Omny Studio: Lina Khan Is Sending a Message to the...
Less than two months after filing a monopolization claim against a private equity-backed healthcare business that sent shockwaves through Wall Street, Lina Khan has a warning for the PE industry: there may be more coming.
The Federal Trade Commission suit filed in September alleges that US Anesthesia Partners (USAP), backed by private equity firm Welsh Carson Anderson & Stowe, snapped up a series of anesthesiology businesses across Texas and then raised prices for their services.
It was the FTC’s
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Now the FTC appears to be looking further afield, to PE roll-ups outside of healthcare and potentially across a variety of industries as it attempts to stamp out anti-competitive behavior.
“We can look at businesses across the US economy and how they’re structured,” Khan said on the Odd Lots podcast. “We’ve been particularly focused on healthcare markets, but especially after we filed this lawsuit, we’ve been hearing from market participants across sectors about additional areas where they believe that we should be scrutinizing — be it in healthcare or elsewhere.”
It’s not just prices that could invite FTC scrutiny. Since taking the helm of the FTC in 2021, Khan has arguably pursued a broader definition of antitrust, with commentators calling the new style “hipster antitrust” and crediting her for “making antitrust cool again.” (Employees at the agency seems to
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Khan argued that the use of a dominant market position to exploit workers is also on the agency’s radar, with labor market concentration mentioned in the FTC’s latest merger guidelines published this past summer.
“You have what’s called monopsony power that can give employers outsized power over their workers when they’re not checked adequately by competition,” she said. “So that’s a dimension of competition — labor markets — that we are very much looking at.”
Khan suggested that the USAP-Welsh Carson suit also marks a new way of looking at serial acquisitions, with more attention focused on the total impact of the deals on the market rather than the effects of each individual move.
“This case was about not just looking at each acquisition in a silo, but really looking at them in the aggregate,” Khan told Odd Lots. “And that’s really what we see with some of these roll-up and serial acquisition strategies is that they may be composed of a whole set of individual transactions and acquisitions.
“Each one, when considered in a silo may not seem problematic from a competition perspective. Some of them may not even be reportable because they may be just a few tens of millions of dollars,” she added.
“And so you may have a series, each one of which is small and may seem benign, but when you zoom out and look in the aggregate, you have what you may have seen is a roll-up of a market. And so this case should really put market participants on notice that the FTC is going to be looking at these deals in the aggregate.”
Still, Khan pushed back against the idea that the PE suit marked a return to more traditional styles of antitrust enforcement that’s focused on price-gouging, arguing that the US legal system allows for flexibility in how the principles of anticompetitive behavior are actually interpreted.
“At various points, lawmakers had debates. They said ‘should we define more specifically what that means?’ And they decided against it because they realized that as markets change, as technologies change, as business models change, firms are gonna be endlessly innovative in how they monopolize,” Khan said.
“And so they left it open-ended for enforcers to use their expertise to do deep investigations and make sure that those principles were being vindicated; no matter whether you’re in a smoke stack industry or in the context of private equity or in the context of some of these newer digital markets. And so those are really the principles that we’re animated by and that we look to vindicate throughout our work.”
While it remains to be seen what else the FTC ultimately pursues, Khan believes that what the agency’s already done has changed the nature of M&A in the US.
“One thing we’ve heard from senior dealmakers, senior antitrust lawyers, is that even a few years ago when there were initial deal discussions, antitrust risk would not be among the list of things that would initially get discussed,” she said. “Antitrust risk is now talked about at the very beginning.”
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