## Facts

- SmileCare and Delta Dental sold dental insurance plans to employers, unions, and individuals in California.
- Delta Dental allegedly covered about 60% of Californians with dental insurance and contracted (nonexclusively) with about 95% of California dentists.
- Delta offered co-payment plans requiring patients to pay a defined co-payment directly to participating dentists at the time of service; provider contracts prohibited dentists from waiving co-payments.
- SmileCare sold “SmileCare Coverage Plus,” a supplemental product designed to pay a patient’s co-payment obligation under a primary plan by paying the dentist directly, so the patient would not pay out of pocket.
- Delta refused to treat supplemental insurer payments as satisfying the patient co-payment and warned dentists that accepting such payments in lieu of patient co-payments could breach Delta provider contracts, risking reduced reimbursement or termination.
- SmileCare alleged Delta adopted and enforced this policy to eliminate SmileCare’s supplemental product and preserve Delta’s market position.
- SmileCare sued under § 2 of the Sherman Act for monopolization and attempted monopolization; the district court dismissed under Rule 12(b)(6), and SmileCare appealed.

## Issues

1. Whether Delta’s refusal to recognize supplemental insurer payments as co-payments, and its enforcement of provider contract terms requiring patient co-payments, plausibly alleged exclusionary conduct supporting monopolization or attempted monopolization under Sherman Act § 2.
2. Whether SmileCare adequately alleged a relevant market and competitive relationship showing harm to competition rather than harm only to SmileCare’s product.

## Decision

- The Ninth Circuit affirmed the Rule 12(b)(6) dismissal of SmileCare’s Sherman Act § 2 claims.
- The court held the alleged conduct was not plausibly exclusionary or anticompetitive in the § 2 sense.
- The court credited Delta’s legitimate business justification: preserving co-payments as a utilization-control mechanism.
- The complaint did not plausibly allege market-wide anticompetitive effects (such as higher prices, reduced output, or diminished consumer choice) attributable to the challenged policy.

## Legal Principles

- Monopolization requires (1) monopoly power in a relevant market and (2) willful acquisition or maintenance of that power through exclusionary conduct, not through competition on the merits.
- Attempted monopolization requires specific intent, anticompetitive (predatory or exclusionary) conduct, and a dangerous probability of achieving monopoly power.
- Antitrust law requires harm to competition, not merely harm to a competitor; allegations must connect challenged conduct to reduced competition in the relevant market.
- A firm, including a dominant one, generally may design and enforce plan terms and may unilaterally refuse certain dealing arrangements when supported by legitimate business reasons, absent exclusionary effects in the market.
- Contractual requirements tied to a plan’s economic design (such as patient co-payments serving cost and utilization control) can be legitimate justifications that defeat an inference of exclusionary conduct at the pleading stage when no competitive harm is plausibly alleged.

## Conclusion

The Ninth Circuit held that enforcing patient co-payment requirements against dentists who would accept supplemental insurer payments was a plan-design decision supported by legitimate utilization-control objectives, and SmileCare’s allegations showed at most injury to its supplemental product rather than injury to competition; therefore, the § 2 claims were properly dismissed.


SmileCare Dental Grp. v. Delta Dental Plan of Cal., Inc., 88 F.3d 780 (9th Cir. 1996)