Lawsuit Alleges Dominant Market Player And Powerful Trade Associations Colluded For Years To Take Down Competitor To Maintain Limited Access To Treatment And Pricing Control
Legal Team Behind Fox News $787.5M Settlement Takes On Alleged Monopolistic Practices In Dental Cosmetics
Last Wednesday, attorneys from Susman Godfrey LLP and Benesch Friedlander Coplan & Aronoff, LLP filed an antitrust lawsuit on behalf of CDS Litigation, LLC, against Align Technology, Inc. (“Align”), the American Dental Association (“ADA”), and the American Association of Orthodontists (“AAO”). The lawsuit, filed in the Superior Court of California, alleges that the Defendants engaged in a multi-year coordinated and illegal conspiracy to eliminate their most serious market competitor to protect their industry dominance at the expense of consumers’ ability to access effective, affordable, and proven orthodontic care.
This lawsuit arises from evidence described in the complaint that the Defendants colluded to drive SmileDirectClub, a leading provider of affordable and effective telehealth-based orthodontic solutions, out of business. Align initially invested tens of millions of dollars in SmileDirectClub and supported its business model as an investor, board member, lender, and manufacturer. All that changed, however, after SmileDirectClub rejected Align’s proposed buyout bid and an arbitrator later forced Align out of the company entirely for improperly using its access to confidential and proprietary SmileDirectClub information to try to copy SmileDirectClub’s business. The complaint explains how Align, no longer able to profit off of SmileDirectClub’s growth, turned to colluding with the ADA and AAO on a years-long campaign to destroy SmileDirectClub. Despite SmileDirectClub’s high customer satisfaction ratings and proven track record of offering effective care, the Defendants’ coordinated actions described in the complaint ultimately required the company to cease operations, resulting in fewer choices and higher costs for consumers.
Evidence Of Anti-Competitive Behavior
SmileDirectClub’s innovative model disrupted the orthodontic industry and threatened the financial interests of the Defendants by offering affordable, effective, and accessible clear aligner treatment, with clinical supervision and approval by state-licensed dentists and orthodontists on a fully remote basis, thereby doing away with the need for in-office visits and eliminating key barriers of cost and geography for millions of consumers.
As detailed in the complaint, Align was initially attracted to this new model, investing $59.5 million for a 19% ownership stake in SmileDirectClub and becoming the company’s exclusive third-party supplier of clear aligners. This partnership granted Align extensive access to SmileDirectClub’s confidential business information, as well as a seat on its board of directors. But as the lawsuit explains, after SmileDirectClub rejected Align’s $1.5 billion buyout offer, Align instead used the confidential information it had learned from SmileDirectClub and opened a series of copycat “Scan Shops” modeled directly on SmileDirectClub’s innovative SmileShops. SmileDirectClub brought an arbitration against Align because of Align’s violation of the restrictive covenants it had previously agreed to, and the arbitrator ruled in SmileDirectClub’s favor in early 2019. The ruling ordered Align to divest its stake in SmileDirectClub at a steep discount, costing Align hundreds of millions of dollars. The arbitrator also enjoined Align from opening competing stores until August 2022. At this point, the complaint alleges that Align pivoted and launched its new strategy to eliminate SmileDirectClub as a competitor and secure a monopoly in the clear aligner market.
The complaint details allegations as to how Align worked in concert with the ADA and AAO to spread false and misleading claims about SmileDirectClub’s safety and efficacy to damage its reputation with consumers and industry professionals, filed baseless complaints with the Food and Drug Administration (FDA) and Federal Trade Commission (FTC), and leveraged exclusive agreements with dental support organizations - while also interfering with other third-party relationships - to block SmileDirectClub from accessing vital market opportunities. According to the lawsuit, these actions represented a calculated and coordinated effort by the Defendants to stifle competition and innovation in orthodontic care as part of their conspiracy to monopolize the industry and prevent consumers from accessing additional proven treatment options at more affordable prices.
The lawsuit also shows how these actions directly contradicted the positions two of the conspirators—Align and the ADA—had taken up until the point when Align’s efforts to buy or copy SmileDirectClub failed. As the lawsuit explains, prior to embarking on the conspiracy, Align’s own CEO had forcefully debunked the exact same false assertions about SmileDirectClub’s services that Align and its coconspirators would repeatedly promote once Align shifted from trying to copy or buy SmileDirectClub to trying to destroy it. Similarly, as the lawsuit shows, the ADA expressly supported and endorsed “asynchronous” teledentistry (i.e., dentists treating patients without having to meet with them live) for years, only to reverse course right when it began conspiring with Align to falsely denigrate SmileDirectClub’s business model.
Consumer Impact
The alleged actions of Align, the ADA, and the AAO significantly reduced competition, requiring consumers to pay higher prices for orthodontic treatment while limiting their access to proven and less expensive alternative solutions. Before its bankruptcy, SmileDirectClub provided millions of consumers with an affordable and effective telehealth solution for clear aligner treatment, receiving high customer satisfaction ratings and helping those who used the company’s products achieve successful outcomes. Despite its effectiveness and proven product quality, the filing explains that SmileDirectClub was forced into bankruptcy and ceased operations in 2023 as a result of the Defendants’ systematic anticompetitive actions. The Plaintiff in this case, CDS Litigation, LLC, has the right to pursue litigation claims held by SmileDirectClub against the Defendants.
ADA/AAO Involvement
The filing describes the pivotal roles the ADA and the AAO played in the conspiracy to destroy SmileDirectClub, leveraging their positions as influential trade associations and active market participants to shield giant sponsors - like Align - and block disruption in the industry. The complaint alleges that the ADA and AAO participated in this monopolistic conspiracy by using their position as both market participants and powerful trade associations to preserve the profits and dominance of entrenched industry leaders and ensure that disruptive innovations – like SmileDirectClub’s affordable and accessible care model – could not succeed.
About Susman Godfrey
The lawsuit is being led by the team at Susman Godfrey that secured a $787.5 million settlement on behalf of Dominion Voting Systems in its defamation case against Fox News.
“The filing alleges that Align Technology abused its market dominance to systematically crush competition and protect its monopoly at the expense of consumers,” said Stephen Shackelford, Partner at Susman Godfrey LLP. “According to the complaint, after Align was forced to give up its ownership interest in SmileDirectClub, it suddenly changed its tune as to SmileDirectClub’s model and conspired with the ADA and AAO to spread falsehoods, disrupt SmileDirectClub’s business relationships, and block its access to essential equipment and partnerships. Align’s conduct alleged in the complaint was anticompetitive, calculated, and illegal. The allegations in the complaint show how the entrenched and powerful incumbents in Big Dentistry manipulated the system to collude against a revolutionary and otherwise successful competitor, restrict affordable and effective options for consumers, and inflict lasting reputational damage through their dissemination of demonstrably false claims.”
“As explained in the complaint, the Defendants didn’t just target their main competitor - they targeted the millions of consumers who stood to benefit from the affordable and accessible orthodontic care the competitor offered. The effectiveness of SmileDirectClub’s model and products threatened the Defendants’ market and financial interests, who, according to the filing, conspired to destroy the company rather than compete with them fairly,” said Davida Brook, Partner at Susman Godfrey LLP. “This complaint presents a textbook example of how dominant players collude to maintain market power, stifle competition, and harm consumers.”
Susman Godfrey LLP is a leading national trial firm with an unmatched track record in high-stakes litigation. The firm has earned recognition as a fearless advocate for fairness, representing clients seeking justice against entrenched industry leaders.
About Benesch
Benesch, Friedlander, Coplan & Aronoff joins Susman Godfrey as co-counsel and is being led by a team that has extensive experience representing SmileDirectClub.
“Having previously litigated and won against Align, we are all too familiar with the sort of abusive anticompetitive acts alleged in the Complaint against Align and other dominant players in the traditional dental market. SmileDirectClub pioneered the use of teledentistry to advance oral care with over 2 million satisfied customers, and the Complaint details the astonishing tactics the Defendants devised to run SmileDirectClub out of business,” said David Rammelt, a Partner at Benesch and Co-Chair of its Litigation Group.
Benesch’s award-winning Litigation Practice Group has secured multibillion-dollar wins for plaintiffs and defendants in precedent-setting cases. An Am Law 200 firm, Benesch is nationally recognized by Chambers USA, Benchmark Litigation, and Best Law Firms “Best Lawyers” for earning a place of distinction representing mid-size to Fortune 100 companies in high-stakes litigation and jury trials across the country. Founded in 1938, Benesch has grown to more than 400 attorneys across six U.S. offices. Over the last five years, Benesch’s Litigation Practice Group has expanded by 40% to more than 170 attorneys, making it among the fastest-growing practices in the country.
View source version on businesswire.com: https://www.businesswire.com/news/home/20241223208613/en/
Contacts
Jeremy Adler, jeremy@uplandworkshop.com
