Arizona AG accuses dental suppliers of fraud
Benco and others stifled competition, suit claims
Arizona Attorney General Mark Brnovich filed a lawsuit Wednesday against three major dental supply companies over antitrust and consumer fraud claims dating back to 2014.
The suit charges Benco and two other companies cited as the “Big Three” for committing acts which stifled competition, including spreading knowingly false rumors to force a new, cheaper dental supplier out of business and a “coordinated boycott” of the Arizona Dental Association to pressure consumers to buy from Benco, according to a press release from the Arizona Attorney General’s Office.
If Benco is found guilty of these charges, Brnovich is seeking remedies that would give money back to the consumers misled by the company and strip the company of all profits made from the use of anti-competitive and deceptive tactics.
“My office is committed to preventing conspiracies against free competition,” Brnovich said in the press release. “We will continue to fight to ensure Arizona consumers are not harmed by anticompetitive and deceptive acts and practices.”
The suit by the attorney general alleges violations of antitrust laws and consumer fraud against Benco, the only company named as a defendant. The two other companies that compose the Big Three are not named in the lawsuit.
Antitrust laws are an established practice in the Untied States to protect consumers from monopolies in business that would stifle competition and inhibit consumer choice.
The consumer fraud charge that Benco is facing is due to suspected lying and deception about the products SourceOne Dental sold to manufacturers and dentists, implying that SourceOne sold products that were not up to safety standards.
Benco, along with the two other major dental distributors in Arizona, felt their market share was threatened by the emergence of SourceOne Dental in 2014, the attorney general alleges in the suit.
SourceOne emerged with the help of a relationship with the Arizona Dental Association and an online retail platform to allowed dentists to purchase products at a lower cost than previously available.
The established Big Three used a sales force team to meet in-person with dentists to sell products to their offices. This business model had been used for decades by the companies, and the threats of cheaper products from a new competitor spurred retaliatory action, according to the suit.
Benco, along with the two other major dental supply companies in Arizona, took “collective, coordinated action” in an attempt to oust SourceOne from the Arizona dental market, the attorney general’s suit alleges.
The Big Three boycotted any state dental associations which held a partnership with SourceOne, claiming those institutions were now competitors, according to the suit. This action would freeze SourceOne’s ability to form new relationships with consumers of its products.
State dental associations cannot buy dental equipment, so they use distributors like SourceOne to help consumers in the dental industry to receive the least expensive products for their business.
The Big Three attempted to strongarm its consumers at dental offices to continue to order their more expensive products instead of those at SourceOne, the lawsuit alleges.
The other approach that Benco, the smallest member of the Big Three, used to protect its market share was spread knowingly false rumors to people in the dental industry that SourceOne was selling “gray market products,” according to the filings by Brnovich.
Gray market products, as the report states, is a term in the dental industry that describe consumable goods that are sold outside of an owner’s distribution channels. Gray market products may lack warranty or violate U.S. safety codes.
Benco’s invocation of “gray market products” to describe SourceOne’s goods were used to deceive dentists and protect Benco’s market share.