)

201. Atlanta Dental decided not to put in the Vita line,
in order to avoid jeopardizing its Trubyte business. (Jd. at
608-10) At that time, its sales revenue for artificial teeth
was one million dollars a year, and Trubyte teeth comprised
90% of that revenue. (/d. at 615) “I had no way of knowing
what our Vita sales would be at that time, so losing that
much business was—this is my livelihood, this is what I do,
and I didn’t want to jeopardize my company or myself in
that way.” (/d. at 616)

d. DLDS (Universal, Vita)

202. DLDS sought to add Universal and Vita teeth in
1994 to fulfill customer demand. (D.1. 425 at 1423-24)
However, a week after DLDS introduced the teeth to its
customers, Dentsply informed DLDS that if it carried the
teeth it would lose the entire Trubyte line of teeth and
merchandise. (/d. at 1426-27) As a result, DLDS did not
take on the Universal and Vita teeth. (/d.; GX 58; GX 66)

e. Marcus Dentai (Kenson)

203. In the spring of 2000, Marcus Dental, a Dentsply
dealer in Minneapolis, had taken on the Kenson tooth line
because of an out of stock problem with Trubyte teeth. (D.I.
432 at 2291) For several months during 2000, Dentsply was
having problems supplying teeth to dealers. (Jd. at 2292)
The service problems started in the spring but continued
into October 2000, and in August 2000 Dentsply’s success
rate for fulfilling one-day shipments dropped to 2n all-time
low of 80.5% (Dentsply’s goal was 97%). (Jd. at 2292-93)
That rate of order fulfillment by Dentsply caused concern

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among dealers such as Marcus. (/d. at 2292) Due to these
problems with Dentsply’s service levels, some of Marcus’ lab
customers had switched to Kenson teeth and Marcus was
reportedly trying to retain its customers by selling them
Kenson teeth. (/d. at 2291-92) Dentsply, however, enforced
Dealer Criterion 6 against Marcus, and Marcus returned the
Kenson teeth to Myerson. (/d. at 2293; D.1. 425 at 1314-15)

f. Thompson Dental (other tooth lines)

204. In his November 2000 monthly report to his
superior, Mr. Roos, Mr. Jenson reported that Thomson
Dental, a Dentsply dealer, was exploring competitive tooth
lines. (D.I. 432 at 2297) Mr. Uthus, Trubyte’s Director of
Sales, explained Dentsply’s “agreement” with Thompson on
competitiveteeth and faxed Thompson a copy of Dealer
Criterion 6. (/d. at 2297-98)

g. Patterson Dental (other tooth lines, Kenson)

205. Dentsply discouraged Patterson’s consideration of
adding a rival line in fall 2000, when Patterson inquired
about carrying competitive tooth lines. (/d. at 2298) Mr.
Jenson told Mr. Easty of Patterson that the Dealer
Criterion 6 would be enforced. (Jd. at 2298)

206. In 2001 Patterson bought a Dentsply dealer in Los
Angeles named Guggenheim, which carried Kenson teeth.
Patterson itself did not carry Kenson teeth, and so Dentsply
asked Patterson to comply with Dealer Criterion 6 and drop
the competing tooth lines from the Guggenheim locations.
(D.I. 432 at 2289-90) Patterson complied and dropped the
Kenson teeth that Guggenheim had been selling. (/d. at
2291)

h. Darby (Vita)

207. Darby acquired DTS in 1998. (D.I. 457 at 4101) As
a part of that acquisition, Darby acquired the Vita tooth line
that DTS had been selling out of its New York office. (/d. at
4104-05)

208. Dentsply considered Darby’s acquisition of this
Vita tooth stock to be a violation of Dealer Criterion 6. (D.I.

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432 at 2289) As Sidney Nordhauser of Darby Dental
testified, “[Dentsply] made it very clear, when we bought
DTS, that we cannot promote or give to the rest of our
customers Vita teeth. We can only, for a very short period
of time, sell it to the omers we have.” (D.1. 457 at 4106,
4135-37, 4150-51) E though Dentsply had earlier
permitted DTS to keep the Vita tooth stock in New York,
and Darby agreed not to expand the Vita business beyond
the customers already buying Vita teeth, Dentsply still
insisted that Darby drop the Vita tooth line. (/d. at 4139)

209. Because Darby did not immediately agree to drop
the Vita tooth line, lengthy negotiations ensued. Chris
Clark and Steve Jenson of Dentsply both met with Sidney
Nordhauser of Darby Dental, then had a separate telephone
conversation with Darby’s Rita Acquafreeda. (GX 130 at
DARBY 001120-21) In a November 5, 1998 follow-up letter
to Nordhauser, Clark and Jenson stated that Dentsply
“want{ed] to work with Darby” and agreed to give Darby a
six-month transition period to work the Vita tooth stock out
of the New York location. (/d.) This period lasted more than
six months, however, because at the time of Mr.
Nordhauser’s deposition in December 1999 Darby was still
selling Vita teeth. (D.1. 457 at 4106-07)

210. Eventually, Darby complied with Dealer Criterion
6 and dropped the Vita tooth stock in New York. (D.I. 432 at
2289-90)

i. Pearson Dental Supply (Vita)

211. In 1993 or 1994, Pearson Dental Supply of Sylmar,
California, displayed Vita teeth at its tooth counter after a
visit from the local Vident sales rep. (D.I. 425 at 1386)
When Dentsply found out, it informed Pearson that it would
lose the Trubyte tooth line if it continued to sell Vita teeth.
As Keyhan Kashfian, the president of Pearson Dental
testified, “based on the recommendation [of the]
representative of Dentsply, we sent them a letter that, you
know, we are not going to carry Vita and, therefore, the

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episode ended by returning the tooth consignment to Vita
Company.” (/d. at 1387)

4. Dentsply’s Exclusive Dealing Practices

212. Dealers selling Trubyte teeth are independent
businesses, selling under their own name and not
Dentsply’s, and offering thousands of different products that
are made by hundreds of different manufacturers. (GX 160;
D.1. 417 at 102; D.I. 425 at 1410-11)

a. Both Dentsply and the Dealers Selling
Trubyte Teeth Consider Dealer Criterion 6 to
Be an Agreement Between Them

213. Dentsply considers Dealer Criterion 6 to be an
agreement between Dentsply and dealers selling Trubyte
teeth. As acknowledged by Chris Clark, who was Trubyte’s
General Manager for many years, a dealer must “agree to
the Trubyte dealer criteria” in order to be recognized as an
authorized tooth dealer. (D.I. 448 at 2578; D.I. 420 at 692-93;
D.1. 432 at 2296-98)

214. Dealers consider Dealer Criterion 6 to be an
agreement as well. (D.1. 417 at 179; D.I. 453 at 3432; D.I. 448
at 2475-76)

b. Dentsply’s Reputation in the Industry

215. Dentsply has had a reputation among many labs
and dealers in the industry of being nonresponsive to the
concerns of dealers or labs.

(a) In 1998, Dentsply was viewed as “dictatorial and
arrogant” among most of its lab customers. (DX 653 at DS
005170)

(b) In a June 1995 memorandum Ronald Zentz wrote
that there was a feeling among Dentsply customers “that
Dentsply does not care much about them, except when they
will be placing their next order.” (GX Y¥1 at DPLY-A
653290)

(c) In a March 1997 Project Max/Black Jack document
written by Dentsply’s James Mande!) and Chris Clark, it
was noted that the Ceramco and Trubyte Divisions were

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viewed differently—while Ceramco was “user friendly,”
Trubyte was seen as the “evil empire.” (GX 108 at DPLY-A
110081)

(d) Similarly, dealers selling Trubyte teeth testified
that Dentsply, in imposing Dealer Criterion 6 upon them,
exerts too much control over the products they are able to
sell. (D.1. 420 at 593-94; D.I. 417 at 156-57)

5. Dentsply’s Intent Has Been Exclusionary

216. The express purpose of Dealer Criterion 6 has been
exclusionary—to block competitors from dealers selling
Trubyte teeth by tying up those dealers. In a document
entitled, “Sales/Distribution Principles for Cash Cow
Business,” Chris Clark identified Dealer Criterion 6 as one
of five principles for running the Trubyte tooth business.
Clark’s “reiteration” of Dealer Criterion 6 stated:

¢ Block competitive distribution points. Do not allow
competition to achieve toeholds in dealers

¢ Tie-up dealers
¢ Do not “free up” key players
(GX 171 at DPLY-A 004360; D.I. 450 at 2608)

217. According to Gordon Hagler, Trubyte’s Director of
Sales and Marketing from 1989-93, the sole purpose of the
policy was to exclude Dentsply’s competitors from the
dealers:

Solely. 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.

(D.1. 423 at 1178-84)

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218. Dentsvly’s exclusionary intent is evident from its
termination of Trinity Dental.

(a) In 1998, Trinity Dental, located in Geneva, Illinois,
was a dealer selling Trubyte merchandise, but not teeth.
Trinity decided to add the Vita tooth line. As a result, it
was terminated as a Trubyte merchandise dealer. (D.1. 431
at 1903-06; GX 36)

(b) This interpretation of Dealer Criterion 6, that it
prohibited merchandise-only dealers from adding competing
tooth brands, was in effect for at least the 2% years in which
David Pohl was Dentsply’s National Sales Manager. (D.lI.
431 at 1901, 1906)

(c) Dentsply’s alleged “free riding” justification for
Dealer Criterion 6 cannot justify the termination of Trinity,
given that Trinity was not a Trubyte tooth dealer. (D.1. 457
at 3976; D.I. 429 at 1888) Nor is there any evidence that
preventing Trinity from selling competitive brands of teeth
would somehow enhance its ability to sell Trubyte
merchandise. (D.1. 429 at 1707)

219. Dentsply’s intent is also apparent from its use of
Trubyte merchandise as additional leverage in coercing
dealers to agree not to add competing tooth brands.

(a) When terminating Frink Dental for adding the
Ivoclar tooth line, Dentsply terminated Frink as a Trubyte
merchandise dealer as well. It did so not because Dentsply
believed that Frink would not be an effective merchandise
dealer after adding the Ivoclar tooth line, but because it
“wanted to make a strong point.” (D.I. 429 at 1720)

(b) Similarly, when DLDS sought to add the Universal
and Vita tooth lines, Dentsply threatened it with the loss of

not only the Trubyte tooth line but its merchandise business
as well. (D.1. 425 at 1426-27)

220. In October 1992, Dentsply recognized Jan Dental
as a Trubyte tooth dealer for exclusionary reasons. In order
to obtain the Trubyte tooth line, Jan was required to stop
selling Vita, Kenson, Dentorium and Justi teeth. (GX 24, 26)

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As David Pohl wrote in an October 6, 1992 memo to his
superiors, Robert Brennan and John Weiland, “(o]pening
Jan with teeth will increase our presence within the

laboratory market and eliminate several competitors.” (GX
26 at DS 016474; D.I. 431 at 1909)

221. Darby Dental was recognized as a tooth dealer in
the mid-1990s in order to block Vita from a competitive
distribution point.

(a) In June 1994, Dentsply turned down Darby’s request
to sell Trubyte teeth, stating that it had adequate
distribution in Darby’s area. (GX 63) Indeed, at that same
time, Dentsply internally concluded that it did “not need
additional distribution points.” (GX 77 at DS 015926)

(b) Shortly after receiving this letter, Darby was visited
by its local Vident representative. As a result, Sidney
Nordhauser, the General Manager for Darby Dental,
became interested in selling Vita teeth. (D.1. 457 at 4128)

(c) When Dentsply learned of Darby’s interest in selling
Vita teeth, its position changed. Mr. Nordhauser told the
local Dentsply sales rep, Holly DeFalco, that he was
“seriously considering taking on Vita teeth.” (Jd. at 4129-30)
In response, Ms. DeF alco said:

‘Wait a minute,’ and she got on the phone
right there and then, and I am not sure who
she spoke to, and she said, ‘Don’t do anything,
we will see you next week,’ or something like
that. So we did nothing, we waited, and their
people came to us and it was a different story.

(Id.} Whereas during the earlier discussions, Dentsply
“really didn’t listen to us too much,” these negotiations were
different because of “the fact that we had Vita thrown in. It
made a difference.” (Jd. at 4118, 4130)

(d) Dentsply then authorized Darby as a Trubyte tooth
dealer upon Darby’s agreement not to add the Vita tooth
line. (GX 82 at DS 015663; D.1. 450 at 2636)

wy t

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(e) A December 12, 1994 memo written by Chris Clark,
Director of Sales and Marketing for the Trubyte Division,
shows that Dentsply’s primary motivation for recognizing
Darby was to block Vita from a key competitive distribution
point. Clark was concerned about Vita gaining “a major
distribution point (a third major one after DTS and
Lincoin).” (GX 77 at DS 015926) Clark was also concerned
about the fact that Kent, an affiliate of Darby, was already a
Trubyte tooth dealer and that if Darby added Vita teeth,
“our dealer criteria becomes a sham for others to poke at.”
(/d.) However, the “key issue” for Clark was “Vita’s
potential distribution system. They're having a tough time
getting teeth out to customers. One of their key weaknesses
is their distribution system.” (/d. at DS 015927)

(f) Robert Brennan, Clark’s boss who received this
memo, agreed during his testimony that Darby was
recognized as a tooth dealer “because it prevented Vita from
getting a dealer.” (D.1. 429 at 1743) Brennan believed that
Darby would have increased Vita’s market share at
Dentsply’s expense. (/d. at 1743- 44)

222. In 1995, Dentsply recognized DTS as a tooth dealer
to “fully eliminate the competitive threat they pose by
representing Vita and Ivociar in three of four regions [in
which DTS operated).” (DX 86 at DS 015805) DTS was a
lab-focused dealer that had taken business away from
Dentsply by selling Vita and Ivoclar teeth. (D.1. 450 at
2639-40) Dentsply’s regional manager in the Midwest was
concerned that Dentsply would have to compete even
harder in that region if DTS was not recognized: “Should
our decision be not to open DTS, I will have significant new
competition to allocate time and resources against.” (/d.)

223. The recognition of Jan Dental, Darby and DTS in
the early-to-mid-1990s is significant in light of Robert
Brennan's, Trubyte’s General Manager from 1986 to 1996,
belief that Dentsply had more dealers than needed to
properly distribute its teeth. (D.1. 429 at 1710)

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G. Pricing, Profit Margins And Market Share In
The Artificial Tooth Market
1. Pricing

224. Since 1996, the first full year of its introduction,
Trubyte’s Portrait tooth line consistently has been priced
approximately midway between Vita’s and _ Ivociar’s
premium tooth lines. (DX 511; DX 512; DX 513) In 1996, the
lab price of an anterior 1x6 tooth card for Vita Vitapan was
$29.85, Trubyte’s Portrait was $26.95, and Ivoclar Vivodent
PE Hardened Acrylic was $24.05. In 1997, Vita Vitapan was
priced at $30.45, Trubyte’s Portrait wus priced at $27.75,
and Ivoclar Vivodent PE Hardened Acrylic was priced at
$25.05. In 1998, Vita Vitapan was priced at $31.65 and
Trubyte’s Portrait was priced at $28.45. In 1999, Vita
Vitapan was priced at $32.91, Trubyte’s Portrait was priced
at $29.15, and Vivodent PE Hardened Acrylic was priced at
$26.60. (DX 511; DX 512; DX 513)

225. Between 1992 and 1995, prior to Dentsply’s
introduction of Portrait, Trubyte’s Bioform IPN was priced
closely to Vita’s and Ivoclar’s hardened plastic teeth. (DX
511; DX 512; DX 513) In 1993, the suggested lab price for a
Bioform IPN 1 x 6 anterior tooth card was $21.05, which was
just slightly above Ivoclar Vivodent PE 1x6 anterior at
$20.76, and below Vitapan 1 x 6 anterior at $21.59. (DX 511;
DX 512; DX 513) Since 1996, subsequent to the introduction
of Portrait, Bioform IPN has been priced at parity with
Ivoclar’s comparable Vivodent PE tooth line, and between
$4.00 and $5.00 below Vita’s comparable Vitapan tooth. (DX
511; DX 512; DX 513)

226. William Turner, who was the Senior Product
Manager for Trubyte’s tooth products, described the
process by which he believed Dentsply established prices in
the market: “As the price leader, Dentsply usually sets the
prices in the marketplace and everyone eise contributes or
competes under that broad umbrella.” (D.1. 420 at 401-03,
456) The current General Manager of the Trubyte Division,
Steve Jenson, testified that Dentsply’s pricing of its

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premium teeth offers an opportunity for other tooth brands
to come in underneath what they would consider the right
price. (D.1. 432 at 2217-18)

227. In setting prices, Dentsply consults the consumer
price index for medical and dental materials, or possibly
other indexes of inflation. (D.1. 420 at 456-57) Since 1997,
Dentsply has typically increased its prices by a point, to a
point and a half, over inflation. (/d. at 457-58)

228. Mr. Turner believes Dentsply has not set its own
prices by referencing the prices of competitors. (/d. at 456)
Competitors’ prices have been consulted “just to be aware
what the marketplace was doing.” (/d.)

229. Dentsply has not reacted with lower prices when
others have not followed its price increases. As Myerson’s
president James Swartout testified, Myerson’s prices have
remained unchanged in the past two to three years. And
yet Dentsply has not “changed [its] behavior because of my
failure to raise prices.” (D.1. 425 at 1296)

230. Dentsply has had a reputation for aggressive price
increases in the market. (D.I. 450 at 2650) In his July 1993
monthly report to David Pohl, Regional Sales Manager
Edward Jilek stated that, “we need to moderate our
increases—twice a year for the last few years was not
good!” (GX 42 at DS 024274) This reputation persists today.
Certain dealers selling Trubyte teeth, including Dentsply’s
largest dealer Zahn Dental and its third-largest Darby
Dental, perceive that Dentsply’s prices create a high-price
ambrella. (D.1. 432 at 2219-20)

2. Profit Margins

231. Mr. Clark introduced “cash cow” into Dentsply’s
lexicon to describe the Trubyte Division. Mr. Clark learned
the term cash cow while attending business school. (D.I. 450
at 2605; DX 1595) The term is derived from a Boston
Consulting Group (“BCG”) analysis categorizing businesses
utilizing two criteria: (1) relative growth of the market in
which a business operates; and (2) the business’s market

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share relative to competition. (D.I. 450 at 2605; DX 1595)
Under the BCG analysis, a business that has achieved a
relatively high market share in a low- or no-growth market
is deemed a “cash cow.” (D.1. 450 at 2606; DX 1595) Mr.
Clark testified that, in accordance with his understanding of
the BCG analysis, firms invest in cash cow businesses in
order to milk them so that they continue to give profits back
to the corporation. (D.I. 450 at 2606)

232. Mr. Clark analyzed the Trubyte Division relative to
market conditions, and identified the “basic parameters
upon which [the Trubyte Division) need[ed] to operate in
order to continue to be as successful” as it had been. (Jd. at
2607) Mr. Clark reduced these parameters to writing in a
memorandum entitled “Sales/Distribution Principles for
Cash Cow Business,” which he used in connection with his
quarterly operations review with John Weiland, Senior Vice
President of Dentsply’s North American operations. (GX
171; D.I. 450 at 2607) In the memorandum, Mr. Clark
identified, among others, the following two principles

necessary to the successful operation of Dentsply’s artificial
tooth business in a no growth market:
e Service is e¢rucial—cannot allow
competition to gain toehold via poor
services (either from us or from dealers).

¢ Implications for Trubyte service levels.
¢ Reward/punish dealers based on their
level of customer service?

Block competitive distribution points. Do

not allow competition to achieve toeholds

in dealers.

¢ Tie up dealers.

¢ Do not ‘free up’ key players.
(GX 171 (emphasis original)) Mr. Clark testified concerning
the by-play underlying these two principles. (D.1. 450 at
2607-09) Because the Trubyte Division operated in a cash
cow situation (high market share business in a low or no

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growth market), Dentsply needed to fully leverage the
investments it has made in the business. (Jd. at 2608)

233. Dentsply’s average margin on all of its tooth
products is approximately 80%. Its margin on its premium
anterior teeth is approximately 90%. (D.1. 427 at 1474-76;
D.1. 432 at 2237-38) High margins are expected in a market
with substantial pre-sale promotion. (D.1. 454 at 3640-41)

234. Dentsply’s tooth margins have been increasing
over time. (D.I. 432 at 2237-38; DX 1625 at DPLY-A
200264)

235. Dentsply’s tooth business has long been a highly
profitable, “cash cow” business. (D.1. 432 at 2223) In 1996,
the Trubyte Division’s Long Range Plan stated that
Dentsply/Trubyte was “first and foremost a denture tooth
company, with the primary goal of protecting and defending
this important source of profit and cash to the corporation.”
GX 101 at DPLY-A 037303) It also noted that the division
had “been very successful over the past several years

operating the business as a cash cow. Profits since 1990
have increased 32% from $16.8 million to $22.2 million.” (/d
at DPLY-A 037305)

236. By definition, the profits of a cash cow business are,
at least in part, siphoned away from the Trubyte Division
and used for other projects within the corporation. (D.1. 450
at 2606) Over the years, the Dentsply corporation has used
the profits from the Trubyte “cash cow” to grow through
acquisitions of companies outside the artificial tooth
business. (D.I. 432 at 2221-23)

3. Market Share

237. For many years, the artificial tooth market has
been stagnant in terms of unit growth and sales revenue has
grown only by inflation. (GX 101 at DPLY-A 37304; D.1. 432
at 2304-05; D.1. 448 at 2560; D.1. 427 at 1581)

238. Dentsply has had a persistently high market share,
between 75% and 80% on a revenue basis, in the artificial
tooth market. (D.1. 427 at 1471-72)

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239. Dentsply’s market share is approximately 15 times
larger than its next closest competitor. Ivoclar has the
second-highest share at the market, at approximately 5%.
(Id. at 1472; D.I. 423 at 984-85) The shares of Vita and
Myerson are in the 3% range. (D.I. 427 at 1472; D.I. 419 at
239-40) ATI has a 2% share, Universal’s share is between
1% and 2%, Heraeus Kulzer has a share of about 1%, and
various other rivals have even smaller shares. (D.I1. 427 at
1472)

240. The market share surveys commissioned by
Dentsply demonstrate that it has held a share of
approximately 80% for at least the past 10 years.

(a) Since 1989, the Trubyte Division, through Sam
Thumim, its Manager of Market Research, has
commissioned three surveys of tooth market shares
performed by outside firms: the Market Dynamics survey in
1989; the Axxiom Research survey in 1991; and the Polk-
Lepson survey in the mid-1990s. (D.1. 422 at 928-29, 943-44,
973)

(b) Mr. Thumim was involved in retaining these outside
survey firms and believed that the survey results were
reliable. Mr. Thumim was involved in both retaining Market
Dynamics and in designing the survey. (/d. at 929) He
described that survey as “by far, the most comprehensive,
sophisticated and complex survey we have ever conducted.”
(GX 17 at DS 053918; D.I. 422 at 933) Similarly, Mr. Thumim
was responsible for retaining Axxiom Research and
described that firm as having “a proven track record of
conducting Dentsply surveys.” (GX 18 at DS 954027; D.I.
422 at 941-42) He was also involved, along with Chris Clark,
then Trubyte’s Director of Sales and Marketing, in retaining
Polk-Lepson and in designing that survey. (D.I. 422 at 973-
74)

(c) Mr. Thumim’s analysis of the Axxiom survey results
showed that Dentsply had a 80% market share. In
November 1991, he reported his analysis of the Axxiom
survey results in a series of charts dated November 20,

90a

1991. (GX 20; D.J. 422 at 952-53) His analysis showed
Dentsply’s market share (by sales dollars) to be 80%. Vita’s
share was 2.4%, and Ivoclar’s was 2%. (GX 20 at DS 053579;
D.I. 422 at 958-61) He also concluded that Dentsply’s tooth
market share by units was 67%, and that Vita’s unit share
was 1.32%, and Ivoclar’s was 1.32%. (GX 20 at DS 053583;
D.I. 422 at 963-64) Dentsply’s dollar market shares are
higher than its unit market share because sales of premium
teeth, in which Dentsply has an even greater share, have a
greater influence than sales of economy teeth, because
premium teeth are priced quite a bit higher than economy
teeth. (D.1. 422 at 962-63)

(d) A year later, Mr. Thumim prepared and distributed
another analysis of tooth market shares, in a series of tables
dated September 23, 1992 and charts dated September 25,
1992. (GX 23A; D.I. 422 at 965-68) He concluded that
Dentsply’s market share (by sales dollars) was 81%, and
that Vita’s share was 2.47% and Ivoclar’s was 2.0%. (GX 23-
A at DS 054129; D.I. 422 at 971-72)

(e) These surveys also showed that Dentsply’s share of
the premium tooth segment was at least 80% and, in some
cases, close to 90%. In 1989, the Market Dynamics Survey
showed that Dentsply’s share of the premium tooth segment
was 85% (for anteriors) and 81% (for posteriors). (GX 17 at
DS 053928; D.I. 422 at 935-38) It also concluded that “since
Dentsply dominates all segments and Dentsply’s sales have
been flat, this suggests that the overall market is currently
relatively stable.” (GX 17 at DS 053928; D.I. 422 at 938) In
1991, the Axxiom Research survey showed that Dentsply’s
premium segment share was 89%. (GX 14 at DS 054047;
D.1. 422 at 942-49) The Polk-Lepson survey in the mid 1990s
reported “comparable” results. (D.1. 422 at 975-77)

241. Knowledgeable industry executives concur in the
view that Dentsply’s market share is approximately 80%.
(D.1. 419 at 240; D.I. 457 at 4145-46)

242. Dentsply’s unit volume share is lower than its
dollar volume share of the tooth market. (D.1. 427 at 1554)

9la

Dentsply’s 2001 Trubyte Marketing Plan estimated its share
of the artificial tooth market in units at 56.5%. (DX 1594 at
DPLY-A 200191; D.I. 427 at 1554-55) Dentsply’s share of the
artificial tooth market not counting the sub-economy
segment, a segment Dentsply does not compete in, is 67%
(GX 20 at DS 053583; GX 23-A at DS 054130)

243. Dentsply’s unit share of the tooth market has
declined recently due to increased competition. Mr. Jenson
testified that Dentsply’s tooth unit sales declined 4.2%
between 2000 and 2001. (D.1. 432 at 2097-98; DX 1625 at
DPLY-A 200254) He attributed this decrease in unit sales,
in part, to the competitive entries in 2000 of Heraeus Kulzer
and Leach and Dillon and to Ivoclar’s “more aggressive”
presence in the market. (D.1. 432 at 2098) As a direct
response to Dentsply’s loss of sales at the lab leve], Dentsply
increased its rebate to National Dentex by approximately
1% on purchases Nationa] Dentex makes as part of the
Preferred Laboratory Program. (D.I. 432 at 2311-13; D.I.
452 at 2943-45; DX 1213; DX 101) Additionally, Heraeus
observed a “noticeable” increase of Trubyte advertisements
in direct response to Heraeus’s entry into the U.S. tooth
market. (D.1. 429 at 1870-71)

H. The Level Of Success Of Vita and Ivoclar Is
Due To Their Own Business Decisions

1. Marketing Focus On Crowns and Bridges, Not

Teeth
244. Vident’s stated sales focus during the 1990s was on
porcelain products, not teeth. Vident’s President

acknowledged that the company philosophy has been
“porcelain first.” (D.1. 419 at 361, 370) As of December 1999,
this philosophy resulted in: (1) no measuring system and
lack of follow-up for artificial tooth sales leads; (2)
inconsistencies in training levels and commitment; (3)
minimal direct involvement by the denture product manager
in telemarketing; and (4) minimal support for denture
products by Vident management. (/d. at 361-63)

92a

245. Vident always has lacked a dedicated tooth sales
force. Vident’s outside sales force consists of 15 to 16 sales
representatives. (/d. at 296) Not one outside sales
representative is dedicated to selling and promoting Vita’s
artificial teeth. (/d. at 296-97) Vident recognizes that
requiring its sales force to handle multiple products
constitutes a recurring weakness within its distribution
system. (Jd. at 298) Vident’s President testified that
Dentsply’s Trubyte sales force that is dedicated to
supporting artificial teeth provides Dentsply with a
competitive advantage over Vident. (/d. at 298-99) In 1997-
98, during the short period when Vident directed its sales
representatives to concentrate on teeth, it realized an
increase in tooth sales. (/d. at 297-98) Nonetheless, Vident’s
sales representatives at the time of trial split their time
among thousands of fixed and removable restorative
products sold to dental labs. (/d. at 297)

246. For many years Ivoclar did not employ enough
sales representatives to call on many labs and was perceived
as having a small sales force. (D.I. 431 at 1996; D.I. 453 at
3320; GX 381) In 1988 and 1989, when Ivoclar experimented
with selling teeth through Frink Dental Supply, Ivoclar did
not have enough sales representatives to support tooth sales
through Frink. (D.I. 423 at 1047-48; DX 15) As of July 1989,
Ivoclar had no tooth sales representatives in the field, and
no telemarketing staff. (DX 17 at IVC 23705) In dition,
Ivoclar staffed its Customer Service Department in Buffalo,
New York with just one full-time and one temporary
representative. (DX 17 at IVC 23705)

247. Throughout the 1990s Ivoclar did not employ any
sales representatives that were dedicated specifically to
selling and promoting artificial teeth. (D.1. 423 at 1017-18)
Instead, Ivoclar’s sales representatives were responsible for
selling both crown and bridge products and artificial teeth.
(Jd. at 1018; D.1. 454 at 3462) Ivoclar’s President recognized
in 1996 that his sales representatives focused “most of their
time” promoting crown and bridge products, such as

93a

Ivoclar’s IPS Empress and Concept porcelain systems, due
to the beneficial commission formula. (D.1. 423 at 1073-77;
DX 296 at IVC 4697) Because of the way Ivoclar’s sales
representatives allocated their time, they had “very little
time” to promote all other products, including teeth. (DX
296 at IVC 4697)

248. Those lab customers of Ivoclar who testified at trial
agree that Ivoclar has marketed its crown and bridge
products at the expense of artificial teeth. (D.1. 450 at 2731,
2842-45; D.I. 453 at 3268-69; D.I. 448 at 2351) Additionally,
Ivoclar does not provide on-site technical training, technical
assistance and educational programs to dental lab denture
technicians. (D.1. 431 at 1996-97; D.I. 453 at 32) Nor does
[voclar cosponsor on-site clinics or seminars. (D.I. 431 at
1997)

2. European Moulds/Poor Tooth Quality

249. Ivociar’s President testified that the European
mould and full ridge lap design of its artificial teeth have
been two of the chief obstacles to Ivoclar increasing its
market share in the U.S. market for artificial teeth. (D.I.
423 at 1119-20; DX 1111 at I1VO 100405) Ivociar’s ridge lap
design represents a full lingual contour. The lingual contour
is the inside of the tooth that has contact with the tongue.
(D.I. 423 at 1090) Ivoclar teeth traditionally have been
distinguishable from other tooth lines due to their ridge lap
design. (Jd. at 1015, 1086-87) Ivoclar’s “full” ridge lap, the
portion of the tooth that is processed within the denture
base, is larger and more extended than that of other tooth
brands. (/d. at 1014-15) This full lingual contour was seen as
not “desirous.” (/d. at 1090; DX 1111 at IVO 100405) For
years Gerry Mariacher of National Dentex told Mr. Ganley,
Ivociar’s President, that Ivoclar did not have a suitable
tooth to sell in the U.S. (D.1. 452 at 2910-11)

250. The full ridge lap design creates difficulties setting
the Ivoclar teeth in the denture base material. (DX 1111 at
IVO 100405) Labs must grind the ridge lap down to set the
teeth. (D.1. 452 at 2907-08; DX 1111 at IVO 100405; D.I. 423

94a

at 1015, 1087; D.1. 450 at 2854-55) Accordingly, this grinding
adds additional labor for the denture technician and, in turn,
additional cost to the consumer. (D.I. 423 at 1087-88; D.l.
450 at 2855) Labor is a lab’s largest cost in fabricating a
denture. (D.I. 450 at 2855; D.1. 452 at 2925) Additionally, a
dental lab wastes more materials when it must grind on a
tooth than when it does not. (D.1. 452 at 2925-26) It follows
that the less time a dental lab spends grinding artificial
teeth, the more profitable the lab will be. (D.1. 431 at 2000;
D.I. 423 at 1088)

251. Finally, in 2002, Ivoclar introduced new artificial
tooth moulds called Ortholingual and Orthoplane. (D.1. 423
at 1090-91) After examining the new lines, Mr. Mariacher of
National Dentex informed Mr. Ganley that Ivoclar finally
had addressed the problem with its teeth. (D.1. 452 at 2905-
06) This product introduction was a response to long
standing complaints by American lab technicians concerning

Ivoclar’s European tooth moulds. (DX 1111 at 100405; D.L.
423 at 1088) Mr. Ganley testified that the purpose of
introducing these two lines was to participate in an aspect of
the market that it did not previously participate in. (D.I.
423 at 1086, 1098)

252. These two new lines of Ivoclar teeth have been well
received by labs. (D.I. 452 at 2911-14) In the first year
alone, Ivoclar projects that its sales of Ortholingual and
Orthoplane will increase its market share by 10%. (D.1. 423
at 1111-12) All other existing Ivoclar tooth lines, though,
still are made utilizing European moulds. (/d. at 1091-92)

253. As early as 1995, Ivoclar recognized that dental
schools were using flat plane and non-anatomical teeth to
teach dental students, yet Ivoclar had only anatomical teeth
as part of its tooth offering at the time. (/d. at 1094-96; DX
231) Ivoclar recognized it would have an “easier time within
the university environment” if it offered a tooth suitable for
use with the lingualized occlusion approach. (DX 231) In
light of the long-recognized deficiencies of Ivoclar’s tooth
moulds, in 1999 Ivoclar’s President Robert Ganley finally

a

95a

authorized development of Ivoclar’s new lines. (D.I. 423 at
1090-91)

254. Ivoclar also is expanding its tooth lines further to
include another artificial tooth that has been referred to
internally as a “Dentsply knock-off” tooth because it mimics
Dentsply’s popular American mould offerings. (DX 1111 at
415; D.1. 423 at 1097-98) Ivoclar intends to employ the Vita
shading system with its Dentsply knock-off tooth line. (D.!
423 at 1114) Previously, Ivoclar teeth incorporated their
own unique shading system that largely has been unpopular
with dentists who are accustomed to Vita’s shade systems.
(D.1. 431 at 1995; D.1. 454 at 3463) Mr. Jaslow described
[voclar’s unique shade guide system as “confusing” because
it uses the exact “opposite” of Vita’s letter and number
shade designations. (D.I. 431 at 1995) In his view, Ivoclar’s
shade system makes it difficult for dentists to prescribe
Ivoclar teeth. (/d.; D.1. 429 at 1856-57) To date, Ivociar is
the only tooth manufacturer not to offer a tooth in Vita
shades; even the two newest market entrants, Heraeus
Kulzer and Schottlander, offer a Vita shaded tooth. (D.1.

29 at 1857; D.1. 457 at 4086)

255. Ivoclar teeth tend to “pop” out of denture acrylic.
(D.1. 4381 at 1993-95) As Mr. Jaslow explained, lab
technicians have to drill mechanical retentions to keep the
[vociar teeth in place, and even these are not foolproof. (/d.)
Mr. Mariacher of National Dentex diagramed the bulky
moulds that Ivoclar uses and the difficulties of using those
moulds in the denture fabrication process. (D.1. 452 at 2906-
09)

256. Like Ivoclar teeth, Vita teeth require a substantial
amount of grinding. (D.I. 452 at 2924) As a result, it is
difficult for U.S. dental lab technicians to set Vita teeth
when fabricating dentures. (/d. at 2924-25) Mr. Mariacher
attributes this tooth grinding problem as well as a lack of
advertising on Vident’s part as the principal reasons why
there exists limited demand for Vita teeth in the U.S.
market. (/d. at 2925-26)

96a

3. Failure To Promote Teeth

257. In the 1990s, some labs felt that Vident and Ivoclar
did not adequately invest in promoting their respective
artificial tooth lines. (D.I. 425 at 1395; D.I. 448 at 2350)
Myerson, another rival of Dentsply in the artificial tooth
market, also failed in the 1990s to market its brand.
Myerson President James Swartout conceded that between
1990 and 1993, Myerson/Austenal used no outside sales
representatives to promote teeth. In 1994, it used ‘ust one.
(D.I. 425 at 1359-60) Reynolds Challoner of Lord’s Dental
Studio described Myerson’s tooth promotional efforts as
“almost nonexistent.” (D.1. 450 at 2841; D.I. 431 at 1997-
1998)

258. As a result of Vident and Ivoclar’s lack of
promotional efforts and other tooth related problems, dental
labs and dealers do not experience demand for Vita and
[voclar teeth in the marketplace. (D.I. 420 at 549-550; D.1.
431 at 1998-94; D.I. 450 at 2730-31, 2784; D.1. 452 at 2924;
D.I. 448 at 2350, 2358) Dr. Armstrong explained that Vita
and Ivoclar, unlike Dentsply, do not “{iJnform [their;
potential customers that [they] make a particular product,”
nor do they “inform them as to why it is better ... to use or
buy (their) product than the one they are currently buying.”
(D.1. 448 at 2349-50)

259. Throughout the 1990s, Vita Zahnfabrik hampered
Vident’s ability to create and sustain market demand for
Vita artificial teeth. For example, in 1993, Vident imposed
on its lab customers a 15% restocking fee on returned
broken sets because Vita would not accept back broken sets
from Vident. (D.1. 419 at 367) This generated customer
complaints. (/d.) In the early 1990s, Vita was unable to
supply Vident with an adequate inventory of teeth. (/d. at
357-58) This created backorder problems for Vident, which
resulted in lost consumer confidence in Vita teeth. (/d. at
358) Vident largely “ignored” the tooth product line due in
part to these delivery problems. (/d. at 359)

97a

260. Vident also created its own difficulties in increasing
demand for Vita teeth. Vident initially committed to Vita to
promote its products in order to drive demand for those
products. (Jd. at 312-13) But Vident’s President testified
that one problem associated with this was the hybrid
distribution system that it used to distribute teeth. (/d. at
370)

261. In 1995-1996, Vident implemented a “more
aggressive marketing approach.” (/d. at 368-69) This new
approach coincided with Dentsply’s introduction of Portrait.
(/d.) Vident acknowledged in its 1997 Marketing Plan that
this introduction caused its sales of Vita teeth to decline by
18% (representing approximately a $500,000 decline) in the
first full year that Portrait was in the market. (/d.)

262. In 1997, Vident discontinued tooth advertising and
placed no tooth ads at all in 1998, prompting Vident’s
marketing manager to comment that there exists a
perception among dental labs that Vident does not
advertise. (/d. at 313-18, 370) Gerry Mariacher of National
Dentex observed that Vident does not spend many dollars
marketing its products in trade journals, and does not have
anyone on the lecture circuit who speaks exclusively about
Vita teeth. (D.I. 452 at 2925) During the same time frame
that Vident discontinued al] advertising, sales leads for its
artificial teeth dropped to less than five per week. (D.I. 419
at 319)

263. Denture-focused labs perceived Vident’s outside
sales representatives to make infrequent sales calls on the
labs. (D.I. 450 at 2845; D.I. 453 at 3264- 65) When the
Vident representatives do make sales calls on dental labs,
they focus primarily on promoting Vita’s crown and bridge
products, not teeth. (/d.) The representatives do not
provide on-site technical training and educational programs
to denture lab technicians, nor do they provide technical
assistance to dental labs. (D.I. 432 at 1992; D.I. 453 at 3264)
Mr. Jaslow summarized the difference between the services
offered by his Trubyte sales representative and his Vident

YSa

representative as “almost like night and day.” (D.1. 432 at
1992)

264. Vident has used telemarketing sparingly to
promote Vita artificial teeth. (D.I. 419 at 299-301) Vident
recognized in 1999 that it had not fully utilized its
telemarketing staff with respect to the sale of artificial
teeth. (/d.)

265. Vident acknowledges that it is important to
increase product awareness among dentists who prescribe
dentures, and that a prime method of increasing this
awareness is to focus on dental schools. (/d. at 320-26)
Vident’s documented efforts to court dental students have
been “sporadic.” (/d. at 324) Vident has never had a formal
tooth consignment program for dental schools, and there is
no evidence that Vident has placed a single tooth
consignment with a dental school. (/d. at 324-25) Instead,
Vident requires a dental school to pay for Vita teeth up
front. (/d. at 324) As a result, dental students have minimal

awareness of Vita teeth, and as recently as 1999 Vident has
recognized that product awareness of Vita artificial teeth
from the dentist’s point of view has not been strong. (/d. at
325-26) Vident’s President believes that Vident’s “sales will

stagnate until it becomes better able to promote Vita teeth
directly to dentists.” (/d. at 326)

266. Like Vita and Vident, Ivoclar’s internal business
decisions and tooth strategies have resulted in limited
demand for Ivoclar artificial teeth in the U.S. market. As
early as July 1989, an Ivoclar task force concluded that
Ivoclar’s brochures, statement stuffers, clinical studies and
additional support materials were not sufficient to promote
Ivoclar’s artificial teeth. (D.I. 423 at 1027-28; DX 17 at IVC
23705; D.I. 431 at 1994-95; D.I. 452 at 2909) The task force
also concluded that the lack of a functioning policy or
procedure in place for Ivoclar to take back broken sets of
teeth from dental labs constituted a “major disadvantage”
for Ivoclar in terms of teeth sales compared to Dentsply.
(D.1. 423 at 1029; DX 17 IVC 23705; D.1. 425 at 1398)

99a

267. As a result of this disparity in the sales
representatives’ promotional efforts, as early as 1996, Mr.
Ganley considered hiring a dedicated artificial tooth sales
force. (D.1. 423 at 1077-78; DX 296 at IVC 4697-98) Ivolcar
did not begin to do so until nearly three years later in 1998-
99, when it hired former Dentsply representative Herb
Baird. (D.I. 423 at 1018-19) Ivoclar at the time of trial
maintained five dedicated tooth sales representatives. (/d.
at 1078-79)

268. Ivoclar is perceived as engaging in a “minimal”
effort to create demand at the dentist level to drive sales of
lvoclar’s teeth, despite recognizing the need to do so and
specifically that labs use the brand of teeth dentists
prescribe. (D.I. 450 at 2840; D.1. 423 at 1079-80) Ivociar’s
President testified that Ivoclar for a long time has been
aware of the need to raise dentists’ awareness of Ivoclar
teeth. (D.I. 423 at 1079-80) Nonetheless, Ivoclar sales
representatives do not make sales calls on dentists to
promote artificial teeth. (/d. at 1080-81; D.I. 450 at 2840)
Ivoclar lost its position as the “primary tooth suppiier” with
14 TEREC labs because it failed to provide the necessary
support to sell the teeth. (D.I. 448 at 2352-55) In 1999,
Ivoclar’s marketing budget for all products was $4.5 to $5
million. (D.1. 489 at 4384-86) Of that, Ivoclar earmarked only
$200,000 for marketing artificial teeth. (/d.)

I. Dentsply’s Efforts To Generate Demand For
Its Artificial Teeth At The Dental Lab,
Dentist And Patient Levels

269. Dentsply generates demand for its artificial teeth
through pull-through marketing at all three market levels
(lab, dentist and patient). (D.I. 448 at 2543-44; DX 309-A)
By creating demand at the lab level, Dentsply pulls volume
from the dealer. By creating demand at the dentist level,
Dentsply pulls the product from the lab and the dealer.
(D.1. 448 at 2568; D.I. 420 at 468) Because of the influence
labs have on tooth brand selection for a majority of denture

100a

cases, Dentsply’s primary demand-generation focus is on the
lab. (D.1. 432 at 2140-42, 2165; D.I. 448 at 2543-44)
1. The Trubyte Dedicated Sales Force

270. The primary marketing vehicle that Dentsply uses
to create demand for its Trubyte teeth is its Trubyte
dedicated sales force. (D.I. 448 at 2544; DX 1627 at DPLY
A 200386) Dentsply markets to its customers by making
sales calls on dental labs, dentists and dental schools. (D.1.
432 at 2139-40)

271. Since the early to mid-1990s, Dentsply has
employed between 30 to 32 outside sales representatives.
Dentsply had the largest removable-focused sales force
among its competitors and, not surprisingly, called on more
denture labs than its rivals. (D.I. 448 at 2543-44) Dentsply
also has four Regional Managers who coordinate sales and
marketing efforts in four regions of the United States. (D.1.
432 at 2079-80) The primary responsibility of a Regional
Manager is to train, develop, coach and mentor the sales
representatives. (D.1. 448 at 2545)

272. Until the mid-1980s, the Trubyte sales force spent
most of its time making sales calls on dentists. (D.1. 420 at
466-67) The sales force was engaged in creating pull-through
demand for Trubyte teeth primarily at the dentist level.
(/d. at 468) Dentsply as a company was engaged in creating
pull-through demand for Trubyte teeth. (/d.) Beginning
around 1985, Dentsply began changing the focus of its
promotion from dentists more toward dental labs. (J/d.)
Similarly, Dentsply’s sales representatives started calling
more on dental labs instead of dentists. (/d. at 468-69) Since
that time, the focus of Dentsply sales representatives has
flipped, and they now call mostly on dental labs. (/d. at 469;
D.1. 448 at 2545)

273. Dentsply’s enhanced focus on the dental lab as its
primary promotional target is due to dentists’ declining
interest in dentures. (GX 101 at DPLY-A 37304) Dentists,
today, prescribe few teeth by brand, and instead provide

1l0la

dental labs with wide discretion to select the teeth used for
any given denture case. (GX 101 at DPLY-A 37304)

2. Dentsply’s Promotional Efforts With Dental
Labs

274. Dedicated Trubyte tooth sales representatives
generate demand at the lab level for Trubyte teeth by
calling on dental labs. In 2000, 60% of all Trubyte sales calls
were made to dental labs. (D.I. 432 at 2166) In 2001,
dedicated Trubyte tooth sales representatives made over
20,000 personal sales calls on Trubyte customers. (Jd. at
2139-40; DX 1650 at DPLY-A 200041, 200059) Ten thousand
of these calls were to dental labs, or almost 48% of all sales
calls. (D.1. 432 at 2165-66) Dentsply’s general goal is to have
approximately 65% of the dedicated tooth sales force's calls
maae te dental labs. (Jd. at 2140, 2166) Mr. Weinstock of
Zahn acknowledged that Trubyte sales representatives call
on “every dental! lab” that they can find. (D.1. 420 at 469,
472) He agreed that Dentsply “provides the best marketing

support of any manufacturer in the country.” (/d. at 544)

275. Those lab representatives who testified regarding
Dentsply’s promotional efforts agree that Dentsply does
“make a market” for its teeth. (D.I. 448 at 2349-50; D.I. 431
at 1980; D.I. 452 at 2938-39; D.I. 453 at 3272-76; D.I. 420 at
471)

276. During their sales calls to dental labs, Trubyte
sales representatives spend time with lab owners, denture
department managers and technicians. (D.I. 448 at 2545-46)
Sales representatives perform hands-on product
demonstrations of Trubyte products and help troubleshoot
any technical problems the lab is experiencing with Trubyte
products. (/d.)

277. One of the purposes of a lab sales call is to convert
a lab using competitive artificial teeth to using Trubyte
artificial teeth. (D.1. 432 at 2167) Dentsply accepts the
return of competitive lines of teeth in exchange for Trubyte
teeth only if a dental lab makes the commitment to market

102a

Trubyte teeth. (Jd. at 2169-70) This practice, part of
Dentsply’s Competitive Tooth Stock Conversion Program, is
known as a “tooth swap.” (/d.; D.I. 448 at 2573- 74)

278. Dentsply designed the tooth swap program to
handle the objections of labs that are interested in using
Trubyte teeth but already hold inventories of competitive
teeth. (D.I. 448 at 2573; D.I. 432 at 2169-70) To overcome
the barrier of a competitive inventory, Dentsply will swap
out a lab inventory of competitive teeth if the lab orders
twice that amount in Trubyte teeth. (D.1. 432 at 2169-70)

279. Beginning in 1993, Dentsply established its
Preferred Lab Group Program. (D.I1. 448 at 2534-2537; DX
101; DX 121; DX 251-A) Through this program, Dentsply
provides rebates to participants, in the form of free teeth,
based on labs’ purchases of Trubyte teeth compared to their
nrior year’s purchase volume. (D.1. 448 at 2535-36; D.I. 452
at 2943-44) Dealers play no role in the Preferred Lab Group
Program. (D.I. 448 at 2535; D.1. 452 at 2945) During the first
year of participation in the Preferred Laboratory Group
Program, National Dentex’s Trubyte tooth purchases
increased 40%, Dental Services Group’s purchases increased
13% and Dental Arts Laboratory’s purchases increased 25%.
(D.1. 448 at 2539-40)

280. In addition to cooperative marketing, Dentsply
seeks to stimulate lab purchases of Trubyte teeth by
focusing marketing and promotional efforts on labs. Since
1994, Dentsply has offered the “Add-A-Drawer” Financing
Program. (D.I. 448 at 2518-19; DX 223 at 29088; DX 1603 at
66068) This program, intended to persuade labs to trade up
to the Portrait premium line, provides extended-term
financing to labs that purchase at least one incremental
tooth cabinet drawer of Portrait teeth. (D.I. 448 at 2518-19)
Also to promote lab trade up to the Portrait line, Dentsply
developed the Portrait Spectacular Rebate Program. Under
the program, Dentsply provides labs that purchase a
Portrait tooth stock valued at $1,000 or more with a 5%
rebate, paid in teeth or merchandise products, on Portrait

103a
tooth usage during the six-month interval following the
purchase of the stock. (DX 309 at DPLY-A 91807, 91811;
D.1. 432 at 2171)

281. To streamline the tooth ordering process, Dentsply
developed the Dentsply Order Network or DON system.
(D.I. 432 at 2171; DX 341 at DPLY-A 99720) DON allows
labs to order teeth via the internet or over phone lines using
a bar code scanner with a computer or a portable data
terminal. (D.1. 432 at 2171- 74; DX 341) Without DON, or a
similar system, labs manually review the inventory in their
tooth cabinets, identify those teeth they need to order, place
a telephone call or send the order via fax to a dealer. (D.I.
432 at 2171-72; D.I. 450 at 2836-37) The lab uses DON to
refill its inventory by electronically sending its tooth order
to the dealer. (D.1. 432 at 2172-73; DX 341) DON benefits
labs by: eliminating errors made when ordering Trubyte
teeth; saving time ordering, thereby increasing production;
making ordering easier; reducing tooth out-of-stocks; and
assisting with tooth stock inventory management. (DX 341
at DPLY-A 99718; D.I. 432 at 2172-73; D.I. 450 at 2837-38;
D.I. 431 at 1986-87) DON benefits dealers by: reducing
errors from customers, thereby reducing customer call-
backs; reducing time spent receiving orders because DON
takes less time than phone orders and is more legible than
fax orders; and reducing time spent fulfilling orders because

orders are sorted by brand, upper or lower, mould, and
shade. (DX 341 at DPLYA 99718)

3. Dentsply’s Promotional Efforts Focused On
Dentists

282. At the dentist level, Dentsply’s sales
representatives try to convince dentists to prescribe
Trubyte teeth, thereby increasing the demand. (D.1. 448 at
2546) If the dentist prescribes teeth by brand, labs must
comply with the prescription and use that brand in the
fabrication of a denture. (D.1. 432 at 2141) Dentsply works
toward this objective both through personal sales calls with

104a

dentists and a series of promotional programs geared
specifically to dentists. (D.I. 432 at 2140-49; DX 1601)

283. In addition to the Preferred Laboratory Group
Program, in 1993 Dentsply devised a formalized Laboratory
Cooperative Marketing Program. (DX 223 at DS 29117; DX
309 at DPLY-A 91846; DX 367 at DPLY-A 70647; DX 1580-
C at DPLY 1899; DX 1609 at DS 59517; DX 1611-B at DS
67568; DX 1664 at DPLY-A 200773) The objective of the
program is to work jointly with the labs to create pull-
through demand among dentists for Trubyte teeth in the
form of prescriptions for Trubyte removable denture cases.
(DX 223 at DS 29088) Through its Lab Cooperative
Marketing Program, Dentsply not only increases the volume
of business for the lab, but it also increases the overall
demand for Trubyte teeth.

284. Dentsply’s Laboratory Cooperative Marketing
Program, also includes the “Imprinting Program” in which
Dentsply disseminates promotional material to dentists on
behalf of labs. (D.1. 448 at 2519; D.I. 482 at 2134, 2165; DX
367 at DPLY-A 70650-51) Dentsply imprints the lab’s name,
address, telephone number, and even a logo on Trubyte’s
four color product literature which the lab can insert with
the dentist’s monthly invoice. (DX 367 at DPLY-A 70650)
Dentsply also imprints Work Authorization Forms (i.e.,
prescription pads) with laboratory-specific and Trubyte
product-specific information for dissemination to a lab’s
dentist accounts. (DX 367 at DPLY-A 70650-51)
Information available for imprinting includes: the lab’s
name, address, telephone number and logo; the Trubyte
teeth preferred; the desired Trubyte acrylic; and the shades
and moulds appropriate for the patient. (DX 367 at DPLY-
A 70650)

285. Over the years, Dentsply and dental labs have
worked together in a variety of ways to drive the demand
for Trubyte teeth at the dentist level. Customized
telemarketing on behalf of individual labs has served as a
mainstay of the Laboratory Cooperative Marketing

105a

Program. Dentsply’s telemarketing efforts create demand
for its premium teeth among dentists on behalf of
participating labs. (D.I. 448 at 2519; DX 223 at DS 29119;
DX 309 at DPLY-A 91846-47; DX 367 at DPLY-A 70648-49;
DX 1609 at DS 59517-18; DX 1611-B at DS 67573-74; DX
1664 at DPLY-A 200773-74)

286. There are five stated objectives underlying
Dentsply’s telemarketing efforts: (1) create pull-through
demand for newly placed lab tooth stocks; (2) trade up
dentists who use slower-moving product lines; (3) upgrade
key dentists to premium Trubyte tooth lines; (4) convert
accounts using competitive teeth; and (5) target key dentists
for a high quality denture service message. (DX 223 at DS
29119) To achieve these objectives, Trubyte sales
representatives obtain lists of 25 denture-doing dentist
accounts from dental labs. (DX 223 at DS 29119; DX 309 at
DPLY-A 91846-47; DX 367 at DPLY-A 70648-49; DX 1580-C
at DPLY 1902; DX 1609 at DS 59517-18; DX 1664 at DPLY-
A 200773-74) Dentsply’s inside sales staff targets these
dentist accounts with telemarketing customized on behalf of
each participating lab. (DX 223 at 29119-20; DX 1580-C at
DPLY 1902; DX 1609 at DS 59517-18; DX 1611-B at DS

7573-74) Dentsply follows up with each dentist account
with direct mail product literature, coupons, special offers,
prescription pads, in-office sales aids, and even in-person
sales calls by the Trubyte sales force. (DX 223 at 29119-20;
DX 309 at DPLY-A 91846-47; DX 367 at DPLY-A 70648-49;
DX 1580-C at DPLY 1902; DX 1609 at DS 59517-18; DX
1611-B at DS 67573-74; DX 1664 at DPLY-A 200773-74)

287. Separate and apart from its telemarketing efforts,
Dentsply’s Cooperative Laboratory Marketing Program
uses direct mai] marketing to send dentists marketing
literature, promotional offers, and in-office aids to support
Dentsply’s competitive conversions and premium trade up
efforts. (DX 223 at DS 29122-23; DX 1609 at DS 59517; DX
1611-C at DS 67601) Dentsply also has assisted labs to

106a

develop their own sales plan to market their services to
dentists. (DX 223 at DS 29134)

288. Dentsply, working with labs, identifies “heavy
hitter,” “must-see” and “key” dentist accounts to whom
Trubyte sales representatives make in-office sales
presentations. (DX 223 at 29119-20; DX 1580-C at DPLY
1902; DX 1611-B at DS 67573-74) Dentsply uses direct mail,
on its own and in conjunction with labs, to send dentists
marketing literature, promotional! offers, and in-office aids
to support Dentsply’s competitive conversions and premium
trade up efforts. (DX 223 at 29122-33; DX 1609 at DS 59517;
DX 1611-C at DS 67601)

289. Each year, Dentsply devises direct mail programs
to create pull-through demand -for Trubyte teeth at the
dentist level. For instance, in 1995, Dentsply implemented a
focused direct mail promotional campaign to support its
premium Trublend SLM tooth line. (DX 223 at DS 29122)
With its “Mock Shade Guide Offer,” Dentsply sent dentists
“mock” shade guides with the most popular Trublend
shades, thereby enabling them to prescribe their first
Trublend case without purchasing a Trublend shade guide.
(DX 223 at DS 29122-23) With its “Try Trublend SLM for
IPN Price” promotion, Dentsply sent preprinted (with
individualized laboratory names) work authorization forms
to dentists who owned a Trublend shade guide but did not
regularly prescribe Trublend. (DX 223 at DS 29124-31)
These forms permitted dentists to order Trublend dentures
but pay the lower IPN tooth price, and Dentsply
reimbursed labs the difference with free teeth. (DX 223 at
DS 029124-31)

290. In 1996, Dentsply launched the “Portrait IPN $5
Off Work Authorization Program.” (DX 1580-C at DPLY
1907-12) The program subsidized a $5.00 discount on
Portrait teeth, or about 10% on the price of a card of
anterior teeth and nearly 24% on the price of posterior teeth
to the dentist. (DX 1580-C at DPLY 1907-08; DX 511)

107a

291. The Denture Opportunity Program (“DOP”), the
successor to Dentsply’s Replacement Denture Program, is a
“major initiative” to assist dentists with their practices and
to expand the overall tooth market. (DX 86 at 36141-42; D.I.
432 at 2155-56; DX 367 at DPLY-A 70652) The ultimate goal
of the DOP is to expand the overall denture market. (DX
367 at DPLY-A 70629)

292. The DOP contains three different facets: assist
dentists and their staff with patient management; assist
dentists to create better dentures through educational
programs focusing on technique; and assist dentists with
patient retention. (D.I. 432 at 2155-56)

293. DOP is an example of a promotion that directly
includes the patient. Under the American Dental
Association’s recommended 5 to 7 year life cycle for
dentures, there are an estimated 20 million denture-wearers
who, for a variety of reasons, should have their dentures
replaced. (Jd. at 2156-57; D.I. 448 at 2559) Accordingly, the
patient component of the DOP is known as the “20 Million

Smiles Program.” (D.I. 432 at 2156) The goals of the
program are to “[pjrovide patients with optimal care,”
“felducate patients about replacement dentures,” and
“(tleach patients about premium denture options.” (DX 367
at DPLY-A 70706)

4. Dentsply’s Promotional Efforts Targeting
Dental Schools

294. Dentsply has maintained a presence in the dental
schools for decades. (D.I. 432 at 2138; DX 1611-A; DX 221-
B) Dentsply has invested a considerable amount of time
over many years penetrating the dental schools and trying
to make the dental students familiar with Trubyte teeth.
(D.1. 448 at 2546-47; D.1. 452 at 2936)

295. Dentsply’s tooth sales representatives visit each
dental school about once a month. (D.1. 432 at 2136) In total,
roughly 5% of the dedicated tooth sales force’s calls are
made to dental schools and dealers. (/d. at 2140) This sales

108a

call activity level at dental schools has provided Dentsply
with a long-time strategic advantage. (D.I. 448 at 2546-47)
During each visit, Dentsply’s sales representatives usually
spend a half day in a dental school with key academic
contacts and the school’s:tooth counter manager. (D.I. 432
at 2136- 37; D.I. 448 at 2550)

296. Dentsply consigns tooth stocks to dental schools.
(D.I. 448 at 2547; D.J. 4382 at 2137) There are 53 dental
schools in the United States, and Trubyte teeth are used by
all but one. (D.I. 448 at 2547; D.1. 432 at 2137) Dentsply’s
sales representatives manage these consigned inventories.
(D.I. 482 at 2137-38) Dentsply’s total investment in dental
school tooth stock consignments is $1.8 million. (/d. at 2137)

297. Dental schools use the teeth in clinics, which serve
as the primary teaching vehicle for hands-on application in
dental schools. (D.I. 448 at 2547-48; D.I. 482 at 2136-37)
Dental students utilizing these teeth learn the Trubyte
mould system as part of their dental school instruction.
(D.1. 432 at 2137)

298. Dentsply’s efforts in dental schools flow from the
company’s philosophy “what gets taught gets bought.” (/d
at 2136) Once dentists learn and understand the benefits of a
product, unless something is significantly better, they
generally do not change to a different product. (/d.)

299. Dentsply’s rivals recognize that Dentsply has well-
established “relations with dental schools, old relations.
And each dentist going through school ... prefers to use
[Trubyte teeth} in his office later on [because that is] what
he was taught on.” (D.I. 429 at 1857-58)

5. Education And Training Activities

300. In connection with its product promotional efforts,
Dentsply invests in an Education Department, responsible
for training labs and sometimes dentists and familiarizing
them with Trubyte products. (D.1. 448 at 2552-53) Certified
Dental Technicians (“CDTs”) staff the Trubyte Education
Department. (Jd. at 2552) The Trubyte Division, for a

109a

period, also staffed the Education Department with a
dentist. (/d.)

301. In 1984, Dentsply opened the “Dentsply
Educational Center” at its York, Pennsylvania location.
(DX 331 at 2) The Dentsply Educational Center consists of a
“fully-equipped, state-of-the-art dental laboratory.” (/d.)
Dentsply schedules courses that provide comprehensive
training in removable prosthodontics. (/d.) These courses
include the Trubyte E.P.F. Complete Denture Technique
Course, Expanded Trubyte Complete Denture Workshop,
and Introduction to Basic Procedures Course. (/d.) These
educational courses are “technique-oriented” and focus on
“how to take care of patients” or “do better dentures,”
whether Trubyte products are used or not. (D.1. 432 at
2153; D.1. 458 at 3273-74; D.1. 420 at 470-71; D.1. 452 at 2946-
48)

302. In addition to the Educational Center courses,
Dentsply offers condensed courses, co-sponsored by dental
lab associations, throughout the United States. (DX 331 at
6) The Trubyte Division also provides educational and
training programs jointly with other Dentsply divisions.
(D.I. 432 at 2154-55) For instance, Dentsply has established
“tie-in programs” with Dentsply’s Caulk Division, to teach
dentists techniques to make a better denture, such as
improved impression making, more accurate shade
matching, and how to select the right tooth for the patient.
(/d.)

303. In 1996, Dentsply enhanced its Education
Department with Regional Technical Consultants (“RTCs”).
An RTC is a CDT who also functions as a sales
representative. (D.1. 448 at 2553-54) Dentsply employs one
Trubyte RTC in each of its four sales regions of the United
States. (/d.) RTCs operate closer to the end-user than the
York-based Educational Department staff. (/d.) RTCs
spend up to 30% of their time in their sales region putting on
clinics, courses or training, either formally or informally, and

110a

troubleshooting with labs that are having a difficult time
with Trubyte products. (/d.)

J. The Wind Survey

304. The DOJ’s survey of dental labs purports to show
the effect of brand and distribution options on price. (GX
140) In theory, the survey is meant to predict the
respondents’ purchases of artificial teeth over a three-month
period. (D.1. 427 at 1607)

l. Prof. Wind’s Lack Of Involvement In Design
And Execution Of The DOJ’s Survey

305. The DOJ retained Prof. Yoram Jerry Wind of Wind
Associates to design and conduct a survey of dental labs.
Prof. Wind relied on Dr. Reitman and the DOJ’s lead trial
counsel, William Berlin, as the principal questionnaire
designers. (D.1. 422 at 812, 815-16) Dr. Reitman participated
in designing the survey and formulated the survey
questions. (D.I. 427 at 1539, 1601; D.1. 422 at 822-23) Dr.
Reitman and Mr. Berlin provided Prof. Wind with pricing
and distribution options that underlie the stimuli scenario
cards. (D.1. 427 at 1602) They told him what brands of teeth
to include on the cards. (D.I. 422 at 830) They also led him
to omit a local dealer option for Vita teeth. (/d. at 860-62) At
the time, Vident and 20 sub-distributors located throughout
the country distributed Vita teeth.

306. Prof. Wind was not involved in the collection of
survey data. Wind Associates subcontracted the collection of
survey data to Guideline Research, which in turn
subcontracted the work to a company called TMR. TMR
conducted the actual telephone interviews of lab
respondents. (/d. at 805-08) Prof. Wind did not train
interviewers, create training materials or review written
materials used for training. Guideline Research trained
TMR’s supervisors, and TMR trained the interviewers.
(/d.)

307. Prof. Wind was not involved in monitoring the
interview process. TMR monitored the interviews. (/d. at

lila

809, 817) During the survey process, Prof. Wind did not
know the percentage of lab interviews, if any, that TMR
monitored. (Jd. at 811) Prof. Wind did not review any
completed questionnaires during the survey process, and
performed no interview validation. (/d. at 809- 811)

308. Prof. Wind was not involved with creating or
analyzing the data set. Guideline Research compiled and
input the response data to create cross-tabs and data tapes.
(Jd. at 809-10) Prof. Wind did not analyze the response data,
nor did he analyze the survey data. Prof. Wind retained
Abba Krieger, a university colleague, to run a PRIDEM
model to analyze the survey data. (/d. at 805, 810)

2. The Design Of The Survey Was Far Too
Complicated And Confusing

a. The Screening Questionnaire Failed To
Identify Desired Respondents

309. The Wind survey contains a _ screening
questionnaire. (/d. at 768-69; GX 140, App. D) The purpose
of the screening questionnaire is “to identify the relevant
respondents” by establishing each respondent’s membership
in the survey universe. (D.I. 422 at 768-69) The survey’s
parameters define the universe as “dental lab technicians
responsible for the seiection of plastic artificial teeth
purchased by the lab for use in making dentures.” (GX 140
at 4 (emphasis added)) However, the screening
questionnaire does not identify respondents that make
artificial tooth purchasing decisions. Instead of asking
respondents whether they have “purchasing responsibility”
for the lab, the screening questionnaire asks whether they
are “responsible for selecting the plastic artificial teeth [the
lab} will use.” (GX 140; D.I. 422 at 869)

310. In the normal! course of fabricating a denture,
denture lab technicians will select teeth the lab will use by
taking them from the labs’ tooth inventories and removing
them from tooth cards, without making purchasing
decisions. (D.I. 431 at 1970-71) The survey’s screening

ll2a

questionnaire does not distinguish between’ those
technicians who make purchasing decisions, and those who
merely select teeth from the labs’ inventory for use in a
particular denture case. (GX 140, App. D) Prof. Wind
conceded that if the respondents were not responsible for
purchasing teeth for their labs, then “there wouldn't be a
whole lot of significance to what they think” about the point
allocations. (D.1. 422 at 869)

b. The Questionnaire’s Instructions Were Too

Complex

311. The instructions given to the respondents for
completing the conjoint exercise were far too lengthy,
complicated and difficult to understand. (D.1. 452 at 3011
20) These flawed instructions impact the reliability of the
survey data because the respondents were unable to
understand fully the task presented. (/d. at 3015-16) The
survey procedure required the interviewer to read the
questionnaire’s instructions to the lab respondents over the
telephone. (D.1. 422 at 789-90) Dr. Rossi demonstrated at
trial, by reading aloud, that it would take an interviewer
approximately 2-3 minutes to read the instructions t
respondents. (D.1. 452 at 3012-13) The respondents were
not provided with a written copy of the instructions. (/d. at
3011)

312. The elaborateness of the instructions may have
confused the lab respondents Id. at 3014-16) The
interviewers asked respondents to assimilate 55 pieces of
information and then allocate 100 “points” across eight
different stimuli scenario cards while on the telephone. (GX
140) The instructions do not explain whether the allocation
of points is directed at preference or volume. (D.1. 452 at
3014-15) Confusion regarding the task to be performed
contributes to measurement error which, in turn, makes
survey data less in‘ormative. (/d. at 3016

ll3a
3. The Execution Of The Survey Did Not Meet
Scientific Standards
313. The execution of the DOJ’s survey did not meet the
necessary research standards since there was no pre-test,
the survey had a low response rate, and the respondents
were unable or unwilling to devote the resources to
compieting the survey correctly D.1. 452 at 2999, 3021-22)
a. There Exists A Substantial Risk Of Non
Response Bias Due To Low Response Rate
314. It is incumbent upon t’» awurvey’s proponent to
prove that non-response bias doer “ot exist where the
response rate is below 70 percent. (/d. at 3040) The
Research Manual for Scientific Evidence instructs that
surveys with response rates below 50% should be regarded
with “significant caution” as a basis for precise quantitative
Statements about the population. (/d. at 3041-43) A
response rate below the 50% level serves as a “red flag” that
the survey possibly is not projectable Id.) Dr. Rossi
explained that “everything that we do in standard statistical
inference from computing a simple proportion io these more
complicated manipulations that we are doing here involve(s)
the notion that what we have is really a random sample, so
we can project it.” (/d. at 3047) A low response presents a
“significant risk” that the sample is not random. (/d.)
315. The response rate for the DOJ’s survey is below
40%. (ld. at 3034-37) Before sending out the DOJ’s survey,
Prof. Wind obtained a list of 10,000 dental labs. (D.1. 422 at

768) Prof. Wind’s team initially placed telephone calls to
2,520 of these labs ld. at 770-71) Of these calls. 702 people
refused the initial screening or could not be reached. (/d. at

771) Of the remaining 1,818 eligible respondents, only 1,760

were actual dental labs and of these, only 674 labs actually
fabricated dentures using plastic artificial teeth. (/d. at 771
72) 667 of the respondents indicated they were responsible
for selecting artificial teeth. (/d. at 772) 67 of these labs
refused to participate in the study, leaving 600 potential labs
to participate in the study. (/d.) Prof. Wind’s staff mailed

ll4a

the surveys to the 600 labs. Of these, 274 labs actually
responded. (/d. at 773) Only 261 labs completed the survey.
(D.1. 452 at 3034)

316. “Any reasonable researcher has to calculate a
response rate.” (/d. at 3034) Prof. Wind did not calculate
one. (/d.) Based upon the data provided, Dr. Rossi
calculated that the response rate for the DOJ’s survey was
approximately 39%. It is likely that the response rate is
even lower hecause some portion of the initial 450 labs that
outright refused to participate could have been eligible for
the survey. (/d. at 3035-36) The highest possible response
rate for the DOJ’s survey, 39%, raises a serious concern that
the survey’s sample universe is not representative. (/d. at
3037) A survey that suffers from non-response bias cannot
be fixed by any other means than re-doing the entire
survey. (/d. at 3050-51)

317. To dispel the risk of non-response bias, Prof. Wind
had to establish both that (1) measurable characteristics of
non-respondents are similar to those of respondents, and (2)

these characteristics are predictive of, or related to,
attitudes towards distribution options. (/d. at 3045-46) Prof.
Wind could have gathered information concerning the size
(i.e., number of technicians) of the non-respondent labs and
compared them to the size of the respondent labs, to show
that the two groups are comprised of labs with similar
characteristics. (Jd.) Even if he did this, Prof. Wind also
would have had to prove that a lab’s size is related to its
view on local dealer availability. (/d.) Prof. Wind failed to
gather any information concerning the characteristics of
non-responding labs. (D.1. 422 at 897-98; D.1. 452 at 3046-47)
b. The Failure To Conduct A Pre-Test Makes
The Survey Unreliable

318. The lack of a pre-test to protect against non-
response bias or confusion over terms used in the survey
renders the results unreliable. A pre-test involves the use
of the draft of the survey questionnaire, including
instructions and stimuli. (D.1. 452 at 3022-23) The survey

ll5a

then is administered to a sub-sample of the target
population, which in this case generally was defined as
dental lab technicians responsible for selecting artificial
teeth used to fabricate dentures (/d.) The survey
administrator then reviews the particular questions with
the pre-test respondents, as well as definitions of key words
(/d.) The administrator also asks the respondents to
paraphrase the survey’s instructions in an effort to test the
respondents’ understanding of the instructions. (/d.) Based
on this feedback, the wording and nature of questions and
instructions are revised. (/d.) As Prof. Wind testified, “{t he
major reason for a pre-test is to see whether the respondent
understands the questions and can answer the questionnaire
in a meaningful fashion.” (D.1. 422 at 854)

319. The DOJ’s survey was never pre-testec. (/d.) Pre-
tests are “absolutely essential” in survey research. (D.1. 452
at 3023) At trial, Dr. Rossi read an excerpt on the critical
nature of pre-testing written by Prof. Wind’s colleague, Dr.
Paul Green, at page 271 of Research for Marketing
Decisions:
| Pre-testing. Pre-testing of questionnaires is a
virtual necessity. The only way to gain real
assurance that questions are unambiguous is
to try them. Pre-testing is almost always
done initially by asking proposed questions of
associates. To be truly effective, however,
pre-testing of questions should be conducted
by asking them of a group of respondents
who are similar to those who will be
interviewed in the final example. It is the
rule, rather than the exception, that
questions will be revised as a result of pre
testing. Several versions of a question may
need to be considered as a result of pre
testing before the final version is decided
upon.

1l6a

(/d. at 3024-25) Prof. Wind hired Dr. Green to assist with the
DOJ’s survey. (D.1. 422 at 805) Design flaws in the DOJ’s
survey could have been detected and corrected with a pre-
test. (/d. at 3023-26)
ce. The Tasks Requested Of Respondents Were
Too Complex And Confusing

320. The lack of variation among individual respondent’s
completed stimuli scenario cards suggests that respondents
were unwilling or unable to devote the time necessary to
take the survey seriously. The conjoint exercise involved
allocating 100 points in each of eight stimuli cards. (D.1. 452
at 3052) Dr. Rossi found considerable evidence in the
pattern of responses showing that the lab respondents were
unable or simply unwilling to provide accurate responses.
(/d. at 3051-52) For example, some respondents returned
less than all eight scenario cards. (/d. at 3035) In half of the
cards, labs did not seem to care about huge variations in
price and distribution options. One-half of the respondents
did not vary their points across the eight cards—even
though prices declined dramatically on some of the cards.
(/d. at 3052-53) Because these responses run counter to
other evidence that labs are extremely price-sensitive, it is
likely that the labs did not complete the requested task
seriously. (/d. at 3052-55) Prof. Wind testified that even
though 48% of respondents did not vary their market share
allocation, he still used this data because it could reflect
brand loyalty. (D.I. 422 at 886-88) Such extreme brand
loyalty, i.e., respondents are so wed to particular brands
regardless of price differences, would likely result in these
respondents allocating a large fraction of points to a
particular brand. (D.I. 452 at 3055-56) The fairly even
distribution of points across brands by these respondents is
inconsistent with Prof. Wind’s extreme brand loyalty
theory. (/d.)

321. Guideline Research engaged in the widespread
practice of editing scenario cards that did not total 100
Points and using those edited cards as data. For those cards

1l7a

that did not add up to 100 points, a Guideline Research
interviewer changed the points on the completed cards.
(D.1. 422 at 888-89)

322. In total, Guideline Research changed the point
allocations for approximately 38 questionnaires, so that
about 15% of all completed questionnaires or 7% of all
respondent cards had points changed. (D.1. 457 at 4066-67)
All 38 scenario cards were used to compile the survey data.
(D.1. 422 at 887-888)

323. Dr. Reitman admitted that since the model is based
on input from the survey, if the inaccuracy of the survey
data was “widespread,” then the accuracy of the results
would be problematic. (D.I. 457 at 4056-57) When
questioned about the adjustments made to numerous cards,
Dr. Reitman acknowledged that some of the reallocations
constitute material adjustments and not merely scaling
adjustments. He then admitted that if all of the changes
resulted in a larger share shift for Vita and Ivoclar, then it
could create a suspicion about his results. (/d. at 4069-71)

d. The Results Of The Analysis Of The Survey
Data Are Not Replicable

324. A key aspect of any scientific approach is
replicability. (D.I. 452 at 3061) Replicability is the ability of
another person educated in the art of the area to replicate
the results of the analysis. (/d.) This enables the reviewer
to inspect the analysis and critique it, which is the whole
point of the scientific inquiry. (/d.) This allows other
scientists to learn from the analysis. (/d.) The scientific
method is every bit as applicable in survey research as it is
in other scientific domains. (/d.)

325. Dr. Rossi was unable to replicate the PRIDEM
software used to analyze the data derived from the DOJ’s
survey. (/d. at 3064-65) Prof. Wind regards PRIDEM as
propriety software. Prof. Wind asserted that the only way
to access PRIDEM is to hire Prof. Wind or one of his
associates. (/d.; D.1. 422 at 900-01) The DOJ did not produce

118a

the source code for PRIDEM to Dr. Rossi. (D.I. 453 at 3242)
He could not inspect the computer instructions underlying
PRIDEM. (D.I. 452 at 3065) As Dr. Rossi pointed out, it
was not necessary for the DOJ to utilize PRIDEM to
undertake analysis of the survey data. (/d.) There are a
number of standard statistical methods and packages
available that can perform the analysis and that are fully
replicable. (/d.)

e. The Lack Of A Standard Error Calculation
Renders The Conclusions Meaningless

326. Prof. Wind’s and Dr. Reitman’s failure to calculate
a standard error measurement for the survey result has
rendered the survey data uninformative. A confidence
interval is a measure of percent of people who respond in a
certain way. The measure is used to help determine
whether the estimate given is statistically significant. In
common parlance, the estimate is sometimes referred to as
“plus or minus a percentage.” Thus, a confidence interval
typically is presented as plus or minus x%. (D.1. 422 at 904)
Prof. Wind did not calculate a confidence interval with
PRIDEM, claiming that it was impossible to do. (/d. at 903-
05) Dr. Rossi testified that Sawtooth, a commercial version
of PRIDEM, provides confidence intervals, standard errors
and other measures of reliability. (D.I. 452 at 3068-69)

327. Neither Prof. Wind nor Dr. Reitman calculated a
sampling error for their estimates of share change and price
change. (Jd. at 3066-67) According to Prof. Wind, the
important question is not whether estimations are
statistically significant, but rather whether estimations are
“managerially significant.” (D.1. 422 at 905) In his opinion,
the concept of statistical significance is not the same as
managerial significance. (/d. at 905-06) Prof. Wind stated
that his intention was to provide the court with an
estimation and have the trier of fact determine whether the
estimation is “managerially meaningful.” (/d. at 906-07)

328. As Dr. Rossi testified, it is “absolutely incumbent
upon anyone using a sample to make inferences about the

119a

population [to] produce some measure of statistical
reliability.” (D.1. 452 at 3061)

f. The Manipulation Of The Analysis Of The
Survey Data

329. Dr. Reitman’s mode! produced negative marginal
costs. (D.1. 452 at 3079) In other words, the model produced
a result that showed that, instead of incurring production
costs, tooth manufacturers are paid to manufacture a
marginal unit, i.e., their next unit, of teeth. (/d.) As Dr.
Rossi explained, negative marginal costs in a production
environment are not possible.

330. Dr. Reitman used parameters on price sensitivity
for Dentsply and for other premium brands. (/d. at 3078-79)
Dr. Reitman arbitrarily changed the price sensitivity
parameter for the other premium brands. (D.I. 453 at 3210)
This change allowed Dr. Reitman to obtain an economically
plausible result. (D.1. 452 at 3081) There is no justification
for changing the parameters of a mode! based on criteria
other than the sample data. (/d. at 3082)

K. Dentsply Has Not Established That its
Alleged Business Justifications Are Sufficient
to Justify its Exclusive Dealing

331. Dentsply has failed to meet its burden to show that
its exclusive dealing practices here are justified by a non-
pretextual, pro-competitive rationale.

1. Dentsply’s Alleged Business Justifications
Are Pretextual

332. As shown above, the contemporaneous evidence is
clear that Dentsply’s express purpose in enacting and
enforcing Dealer Criterion 6 was anti-corpetitive—to
“block” Dentsply’s competitors from the dealers selling

Trubyte teeth by tying up those dealers
333. One rationale Dentsply has relied on is the need to
“focus” its dealers on selling Trubyte teeth. This rationale is
most explicitly set forth in an interrogatory response

120a

provided during the investigation that preceded the filing of

this case:
In Dentsply’s experience, the greater the
number of competing tooth lines carried, the
less likely that a dealer will be able to sustain
all of the desired service and promotional
elements at a high, competitive level. In
short, service and promotional support for a
particular line is likely to suffer the greater
the number of lines carried. Recognizing the
need for dealers to focus their efforts in order
to effectively promote the company’s teeth
and service laboratory customers, the
company formalized criteria in February 1993
for dealers to meet in order to be Trubyte
teeth dealers. One of these criteria is that
dealers that are recognized as authorized
distributors of Trubyte teeth cannot add
additional lines of teeth after becoming a

Trubyte dealer.
(GX 157 at Interrogatory Response No. 13)

334. The former Dentsply executive responsible for
promulgating Dealer Criterion 6, Robert Brennan, General
Manager of the Trubyte Division, also provided this same
“focus dealer services” rationale as an explanation for
Dealer Criterion 6. (D.1. 429 at 1719-20)

335. The “focus dealer services” rationale is not a valid
justification for using exclusive dealing in the tooth industry
because dealers have every incentive on their own to make
sure that their level of service for any given tooth brand
does not suffer. (D.I. 457 at 3927-28) If a dealer provides
inadequate service, it risks losing customers, not only for
teeth, but also all the other products the customer may buy
from the dealer. (/d. at 3928) In fact, there is much greater
risk to the dealer than to Dentsply. If a customer is
dissatisfied with the service it receives from one Dentsply
dealer, it will simply buy Trubyte teeth from another dealer

12la

Dentsply’s sales will stay the same but the dealer will lose
that customer’s business altogether. (/d.)

336. Testimony from, and the conduct of, Dentsply’s
own dealers undermines Dentsply’s alleged concern over
dealer “focus.” Both Norman Weinstock and Betsy Harris
testified that if they added another line of teeth, it would not
affect their level of service or the amount of Trubyte teeth
they stock. (D.I. 417 at 190-91; D.1. 420 at 605, 664) Dealers
selling the “grandfathered” brands have shown no lack of
focus on Trubyte teeth despite the fact that they sell these
other products. (D.I. 425 at 1427-28; D.I. 420 at 664; D.I. 417
at 142) Indeed, Dentsply’s own Chris Clark acknowledged
that Zahn Dental, which sells Universal, Myerson, and other
rival brands, is a more effective dealer than some less
exclusive dealers. (D.1. 450 at 2685)

337. Moreover, the “focus dealer services” rationale
communicated by Dentsply is inconsistent with Prof.
Marvel’s efficiency rationale articulated in this case. (D.I.
457 at 3974) Prof. Marvel has not endorsed this particular

’

rationale for exclusive dealing. (/d. at 3929) To the contrary,
he stated in his 1982 paper that enhancing dealer services
cannot be the justification for exclusive dealing. (/d. at 3929;
D.1. 455 at 3704-06)

338. Instead of endorsing the contemporaneous
rationale for Deal
140a

maintenance of that power as distinguished from growth or

development as a consequence of a superior product,
business acumen, or historic accident.” Eastman Kodak,
004 US. at 480, 112 S.Ct. 2072 (quoting U.S v. Grinnell
Corp., 384 U.S. 563, 570-571, 86 S.Ct. 1698, 16 L.Ed.2d 778
1966
Dentsply Does Not Have Monopoly Power In
The Market For Artificial Teeth

22. “Monopoly power is generally defined as the power
to control prices or to exclude competition, and the size of
market share is a primary determinant of whether monopoly
power exists.” Pennsylvania Dental Ass'n v. Medical Ser
Ass'n of Pa., 745 F.2d 248. 260 (3d Cir.1984). Grinnell, 384
US. at 571, 86 S.Ct. 1698 (“The existence of such power
ordinarily may be inferred from the predominant share of
the market.’

23. Based on Dentsply’s predominant market share.
monopoly power may be inferred. Dentsply’s market share
on a revenue basis is between 75-80%. On a unit basis, in
the segments Dentsply competes in, Dentsply holds a ¢
market share. Dentsply has maintained this dominant
market share for years. Such a predominant market share
is sufficient for the court to infer monopoly power See, €.0
American Tobacco Co. v. U.S., 328 US. 781, 797, 66 S.Ct
1125, 90 L.Ed. 1575, (1946) (over two-thirds of the market is
a monopoly » see alao Grinnell. 3834 U.S. at 571. 86 S.Ct. 1698

_—
sé 4

(listing cases)

24. The inquiry does not end with proof of ugh market
snare The DOJ must also prove Dentsply has the power to
control prices or exclude cornpetition. See Vahu Gas Service
Inc. v. Pacific Res., Inc., 838 F.2d 360, 366 (9th Cir.1988)
(“([Miarket share is just the starting point for assessing
market power A high market share, though it may
ordinarily raise an inference of monopoly power, will not do
so In a market with low entry Oarrners or otner evi lence of a
defendant's inability te control prices or exclude

ompetitors.” (internal citations and quotation

i4la

25. In the case at bar, the DOJ has failed to preve that
Dentsply has the power to control prices or exclude
competitors

26. Dentsply’s criterion 6, while clearly intending to
exclude competitors from dealers, does not exclude
competitors from the consumer—the dental laboratories.
As previously discussed, direct selling to the laboratories is
a viable and, in some ways, advantageous method of
distribution. Dentsply does not have the power to exclude
competitors from the ultimate consumer

27. Furthermore, Dentsply’s two main rivals, Vicent
and Ivociar, have failed to gain market share as a result of
their own business decisions, not Dentsply’s exclusionary
practices

28. Dentsply’s inability to exclude competitors is
further evidenced by the entry of Heraeus Kulzer and Davis
Schottlander & Davis, as well as Ivoclar’s recent expansion
of its line to include American style moulds. Cf. Barr Labs.,
978 F.2d at 114 (“Wie think the continued entry of
competition, albeit with small initial market share shown on
this record, indicates that Abbott’s position is subject to
significant potential erosion.”)

29. The DOJ has failed to prove that Dentsply’s
exclusive dealing arrangement with dealers is a barrier to
entry in the artificial tooth market. While it may be easier
and more expeditious for a new entrant to enter the market
with established Dentsply dealers, competition can thrive
via direct distribution or through partnership with existing
(albeit smaller) dental dealers. Moreover, any new or

existing tooth manufacturer may “steal” a Dentsply dealer
by offering a superior product at a lower price

30. The DOJ also failed to prove that Dentsply controls
prices The evidence shows that Dentsply teeth are
generally pmced between Vident and lIvoclar teeth
Although one former Dentsply employee testified that
Dentsply does not establish its prices in relation to the

142a

competition, this is insufficient to establish that Dentsply
controls price. The DOJ has provided no evidence that
Dentsply has established a market of supra-competitive
pricing. Dentsply’s profit margin, while high, was not
shown to be high relative to any other tooth manufacturer.
Moreover, high margins are to be expected in a market in
which significant pre-sale promotion is employed.

31. The DOJ asserts that Dentsply was slow to react to
changes in the market, specifically with the introduction of
its Vita-shaded line of teeth (Portrait). Contrary to an
indiction of control over prices and exclusion of competitors,
any lack of urgency on the part of Dentsply to react to
market demands is a result of a lack of competition pushing
Dentsply to compete. As the court has already discussed,
this lack of competition is due to Vident’s and Ivoclar’s own
husiness decisions, not Dentsply’s exclusionary practices.

2. The Willful Acquisition or Maintenance of
Monopoly Power

32. Although Dentsply’s high market share could lead to
a conclusion that Dentsply possesses monopoly power,
“merely possessing monopoly power is not itself an antitrust
violation{.!” Microsoft, 253 F.3d at 51 (citing Northeastern
Tel. Co. v. AT & T, 651 F.2d 76, 84-85 (2d Cir.1981)). “A firm
violates § 2 only when it acquires or maintains, or attempts
to acquire or maintain, a monopoly by engaging in
exclusionary conduct ‘as distinguished from growth or
development as a consequence of a superior product,
business acumen, or historic accident.” Microsoft, 253 F.3d
at 58 (quoting Grinnell, 384 U.S. at 571, 86 S.Ct. 1698).

33. The “rule of reason” analysis under § 2 is similar to
the analysis of a §1 claim. See Microsoft, 253 F.3d at 59
(internal citations and quotations omitted). As discussed
previously, the DOJ has failed to prove that Dentsply has
created a market with supra-competitive pricing. Under the
rule of reason, the court concludes that the circumstances of
the artificial tooth market require a finding that Dentsply’s

143a
Dealer Criterion 6 is not an unreasonable restraint on
competition.

34. The DOJ has focused extensively on Dentsply’s
anticompetitive intent in establishing Dealer Criterion 6
While the court agrees that Dentsply’s intent has clearly
been anticompetitive, even the DOJ admits that “bad’
intent alone [does] not establish that conduct |
anticompetitive where the conduct appears objectively

aes

incapable of harming competition{.J” (D.1. 477 at 41

35. In sum, 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 [.!" LePawe’s, 324 F.3d at 159

C. Dentsply’s Justification Of Dealer Criterion 6
ls Pretextual

36. In the event that the DOJ had established Dentsply
violated the Sherman and/or Clayton Acts, Dentsply has
offered a pro-competitive justification for Dealer Criterion
6. The burden in on Dentsply to show that Dealer Criterion
6 is sufficiently pro-competitive. See Brown Univ., 5 F 3d at
669.

37. In this case, the court concludes that Dentsply’s
justification for Dealer Criterion 6 (either to focus dealers or
protect their investment in promotion of artificial teeth) is
merely pretextual. Dentsply’s pre-litigation rationale for
Dealer Criterion 6 was expressly to exclude competitors
from dealers and not to focus dealers or protect Dentsply’s
investment in promoting artificial teeth. See LePage's, 324
F.3d at 159 (“When a monopolist’s actions are designed to
prevent one or more new or potential competitors from
gaining a foothold in the market by exclusionary, Le
predatory, conduct, its success in that goal is not only
injurious to the potential competitor but also to competition

l44a

in general.”). Dentsply cannot prove that Dealer Criterion 6
is pro-competitive

38. Other evidence further belies the litigation inspired
justification for Dealer Criterion 6, such as: (a) Dentsply’s
expert admitted that exclusive dealing with dealers is not
necessary to protect promotion with dentists and
consumers; (6) no evidence exists of dealers practicing “bait
and switch” tactics despite years of opportunity with
grandfathered brands; (c) most promotion is brand specific
and not free-ridabie; (d) Dentsply enforced Dealer Criterion
6 against ‘Trinity—a dealer that did not carry Trubyte teeth
but only merchandise; (e) Dentsply threatened Frink with
losing its dealership of other Dentsply products beyond
artificial teeth; and (f) Dentsply approved Darby as a dealer
despite concluding that there was no need for additional
distribution.

D. Evidentiary Issues

39. The Wind Survey. As discussed in the court's
findings of fact: (1) the screening questionnaire failed to
identify relevant respondents; (2) the questionnaire
instructions were complex and confusing; (3) a pre-test was
not conducted; (4) the response rate was low; (5) non-
response bias was not addressed; (6) respondents were
unwilling or unable to devote time to take the survey
seriously; (7) the results could not be replicated; (8) a
standard error measurement was not calculated; and (9) a
key parameter estimate was arbitrarily changed. The court
finds that the Wind Survey and the expert testimony based
on the survey do not possess “circumstantial guarantees of
trustworthiness|.]” See Fed. R. Evid 702, 708 and 807; see
generally Pittsburgh Press Club v. U.S., 579 F.2d 751 (Gd
Cir.1978) (excluding survey because the survey was not
conducted in accordance with generally accepted survey
principles and not used in a statistically correct way). Thus,
the survey is entitled to no weight and inadmissible under
the Federal Rules of Evidence The Wind Survey is
preciuded and has not been considered by the court

145a

Accordingly, the expert opinions of Prof. Wind and Dr.
Reitman, to the extent their opinions are based on the
survey, are inadmissible as well. See Pittsburgh Press, 579
F.2d at 760. Finally, the court notes that even if the survey
were admissible, the defects in the survey design and
execution would require the court as factfinder to give the
survey no weight.

40. Dentsply Surveys. Dentsply objects to the
admission of surveys previously commissioned by Dentsply
to establish market share, as well as the analysis of the
surveys by Dentsply employees. Specifically, Dentsply
objects to exhibits GX 14, GX 17, GX 20, and GX 23-A. The
court finds that the documents were made by Dentsply’s
agents or employees within the scope of the agency or
employment and adopted by Dentsply. Thus, the exhibits
are admissible under Rule 801(d)(2)(D) and 801(d)\(2)(B).

41. The DOJ argues that certain exhibits and testimony
are inadmissible for hearsay or foundation issues. The court
has reviewed each of the DOJ’s objections and determined
that the evidence cited by the court in the findings of fact is
admissible under the Federal Rules of Evidence.

IV. CONCLUSION

For the reasons stated, Dentsply has not violated § 1 or
2 of the Sherman Act or §3 of the Clayton Act. An
appropriate order shall issue and judgment shali be entered
accordingly

146a

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 03-4097

UNITED STATES OF AMERICA,
Appellant

V.

DENTSPLY INTERNATIONAL, INC.,
Appellee

BEFORE: SCIRICA, Chief Judge, SLOVITER,
NYGAARD, ALITO, ROTH, McKEE, RENDELL,
BARRY, AMBRO, FUENTES, SMITH, FISHER, VAN
ANTWERPEN, WEIS, and ROSENN, CIRCUIT
JUDGES

SUR PETITION FOR PANEL REHEARING
WITH SUGGESTION FOR REHEARING EN BANC

The petition for rehearing filed by Appellee having
been submitted to the judges who participated in the
decision of this Court, and to all the other available circuit
judges in active service, and no judge who concurred in the
decision having asked for rehearing, and a majority of the
circuit judges of the circuit in regular active service not
having voted for rehearing by the court en banc, the petition
for rehearing is DENIED.

As to Pane! Rehearing Only

147a

BY THE COURT:

Js Weis

United States Circuit Judge

DATED: May 17, 2005

Margaret M. Zwisler, Esq
Richard A. Ripley, Esq
Douglas S. Morin, Esa
William D. Johnston, Esq
Robert B. Nicholson, Esq
Eric J. McCarthy, Eso
Kelly A. Clement, Esq
Christian D. Wright, Esa
Adam D. Hirsh, bse

148a

T*TLE 15. COMMERCE AND TRADE
CHAPTER 1. MONOPOLIES AND COMBINATIONS
IN RESTRAINT OF TRADE

§ 2. Monopolizing trade a felony; penalty

Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person or
persons, to monopolize any part of the trade or commerce
among the several States, or with foreign nations, shall be
deemed guilty of a felony, and, on conviction thereof, shall
be punished by fine not exceeding $100,000,000 if a
corporation, or, if any other person, $1,000,000, or by
imprisonment not exceeding i0 years, or by both said
punishments, in the discretion of the court

§ 14. Sale, etc., on agreement not to use goods of
competitor

It shall be unlawful for any person engaged in commerce, in
the course of such commerce, to lease or make a sale or
contract for sale of goods, wares, merchandise, machinery,
supplies, or other commodities, whether patented or
unpatented, for use, consumption, or resale within the
United States or any Territory ‘»ereof or the District of
Columbia or any insular possession or other place under the
jurisdiction of the United States, or fix a price charged
therefor, or discount from, or rebate upon, such price, on the
condition, agreement, or understanding (at the lessee or
purchaser thereof shall not use or deal in the goods, wares,
merchandise, machinery, supplies, or other commodities of a

competitor or competitors of the lessor or seller. where the

effect of such lease, sale, or contract for sale or such
condition, agreement, or understanding may be to
substantially lessen competition or tend to create a

monopoly in any une of commerce

149a
- VOLUME F -

IN THE UNITED STATES DISTRICT COURT
IN AND FOR THE DISTRICT OF DELAWARE

UNITED STATES OF
AMERICA, |
Plaintiff : CIVIL ACTION

NO. 99-005 (SLR)

DENTSPLY
NTERNATIONAL, INC

Defendant

Wilmington, Delaware
Monday, April 22, 2002
9:30 o'clock, a.m.

BEFORE: HONORABLE SUE L. ROBINSON,
Chief Judge

APPEARANCES

DEPARTMENT OF JUSTICE

BY WILLIAM E. BERLIN, ESQ.,
JON B. JACOBS, ESQ..,
STEVEN KRAMER, ESQ.,
SANFORD M. ADLER, ESQ.,
(Washington, D.C.)

Counse! for the Government

150a
APPEARANCES (Continued):

YOUNG, CONAWAY, STARGATT & TAYLOR
BY: CHRISTIAN DOUGLAS WRIGHT, ESQ
and WILLIAM D. JOHNSTON, ESQ

HOWREY & SIMON

BY: MARGARET M. ZWISLER, ESO
RICHARD A. RIPLEY, ES@Q..
KELLY A. CLEMENT, ESQ. and
ERIC J. MecCARTHY, ESQ
(Washington, D.C

-and

DENTSPLY INTERNATIONAL, IN‘
BY: BRIAN ADDISON, ESQ

Counsel for Dentsply International, In

(1220)

Q. And can you tell me what impact not having the

access to dealers as you would

factory operation

A. We, as | said. have been making
years in Trinidad. We now employ roughly 120 people. We
are only running at one shift, and that one shift is not
anywhere near—it's not at its capacity

15la

We have the capability of producing three times
as many teeth as we do today, without any additional
investments in capital. So as a result, we’re running our
factory inefficiently right now, thereby increasing our costs
of production

152a
- VOLUME L -

IN THE UNITED STATES DISTRICT COURT
IN AND FOR THE DISTRICT OF DELAWARE

UNITED STATES OF
AMERICA,
Plaintiff CIVIL ACTION
NO. 99-005 (SLR

DENTSPLY
INTERNATIONAL, INC
Defendant

Wilmington, Delaware
Tuesday, May 21, 2002

9-35 o'clock. a.m

BEFORE: HONORABLE SUE L. ROBINSON

Chief Judge
APPEARANCES

DEPARTMENT OF JUSTICE

BY WILLIAM E. BERLIN, ES@Q.,
JON B. JACOBS, ESQ..,
STEVEN KRAMER, ESQ@..,
SANFORD M. ADLER, ESQ..
MARK J. BOTTI, ESQ. and
FRED YOUNG, ESQ
Washington, D.C.)

Counse! for the Government

153a
APPEARANCES (Continued):
YOUNG, CONAWAY, STARGATT & TAYLOR

BY: CHRISTIAN DOUGLAS WRIGHT, ESQ.
and WILLIAM D. JOHNSTON, ESQ.

-and

HOWREY & SIMON

BY: MARGARET M. ZWISLER, ESQ.,
RICHARD A. RIPLEY, ESQ.,
KELLY A. CLEMENT, ESQ. and
ERIC J. McCARTHY, ESQ.
(Washington, D.C.)

-and-

DENTSPLY INTERNATIONAL, INC.
BY: BRIAN ADDISON, ESQ.

Counsel for Dentsply International, Inc.

Q. Now, did TEREC approach Dentsply about
pricing issues, in some way relate to the volume discount
agreements that it got from Vita and I voclar?

A. We did.

Q. Can you explain a little bit about that?

154a

A. We just met with them and said basically we
have some volumes discounts that are available to us. Is
there anything you can do if you can’t sell direct to us

Q. And did Dentsply respond’

A. Yes. They said we will not sell direct to you and
they came back with what they call incentive rebate
agreement that basically tried to get us to hold the volume
and increase it, if possible, to be able to obtain some free
teeth the following year

Q. And what was the nature of the incentive rebate
that TEREC obtained from Dentsply

A. It was—the nature was that if you hit over a
base amount of volume, you would get 5-3/4 percent, |
[2850] think something like that incentive, and then if we hit

110 percent of the volume, of the prior year, then we would
get up to an 8-3/4 percent

155a

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

NQ. 08-4097

UNITED STATES OF AMERICA

DENTSPLY INTERNATIONAL, INC.

Transcript from the audiotapes of the oral argument
held Tuesday, September 21, 2004, at the United States
Court House, 601 Market Street, Philadelphia,
Pennsylvania. This transcript was produced by James
DeCrescenzo, a Registered Diplomate Reporter, an
Approved Reporter of the United States District Court,
and Notary Public

BEFORE:
THE HONORABLE THEODORE A. McKEE

THE HONORABLE MAX ROSENN
THE HONORABLE JOSEPH F. WEIS, JR.

THE COURT: Well, even though it’s not the
ultimate market, would there be any legal reason [61] why
you did not define the relevant market for Sherman and
Clayton purposes as being the dealers and not the labs?

156a

MR. HIRSH Well, the labs are the ultimate
consumers.

THE COURT: But you could have a scenario,
couldn’t you, where there was a constraint not on the
ultimate consumer but something other than that which
may have had an impact on that, the dynamics of that
limited market, the submarket?

MR. HIRSH: Well, the, I mean the actual product
market is prefabricated artificial teeth and geographic
market is the United States. Those aren’t an issue. So

it’s—

THE COURT: Once you get the prefab teeth as the
definition that takes you to the lab and that drives it beyond
the dealer.

MR. HIRSH: Right. The lab is the ultimate
consumer of the teeth in the raw tooth form, and of course
they then make dentures and sell to dentists who sell to the
patient. And everyone agrees those aren’t the true
consumers here because the lab is the last end user to use it

as a prefabricated tooth.

2 FILED
DEC 9 - 2005
OFFICE OF THE CLERK
No. 05-397 -- SUPREME COURT Ns.

In the Supreme Court of the Gnited States

DENTSPLY INTERNATIONAL, INC., PETITIONER
Vv.
UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

PAUL D. CLEMENT
Solicitor General
Counsel of Record

THOMAS O. BARNETT

Acting Assistant Attorney
General

GERALD F. MASOUDI

Deputy Assistant Attorney
General

ROBERT B. NICHOLSON
ADAM D. HIRSH
Attorneys

Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

QUESTION PRESENTED

Whether the court of appeals erred in holding that a
monopolist’s successful efforts to prevent key dealers
from distributing the products of its rivals violate
Section 2 of the Sherman Act, 15 U.S.C. 2, when those
efforts contribute significantly to the preservation of the
manufacturer’s monopoly and serve no purpose other
than to eliminate competition.

(I)

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TABLE OF CONTENTS
Page
GED cndocdncvcvcosuedsevsesescceevecccoesess l
PED cucoubbactenddsaoesenccrebesabéstooesescnn: l
Statutory provision involved ..............cceeeeceeeeeees 2
Dt ini died deeubhendueenosdababennededuckns 2
BEES cc ccddccedecedeecoceececcteeseeedesencocovess 7)
DEEL canupowedvecdenesrndececedousdeceeséesetees 20
TABLE OF AUTHORITIES
Cases:
Brotherhood of Locomotive Firemen v. Bangor
& Aroostook R.R., 389 U.S. 327 (1967) ............ 10
CDC Technologies, inc. v. IDEXX Labs., Inc.,
ig 5 fk | er rT err err 18
Conwood Co., L.P. v. United States Tobacco Co.,
290 F.3d 768 (6th Cir. 2002), cert. denied, 537
i PT steed chusddundadetedddedecns 13, 14
Eastman Kodak Co. v. Image Technical Servs.,
PR Bee Se GEE GHEE ebsvvcdsccesesscceess 10, 15
Hamilton-Brown Shoe Co. v. Wolf Bros.,
gt kL ee eee 10
LePage’s Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003),
cert. denied, 542 U.S. 953 (2004) ............ 6, 15, 16
Omega Envt'l Inc. v. Gilbarco, Inc., 127 F.3d
1157 (9th Cir. 1997), cert. denied, 525 U.S. 812
Dt? “66 -cadesasdpitinedatdecbedaedtédueeseone 18
Roland Mach. Co. v. Dresser Indus., Inc.,
749 F.2d 380 (7th Cir. 1984) 2... ccc ccccccccccsees 19

(IIT)

foe VG. uA ww Nes ee MA
IV
Cases—Continued: Page

Roy B. Taylor Sales, Inc. v. Hollymatic Corp.,
28 F.3d 1379 (5th Cir. 1994) , cert. denied,

gt BE ree ee 19
Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215 (8th

Cir. 1987), cert. denied, 484 U.S. 1026 (1988) ...... 19
Seagood Trading Corp. v. Jerrico, Inc., 924 F.2d

Dae ey DEED awksenesucecdsossubennenese 19
Tampa Elec. Co. v. Nashville Coal Co.,

git Sf | RP Perr rrr rT Tere ttre. 15,17
U.S. Healthcare, Inc. v. Healthsource, Inc.,

986 F.2d 589 (Ist Cir. 1998) .......ccccecceeees 15,19
United States v. Microsoft Corp., 253 F.3d

34 (D.C. Cir.), cert. denied, 534 U.S. 952

CEE odessavndsddeesoces suaekesees 7, 13, 14, 15, 16
Verizon Communications Inc. v. Law Offices of

Curtis V. Trinko, LLP, 540 U.S. 398 (2004) ....... 14
Virginia Military Inst. v. United States,

Se IEE necnccccdeveesccsscedeuenedoa 10

Statutes and rule:

Clayton Act $3,156 U.S.C.14 ..........cesevces passim
Sherman Act, 15 U.S.C. 1 et seq.:

hs Os B Hdbcendsvosveviccdavesniewns passim

DURES cacnvesdccesecevoessiccivwar passim
, § |’ A PPP Prerererrerrrrrrrr rr re 9

Miscellaneous:

Robert L. Stern et al., Supreme Court Practice
CD ee ace cebsscesstesevesevenecuesess 10

(a

i

, 7
‘4 ‘ : " ~ he * is ees 4. f » ~~ uN a"

Miscellaneous—Continued: Page

3 Philip Areeda & Donald F. Turner, Antitrust
Law: An Analysis of Antitrust Principles and
Pee SEGRE Scccecdcacécdoesesscdss 15

In the Supreme Court of the Anited States

No. 05-337
DENTSPLY INTERNATIONAL, INC., PETITIONER
v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-26a)
is reported at 399 F.3d 181. The opinion of the district
court (Pet. App. 27a-145a) is reported at 277 F’. Supp. 2d
387.

JURISDICTION

The judgment of the court of appeals was entered on
February 24, 2005. A petition for rehearing was denied
on May 17, 2005. Pet. App. 146a-147a. On July 28, 2005,
Justice Souter extended the time within which to file a
petition for a writ of certiorari to and including Septem-
ber 14, 2005, and the petition was filed on that date. The
jurisdiction of this Court is invoked under 28 U.S.C.
1254(1).

STATUTORY PROVISION INVOLVED

Section 2 0° ‘ne Sherman Act provides, in relevant
part: “Every; © on who shall monopolize * * * any part
of the trade or commerce among the several States * * *
shall be deemed guilty of a felony.” 15 U.S.C. 2.

STATEMENT

The United States alleged in this antitrust action
that petitioner Dentsply International, Inc., maintained
its monopoly in prefabricated artificial teeth in violation
of Section 2 of the Sherman Act, 15 U.S.C. 2, by prevent-
ing independent tooth dealers from distributing the
teeth manufactured by petitioner’s rivals. The com-
plaint also claimed that petitioner made exclusive deal-
ing agreements that are illegal under Section 1 of the
Sherman Act, 15 U.S.C. 1, and Section 3 of the Clayton
Act, 15 U.S.C. 14. Following a bench trial, the district
court entered judgment for petitioner on all counts. Pet.
App. 27a-145a. The United States appealed the district
court’s Section 2 ruling. The court of appeals held that
the district court incorrectly applied the controlling le-
gal standards and that several! of its key findings of fact
were clearly erroneous. /d. at la-26a. The court of ap-
peals therefore reversed, and remanded “with directions
to grant injunctive relief requested by the Government.”
Id. at 26a.

1. The district court made extensive findings of fact.
Pet. App. 28a-134a. It properly found that the relevant
market is the market for “sale of prefabricated artificial
teeth in the United States” and that petitioner has held,
“for at least” a decade, a “predominant market share”
amounting to 75% to 80% of the market, based on reve-
nue. /d. at 28a (FF 1), 88a-89a (FF 238-240), 140a (CL

3

23).' Petitioner’s “primary” and “next closest” competi-
tors, Ivoclar and Vita, have 5% and 3% market shares,
respectively. Jd. at 32a (FF 26), 34a (FF 36), 89a (FF
239).

The district court also found that petitioner is the
“price leader” in the market, has “a reputation for ag-
gressive price increases,” and “create|s} a high-price
umbrella” for artificial teeth. Pet. App. 85a-86a (FF
226, 230). Petitioner “has not reacted with lower prices
when others have not followed its price increases.” /d.
at 86a (FF 229). Although the tooth market has been
“stagnant in terms of unit growth,” id. at 88a (FF 237),
the district court found that petitioner’s profit margins
on teeth have been “high” and “increasing over time,”
id. at 88a (F F 233-234), and its tooth division “has long
been a highly profitable, ‘cash cow’ business,” id. at 88a
(FF 235).

As the district court recognized, petitioner sells its
teeth and related products exclusively through a net-
work of 23 national and regional dentai laboratory deal-
ers, which collectively have abou* 100 tooth stock outlets
essentially covering almost every major metropolitan
area and far exceeding the number of stocks of any com-
petitor. Pet. App. 3la (FF 20, 22), 38a (FF 56), 52a (FF
109); C.A. App. A1931-A1932. Taose dealers supply the
7,000 dental laboratories that fabricate dentures with
“the full range of products that dental labs use.” Pet.
App. 37a-39a (FF 55, 58-59). The dealers are “inde-
pendent businesses, selling under their own name and
not [petitioner’s], and offering thousands of different
products that are made by hundreds of different manu-

' “PF” and“CL’ refer, respectively, to the district court's numbered
findings of fact, Pet. App. 28a-134a, and conclusions of law, id. at 134a-
145a.

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4

facturers,” including “large inventories” of artificial
teeth. /d. at 80a (FF 212), 38a (FF 57). The services
that dealers provide to laboratories include delivery,
same-day availability, one-stop shopping, handling tooth
returns, inventory management, and handling accounts
receivable. /d. at 45a-49a (FF 82-98). Petitioner is the
only tooth manufacturer that makes no direct sales to
laboratories. /d. at 2a, 3la-32a, 34a-35a, 36a, 57a-58a,
60a (FF 20, 27, 40, 47, 131, 139).

The district court found that, for more than fifteen
years, petitioner has operated under a policy that dis-
courages its dealers from adding competitors’ teeth to
their product lines. See Pet. App. 69a (FF 174). Peti-
tioner prohibits existing dealers from adding the teeth
of competitors—a policy codified in 1993 as Dealer Cri-
terion 6—and, as a condition of acceptance, requires
prospective Dentsply tooth dealers to drop most or all
competing brands.” /d. at 68a, 70a (FF 169-170, 178).
Under a “grandfather” provision, petitioner has permit-
ted dealers to continue carrying competing brands that
they were carrying when that criterion was announced.
Id. at 70a (FF 175). Vita and Ivoclar, however, are “not
among the grandfathered brands.” /d. at 127a-128a (FF
349).

The district court found that the “express” and “sole”
purpose of Dealer Criterion 6 was “anti-competi-
tive”’—to “block competitive distribution points,” “(t]ie
up dealers,” and “exclude [petitioner’s] competitors
from the dealers.” Pet. App. 81a, 70a, 119a (FF 216, 176,
217, 332). The district court rejected, as “merely pre-

* Dealer Criterion 6 provides that “{i]n order to effectively promote
Dentsply/York products, dealers that are recognized as authorized
distributors may not add further tooth lines to their product offering.”
Pet. App. 68a (FF 169).

o

textual,” id. at 143a (CL 37), petitioner’s proffered busi-
ness justifications for its dealer policies—that the poli-

ies were needed to help “focus” dealers and to prevent
“free riding” by rival manufacturers. /d. at 119a-134a
(FF 331-369).

The district court also found that petitioner’s exist-
ing and prospective dealers wanted to carry competing
brands, and “[vjehement|ly]” and “vigorously” opposed
Dealer Criterion 6. Pet. App. 130a (FF 358). Despite
that opposition, petitioner successfully enforced Dealer
Criterion 6 by terminating or threatening to terminate
several dealers. /d. at 72a-80a (FF 186-211). The dis-
trict court documented numerous incidents in which pe-
titioner coerced a current or prospective dealer not to
sell rival brands. /d. at 36a, 59a, 69a-72a, 73a-80a, 82a-
84a (FF 47, 136, 174, 179-185, 187-211, 218-223). Al-
though dealers distributing petitioner’s teeth have the
legal right to end their agreements at any time without
contractual penalty, id. at 53a (FF 110-111), the district
court found that since at least 1992 “no dealer hafd]
agreed to walk away from [petitioner’s line of] tooth
business to take on a competitive line,” id. at 70a (FF
177).

Nevertheless, the district court also found that direct
distribution to dental laboratories—bypassing deal-
ers—provided petitioner’s rival manufacturers with a
“‘viable’ method of distributing artificial teeth.” Pet.
App. 42a (FF 71).’ That finding formed the basis for its
conclusions that petitioner did not violate the exclusive

* See also Pet. App. 137a(CL 11) (direct distribution is a “viable and,
in some ways, advantageous method of distribution”); id. at 14la (CL
26); id. at 143a (CL 35) (“direct distribution is viable”). The district
court further concluded that “non-Dentsply dealérs are available, and
Dentsply dealers may be converted at any time.” /d. at 143a (CL 35).

6

dealing prohibitions of Section 1 of the Sherm

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_0207%3A1. Public record. Not legal advice.