ICYMI: WSJ Editorial Board Highlights Private Equity’s Legal Victory Against the FTC
“Ms. Khan keeps losing cases because she ignores the consumer welfare standard and other bedrock antitrust principles. Yet she trumpets legal defeats as victories and keeps grinning like she’s winning.”
Recently, the Wall Street Journal published an editorial highlighting the Federal Trade Commission’s (FTC) latest antitrust lawsuit defeat. The U.S. District Court for the Southern District of Texas recently dismissed claims brought by the FTC against private equity firm Welsh Carson Anderson & Stowe (WCAS) over claims regarding U.S. Anesthesia Partners, a portfolio company in Texas.
The editorial criticized the FTC’s novel legal theory that any asset manager could be sued for a company’s alleged anticompetitive conduct if it holds shares. It also noted that, had the court ruled in the FTC’s favor, the agency would have likely used the case to expand liability under antitrust laws and set a precedent that the agency has the power to unroll minority-stake acquisitions.
Read the full Wall Street Journal editorial below:
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Another Lina Khan Theory Loses in Court
By the Editorial Board | May 15, 2024
Federal Trade Commission Chair Lina Khan is a heroine to the media, but not to federal judges, who keep ruling against her antitrust cases.
The FTC sued private-equity manager Welsh, Carson, Anderson & Stowe and U.S. Anesthesia Partners last year for allegedly consolidating and monopolizing the anesthesiology market in Texas. This enabled them “to raise prices for anesthesia services—raking in tens of millions of extra dollars for these executives at the expense of Texas patients and businesses,” Ms. Khan alleged.
Federal Judge Kenneth Hoyt on Monday rejected the case against Welsh Carson, which holds a 23% stake in the anesthesiology group. The agency didn’t “cite any authority for the proposition that receiving profits from an entity that may be violating antitrust laws is itself a violation of antitrust laws,” he noted.
The FTC said Welsh Carson “masterminded” a plan to buy competing anesthesiology practices in Texas and “remained deeply involved in crafting and executing that plan.” But even if the group violated antitrust laws, the judge held that the private-equity firm couldn’t be held legally responsible merely because it had profited as a result.
The agency “has not cited a case in which a minority, noncontrolling investor—however hands-on—is liable . . . because the company it partially owned made anticompetitive acquisitions,” Judge Hoyt wrote. Under Ms. Khan’s inventive theory, any asset manager could be sued for a company’s alleged anticompetitive conduct if it holds shares.
Ms. Khan hoped to use the case to expand liability under antitrust laws and set a precedent that the agency has the power to unroll minority-stake acquisitions. The FTC’s new merger review guidelines say that a “minority position may permit influence of the target firm” and “implicate strategic decisions” or “change incentives so as to otherwise dampen competition.”
Her theory is a major departure from antitrust laws, as the judge noted. Ms. Khan keeps losing cases because she ignores the consumer welfare standard and other bedrock antitrust principles. Yet she trumpets legal defeats as victories and keeps grinning like she’s winning.
