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BARBARA J. NELSON PHILLIP R, MALONE CARLA G. ADDICKS Antitrust Division U.S. Department of Justice 450 Golden Gate Avenue Box 36046, 10th Floor San Francisco, California 94102 (415) 956-6300 Attorneys for the United States IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA UNITED STATES OF AMERICA, and STATE OF ARIZONA, by and through its Attorney General Grant Woods, Plaintiffs, Civil No. 94-1793 PHX PCR vs. Filed: August 30, 1994 DELTA DENTAL PLAN OF ARIZONA, INC., AN ARIZONA CORPORATION, Defendant. VE. MEN’ Pursuant to Section 2(b) of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16(b) - (h), the United States submits this Competitive Impact Statement relating to the proposed Final Judgment (or “the Judgment") submitted for entry against and with the consent of Delta Dental Plan of Arizona, Inc,, an Arizona Corporation, in this civil antitrust proceeding. I NATURE AND PURPOSE OF THE PROCEEDING on » 1994, the United States and the State of Arizona, acting under the direction of their respective Attorneys General, filed this civil antitrust suit. Count one of the Complaint, brought by both the United States and the State of Arizona, alleges that Delta Dental Plan of Arizona, Inc. ("Delta"), an Arizona corporation, and its co-conspirators conspired to unreasonably restrain competition by restraining or eliminating discounting of fees for dental services in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, Count One of the Complaint asks the Court to find that Delta has violated Section 1 of the Sherman Act, and further requests the Court to enjoin the continuance of the conspiracy. Count Two of the Complaint is brought solely by the State of Arizona and alleges @ violation of the Uniform Arizona Antitrust Act, A.R.S. §44-1402, by the same conduct. This Competitive Impact Statement addresses only the Count advanced by the United States, Count One. Entry of the proposed Final Judgment will terminate the entire action, except that the Court will retain jurisdiction over the matter for further proceedings which may be required to interpret, enforce or modify the Judgment or to punish violations of any of its provisions. Ir. PRACTICES GIVING RISE TO THE Al D_V: Defendant Delta is an Arizona corporation with its principal place of business in Phoenix, Arizona. The majority of the Board COMPETITIVE IMPACT STATEMENT -- Page 2 of Directors of Delta is made up of dentists. Delts contracts with businesses, government agencies, and other organizations to provide pre-paid dental care coverage to their employees. Delta contracts directly with dentists or groups of dentists to provide dental services to patients who are members of these covered groups. Delta compensates its participating provider dentists for their services on the basis of a fee for service determined by Delta in part using fee schedules submitted by each dentist. Approximately 85 percent of the dentists in the state of Arizona have provider contracts with Delta. For most of these dentists, payments received from Delta for treating Delta member patients are a Significant part of their income. Most of these dentists are in independent, private practice and actually or potentially compete with other participating Delta dentists to provide dental services to both Delta and non-Delta patients. Defendant Delta's participating dentist agreements and confidential fee listings with dentists participating in its dental plan each contain what is called a “most favored nation” clause ("MPN"). These clauses on their face require that each dentist charge Delta the lowest price that dentist cheraes any patient or competing dental care plan. If dentists wish to reduce their fees for dental services to any other plan or patient, the NEN requires them to also reduce their fees to Delta to the same level. For the reasons described below, however, the actual effect of the MFN clauses has been to require participating Delta dentists to charge other dental plans and non-Delta patients fees that are as high as or higher than the fees the dentists “charge to Delta. COMPETITIVE IMPACT STATEMENT -- Page 3