Here's Why Henry Schein, Inc. Is Sinking Today

What happened

Shares of Henry Schein (NASDAQ: HSIC), a maker of dental and veterinary products, fell as much as 13% in early morning trading on Tuesday as a result of accusations leveled against the company for breaking antitrust rules. The stock has since recovered but is still down about 10% as of 11:05 a.m. EST.

So what

On Monday night, it was reported that the Federal Trade Commission has filed a complaint against the three largest U.S. dental supply companies in the country -- Benco Dental Supply, Henry Schein, and Patterson Companies (NASDAQ: PDCO) -- for running afoul of antitrust law. When combined, these three businesses control about 85% of the $10 billion dental market.

The complaint alleges that the companies conspired to prevent dental groups from buying their products in bulk at a discount. The FTC claims that Benco and Henry Schein entered an agreement to refuse to compete with each other for the buying groups' business. Patterson later joined the agreement, but a fourth supplier -- Burkhart Dental Supply -- was asked to join but refused.

A trial is expected to be held in October of this year to review the case.

Now what

Here's a statement that Henry Schein released in response to this news:

According to management, this matter shouldn't have an impact on the company's financial performance.

Is Henry Schein in the wrong here? That's unclear at this point. It's also unknown whether this lawsuit will permanently impair the company's ability to do business in the long term.

While it is possible that this trial will go nowhere and Henry Schein will be fine, there's no doubt that this news raises questions about the long-term potential of this business. Given the uncertainty, I think the smart move is for potential investors to watch this story play out from the sidelines.

10 stocks we like better than Henry ScheinWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Henry Schein wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 5, 2018

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.