The Biden administration’s antitrust enforcers are intensifying their efforts to combat what they perceive as anticompetitive business practices. The newly issued merger guidelines, announced on Wednesday, may raise significant concerns for the private-equity industry.
According to Federal Trade Commission Chair, Lina Khan, in an interview with CNBC, both her agency and the antitrust division of the Department of Justice are determined to closely examine roll-up strategies. These strategies involve a company making a series of small acquisitions within a single industry, which ultimately leads to the company dominating a significant share of the market.
Khan emphasized that there are instances when individual acquisitions may not raise legal concerns, but when combined, they result in a substantial consolidation of the market. The issuance of these guidelines serves as a warning that such instances will be subject to legal scrutiny and concern.
Importantly, Khan clarified that the guidelines are unbiased in terms of business model. Nevertheless, the scrutiny surrounding roll-up strategies, coupled with the proposed overhaul of the merger notification process for companies seeking government approval, directly impacts the private-equity industry.
Implications of Proposed Changes to Notification Forms
An analysis conducted by the renowned law firm WilmerHale has shed light on the potential consequences of proposed changes to notification forms. According to their estimates, companies will need to dedicate a staggering 144 hours to preparing these forms. This is four times the amount of time required under current regulations.
The Federal Trade Commission (FTC) and the Department of Justice (DOJ) have recently expressed serious concerns regarding the perceived anticompetitive effects of private equity strategies. Specifically, they are focusing on situations where an initial platform company in a particular industry makes investments, followed by acquiring other businesses in the same industry. The analysis by WilmerHale emphasizes these concerns.
These new guidelines come at a time when antitrust enforcers have been facing repeated setbacks. For instance, a recent court ruling favored Microsoft Corp.’s planned $69 billion acquisition of Activision Blizzard Inc., despite attempts by the FTC to block the deal.
Although these guidelines are not legally binding, they will play a crucial role in shaping the decisions of current and future administrations when it comes to determining which mergers should be challenged.
President Joe Biden has highlighted this proposal as part of his economic-reform agenda, which places significant emphasis on promoting competition to drive down prices and raise wages. In line with this agenda, he is scheduled to meet with his competition council, including figures such as Khan and Attorney General Merrick Garland, on Wednesday afternoon.
These proposed changes to notification forms and the broader focus on competition reflect a concerted effort to strengthen the antitrust landscape and ensure fair market practices.