The two top federal antitrust enforcers, in contemporaneous interviews, recently highlighted a new target for antitrust enforcement for their respective agencies: private equity firms and their acquisition strategies. Jonathan Kanter, Assistant Attorney General (“AAG”) for the Antitrust Division of the Department of Justice (“DOJ”), in an interview with the Financial Times, indicated that he intends the DOJ to conduct “a fuller assessment” of private equity deals, especially in situations where firms are engaged in transactions that are “rolling up” companies in the same, or competitively adjacent, industry segments.1 Kanter, in the interview, stated that “’[s]ometimes [the motive of a private equity firm is] designed to hollow out or roll up an industry and essentially cash out. That business model is often very much at odds with the law, and very much at odds with the competition [the DOJ] is trying to protect.’”
Lina Khan, Chair of the Federal Trade Commission (“FTC”), followed up on AAG Kanter’s interview only three weeks later with her own Financial Times sit down.2 Khan used far stronger language than Kanter regarding the role of antitrust in private equity, stating that there are “’life and death consequences’” when buyouts place large sections of the economy under the control of Wall Street,” especially in healthcare acquisitions. Khan backed up this statement by indicating that the FTC has empirical evidence that supports the position that private equity deals, according to the article, “degrade the lives of ordinary Americans in more tangible ways” than higher prices for consumers. Chair Khan also questioned whether a private equity acquisitions of divested assets, from other mergers and acquisitions, which traditionally have been seen as a viable option for merging parties seeking to gain antitrust agency clearance for deals, help the competitive dynamics that the divestitures are intended to preserve.
Kanter and Khan’s comments are consistent with what they have been saying for some time—the Biden Administration is developing and enacting the most robust antitrust enforcement regime in recent memory. Private equity firms that have not encountered strong antitrust scrutiny in the past should be prepared for a very different experience with future acquisitions. It is critical that private equity clients engage antitrust counsel early in a potential transaction to help assess the acquisition in order to provide the necessary guidance to navigate this new enforcement environment. Further, it is important for firms to have antitrust counsel provide compliance guidance for portfolio companies that may be in the same or competitively adjacent industry sectors. Click here to download the full alert.
1 Stefania Palma and James Fontanella-Khan, “Crackdown on buyout deals coming, warns top US antitrust enforcer,” Financial Times (05.18.2022), available at: https://www.ft.com/content/7f4cc882-1444-4ea3-8a31-c382364aace1
2 Stefania Palma, Mark Vandevelde, and James Fontanella-Khan, “Lina Khan vows ‘muscular’ US antitrust approach on private equity deals,” Financial Times (06.08.2022), available at: https://www.ft.com/content/ef9e4ce8-ab9a-45b3-ad91-7877f0e1c797
