FTC Rolls Up on Private Equity Serial Acquisitions

Following years of forceful rhetoric, the Federal Trade Commission (FTC) has unveiled a new enforcement initiative targeting what they classify as a strategy to stifle competition through a series of acquisitions that don’t require reporting. On September 21, the FTC lodged a complaint against U.S. Anesthesiology Partners (USAP) and its primary investor, private equity firm Welsh, Carson, Anderson & Stowe (Welsh Carson). The complaint alleges that the two entities collaborated to establish a monopoly over anesthesiology services in Texas by consolidating individual practices and “methodically acquiring nearly every major anesthesia practice in Texas to establish a single dominant provider.” The FTC contends that Welsh Carson devised this plan when establishing USAP in 2012 and maintained influence, control, and encouragement over USAP’s actions even after reducing its ownership in the company. Additionally, the FTC alleges that USAP engaged in price-fixing agreements with independent anesthesiology practices and made arrangements with a potential competitor to refrain from entering the market.

Although the lawsuit introduces innovative antitrust law theories and liabilities, it is not entirely unexpected given the FTC’s sustained focus on healthcare and its reservations about private equity. This case serves as a test for the harm theories that the agencies have been evolving to challenge successive acquisitions. If successful, bolt-on transactions will face increased hurdles. The complaint also stretches the boundaries in holding an investment fund accountable for its portfolio company’s actions. Consequently, private equity firms should monitor their portfolio companies’ activities and assess potential risks arising from such activities…

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