PE Sponsor and Majority-Owned Portfolio Company Considered Single Entity Under the Sherman Act

PE firms with non-competitor, majority-owned portfolio companies will face reduced risks of antitrust liability under Section 1 of the Sherman Act in the Eleventh Circuit.

On May 24, 2022, the United States Court of Appeals for the Eleventh Circuit held that a private equity firm and its majority-owned and -controlled portfolio company could not, as a matter of law, engage in an antitrust conspiracy under Section 1 of the Sherman Act in OJ Commerce, LLC v. KidKraft Inc. The Eleventh Circuit held that a company “ordinarily cannot conspire with an entity it owns and controls and with which it does not compete,” applying a functional framework for analyzing the ownership structures of private equity firms, which considers whether the entity is majority-owned and -controlled by the sponsor, and whether the two companies compete.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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