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Dentsply Monopoly: A Test of Antitrust Law's Teeth
Subject Monopoly; comparisons with perfect competition; antitrust law
Topic Monopoly, Market Failure, Regulation and Public Choice
Key Words Antitrust law, exclusive dealing, Justice Department, price
News Story

Dentsply International, Inc. is a dental supply company that produces artificial teeth, among other products. The Justice Department alleges that it has violated federal antitrust law through its exclusive-dealing arrangements with authorized dealers who sell its products. According to Dentsply's criteria for independent dealers, they are prevented from selling other brands of false teeth. The justification is that the effective promotion of Trubyte teeth requires no competing products be offered. One dealer tried to sell multiple brands, but Dentsply stopped supplying him with Trubyte; when other dealers sold him some of their stock, Dentsply is alleged to have threatened to cut them off also. The need of dealers to sell the dominant brand forces them to take Dentsply's threats seriously.

Dentsply began in 1899 as the Dentists Supply Co. of New York, but grew through acquisitions, marketing, the support of dental schools, and strong management. It now supplies 70 percent of artificial teeth in the U.S.

The Justice Department estimates that terminating the alleged exclusive dealing arrangements would reduce the price of artificial teeth by 5 to 20 percent. The price of dentures would not fall as much because the teeth are only part of a set of dentures.

(Updated October 10, 2002)

Questions
1.

Explain how exclusive dealing arrangements lead to increased monopoly power in the artificial tooth market.

2. When Dentsply started business, it was small. Assume it was part of a perfectly competitive industry.
a) Draw a diagram of the equilibrium price and output of a perfectly competitive artificial tooth industry, including the marginal revenue and demand curves and the marginal cost curve.
b) Show how, as Dentsply took over other firms in the industry and allegedly made exclusive dealing contracts, and came to approximate a monopoly, its equilibrium price and output changed. (Assume the curves remained the same.) Explain what you draw.
3. 3. Which antitrust law is alleged to have been broken?
Source Pamela Sebastian Ridge, "Big Tooth? Suit Says Dentsply Has a Monopoly," The Wall Street Journal, April 12, 2002.

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