## Facts

- Dentsply International, Inc. manufactured prefabricated artificial teeth and sold primarily through a network of dental-product dealers to dental laboratories.
- The relevant market was the sale of prefabricated artificial teeth in the United States.
- The market was mature and low-growth, with multiple manufacturers, but Dentsply held a dominant share (about 75%–80% by revenue and about two-thirds by units) and was far larger than its nearest competitor.
- Dentsply distributed through 23 authorized dealers; its top five dealers accounted for the large majority of its sales.
- In 1993, Dentsply adopted “Dealer Criterion 6,” which barred authorized dealers from adding competing tooth lines to their offerings; existing rival lines at some dealers were grandfathered, but dealers could not add new rivals.
- Dealer relationships were terminable at will, but Dentsply communicated that dealers risked losing authorization if they carried new competing lines.
- Dealers generally wanted multiple lines but avoided adding rivals because Dentsply’s line was economically important to them; major dealers effectively carried only Dentsply for artificial teeth.
- The district court found Dentsply’s asserted business justifications for Criterion 6 were pretextual and aimed at excluding rivals from dealer access, but it nevertheless ruled for Dentsply, reasoning rivals could sell directly or use other dealers and foreclosure was not proven.
- The United States appealed the denial of injunctive relief.

## Issues

1. Whether Dentsply possessed monopoly power in the U.S. market for prefabricated artificial teeth.
2. Whether Dealer Criterion 6 constituted exclusionary conduct that unlawfully maintained monopoly power in violation of Sherman Act § 2.
3. Whether the lack of long-term exclusive contracts, and the district court’s view of the Clayton Act § 3 claim, precluded liability under Sherman Act § 2.

## Decision

- The Third Circuit reversed the judgment for Dentsply and remanded with directions to grant injunctive relief.
- The court held Dentsply had monopoly power in the relevant market and unlawfully maintained that power through an effective exclusivity policy imposed on dealers.
- The court ruled that the policy’s effectiveness did not depend on long-term written contracts; a terminable-at-will arrangement can still be exclusionary when economic realities make the restraint durable.
- The court found it unnecessary to rest decision on the Sherman Act § 1 or Clayton Act § 3 claims because Sherman Act § 2 liability was established.

## Legal Principles

- A Sherman Act § 2 violation requires (1) monopoly power and (2) maintenance of that power through exclusionary conduct rather than lawful competition on the merits.
- Exclusive dealing is not inherently unlawful, but may violate § 2 when used by a monopolist to block rivals from a distribution channel that is practically necessary to compete and when entry or expansion is meaningfully impeded.
- Monopoly power may be inferred from very high market share, market structure, and evidence of pricing power.
- The absence of formal, long-term exclusive contracts does not defeat a § 2 claim if the exclusivity policy is effective in practice because dealers are economically constrained by the threat of termination and dependence on the monopolist’s product.
- Non-liability (or an asserted failure of proof) under Clayton Act § 3 does not bar Sherman Act § 2 liability based on the same course of exclusive-dealing conduct.
- Pretextual business justifications do not excuse exclusionary conduct aimed at suppressing rivals’ access to effective distribution.

## Conclusion

The Third Circuit held that Dentsply’s Dealer Criterion 6 operated as a de facto exclusive dealing regime that foreclosed rivals from the key dealer distribution channel and maintained Dentsply’s monopoly in prefabricated artificial teeth, warranting injunctive relief under Sherman Act § 2.


United States v. Dentsply Int’l, Inc., 399 F.3d 181 (3d Cir. 2005)