Are Private Equity Funds Liable for Anticompetitive Acquisitions

Private equity acquisitions grew tenfold over the past two decades. Over the same period, their focus shifted from financial engineering to industry consolidation, raising antitrust concerns. Heightening these concerns, privately backed acquisitions of competitors historically escaped detection by federal antitrust authorities in their incipiency. However, academic studies and agency investigations are now unearthing these transactions. Most salient is a recent complaint filed by the Federal Trade Commission challenging a series of acquisitions stretching back ten years. In the wave of litigation that is likely to follow this “landmark” and “groundbreaking” case, a serious problem may arise. Damages, which will accrue over several years and be statutorily tripled, could far exceed what portfolio companies can pay, which will be limited by several factors such as their indebtedness. In these cases, whether victims are made whole depends critically on whether private equity funds are held liable. This paper provides the first evidence that privately backed consolidation extends far beyond what the FTC’s recent lawsuit alleges. Next, it identifies the unique features of these transactions that limit the abilities of portfolio companies to fully compensate the consumers they have overcharged. Finally, it introduces a novel doctrinal framework to determine the liability of private equity funds that finance and direct mergers among rival firms.