## Facts

- The United States brought a civil antitrust action against Delta Dental of Rhode Island, a dominant dental insurer in Rhode Island.
- Delta contracted with a large share of Rhode Island dentists and used “most favored nation” (MFN) clauses in provider agreements.
- The MFN provisions allegedly appeared in contracts with about 90% of actively practicing dentists in the state.
- Delta’s plans allegedly covered roughly 35–45% of persons with dental insurance in Rhode Island.
- The MFNs allegedly required participating dentists not to charge other purchasers lower fees than those charged to Delta, or to give Delta the benefit of any lower fee offered elsewhere.
- The government alleged the MFNs deterred discounting, impeded entry or expansion of lower-fee rivals, and maintained or increased dental-insurance premiums.
- The complaint did not allege predatory pricing or below-incremental-cost pricing; it alleged exclusionary effects from widespread MFN contracting by a firm with substantial market share.

## Issues

1. Whether allegations that a dominant insurer used MFN clauses covering most providers plausibly stated an unreasonable restraint of trade under Sherman Act § 1 under a rule-of-reason framework, despite no claim of below-cost pricing.
2. Whether the complaint plausibly alleged monopolization or attempted monopolization under Sherman Act § 2 based on MFN clauses functioning as exclusionary conduct, even without predatory pricing allegations.
3. Whether the complaint satisfied Rule 12(b)(6) pleading standards such that the government’s claims could proceed to discovery.

## Decision

- The court denied Delta’s Rule 12(b)(6) motion to dismiss.
- The court adopted in full the magistrate judge’s report and recommendation, including its factual statement and Rule 12(b)(6) analysis.
- The court held that the complaint adequately stated claims under both Sherman Act § 1 and § 2.

## Legal Principles

- Under Sherman Act § 1, a plaintiff must allege (and ultimately prove) an agreement and an unreasonable restraint of trade; vertical contractual restraints are generally evaluated under the rule of reason, which examines market structure and competitive effects.
- MFN clauses are not categorically lawful; when used broadly by a firm with substantial market presence, they can plausibly be alleged to restrain trade by deterring discounting and limiting rivals’ ability to compete on price.
- Sherman Act § 2 can be based on exclusionary contracting practices that preserve or threaten to preserve monopoly power; predatory or below-cost pricing is not a required element where the challenged conduct is plausibly exclusionary.
- On a Rule 12(b)(6) motion, well-pleaded allegations regarding market share, breadth of contractual coverage, and exclusionary effects may suffice to state antitrust claims and proceed beyond the pleading stage.

## Conclusion

The court allowed the government’s Sherman Act §§ 1 and 2 case to proceed, holding that allegations of widespread MFN clauses imposed by a dominant dental insurer plausibly described unreasonable restraint and exclusionary conduct even absent below-cost pricing allegations.


United States v. Delta Dental of R.I., 943 F. Supp. 172 (D.R.I. 1996)