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Alternative Market Briefing

Other Voices: Private equity under antitrust scrutiny

Wednesday, May 25, 2022

Authored by John Ceccio and Ben Labow from US law firm Wilson Sonsini Goodrich & Rosati.

For at least the third time in recent months, the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) have signaled increased scrutiny of the private equity industry, highlighting interlocking directorates, roll-up strategies, and divestiture transactions as areas for tougher enforcement. Given the frequency with which the agencies are commenting on these topics, as well as the general desire for increased antitrust enforcement, private equity firms and their portfolio companies should take heed. Below is a summary of each of these issues and key takeaways for clients.

Interlocking Directorates

Interlocking directorates exist where a person serves as an officer or a director of two competing corporations and can be challenged by the agencies under Section 8 of the Clayton Act. In rare cases, the agencies have also challenged interlocking directorates under Section 1 of the Sherman Act as enabling a conspiracy among competitors through the exchange of competitively sensitive information.

Section 8 also prohibits any single firm from appointing two different people to serve as an agent, officer, or director of competing corporations. This prohibition applies equally to private equity firms, which often appoint employees (e.g., partners, principals) to the boards of their portfolio companies. Jonathan Kanter, Assistant Attorney General of the DOJ......................

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