The Brewing Antitrust Investigation of Private Equity Firms

The Antitrust Division of the Department of Justice appears to be gearing up for an investigation of leading private equity investment firms, including luminaries like Kohlberg Kravis Roberts (KKR), Silver Lake Partners, and Carlyle Group, over possible anticompetitive behavior in bidding to take firms private by buying out their public shareholders.  The Antitrust Division is asking the firms for information at this point on deals going back to 2003, and the issues revolve around whether there was collusion in the prices offered for companies or whether firms agreed not to submit competing bids to protect other deals from additional offers.  Given my woeful lack of knowledge about antitrust matters, I asked my friend and colleague, Professor Steve Calkins, a leading authority on antitrust and former general counsel at the FTC, for some brief thoughts on the investigation at this early stage.  Steve is kind enough to let me pass along  the following:

Press reports of DOJ Antitrust Division letters to private-equity firms raise a series of fascinating issues.  Under the Bush Administration the Division has concentrated on challenging mergers (typically resolved by consent) and criminally challenging naked cartels usually uncovered through the Division’s highly effective amnesty program.  The kinder, gentler commencement of this initiative – reportedly with two-page letters – suggests that the Division is at least initially thinking civil, not criminal.  It is investigating an industry quite different from those that have felt the wrath of its anti-cartel program.  And it is venturing into an area where proof of an agreement – the sine qua non of a classic antitrust violation – may turn on subtle interpretations of parallel behavior.  Ironically, the Division (through the SG) recently filed an amicus brief in the Supreme Court Twombly case which urges the Court to reverse a Second Circuit opinion that made it more easy to avoid dismissal of just such a case.

The amicus brief in Twombly is available (here).  (ph)