A recent concern about anti-competitive practices among Private Equity (PE) firms has caused the Justice Department to launch an investigation into PE funds. Two recent articles in the Wall Street Journal highlight the growing concern over potentially anticompetitive activity with regards to PE firms and the mergers and acquisition (M&A) market: "Carlyle Agrees to FTC Limits to Secure Kinder Morgan Deal" and "GE Sets Private-Equity Limits" .
The first article concerns The Carlyle Group's intended Buyout of Kinder Morgan, which, after FTC review, may only proceed if Carlyle gives up "daily involvement in running" Magellan Midstream, a company that competes in the energy distribution market with Kinder Morgan . The FTC contends that Carlyle's stake in these two companies could have threatened competition in 11 metropolitan areas, including
The second article discusses the bids that GE has solicited for it's plastics business, valued at approximately $10 billion. Sources contend that GE will not entertain club offers. The concern, for the DOJ, is that there maybe a potential lack of competition among these bidders: “The "club" issue has taken on greater significance since October, when the Justice Department launched an antitrust probe of private-equity funds. While the ostensible goal of forming buyout clubs has been to spread the risk of larger investments among the members of the club, some takeover professionals have voiced concern that clubs may also limit the number of competing bidders and the value of potential bids." (WSJ - GE article).
These two articles highlight the growing concern in the Antitrust Community that consumers, the beneficiaries of antitrust regulations such as the Sherman and Clayton Act, may be harmed by lack of competition in the PE market. The recent investigation by the DOJ and the unusual restrictions enforced by the FTC are signals that other similar business transactions will be closely scrutinized.
** Posted on behalf of Marie Copoulos, Tiffany Luong, and Vicky Ukritnukun
1 comment:
Team Awesome agrees that the actions taken by the Department of Justice and the Federal Trade Commission are indicative of growing concern about potential harm to consumers by the anti-competitive nature of the private equity market.
However, Team Awesome would like to know how other 419ers stand on this issue. Do you think that Carlyle and GE's actions are anti-competitive in nature and/or harmful to consumers?
From what was said in the post, it seems as if there were not strong reasons behind the restrictions placed on Carlyle - regulatory agencies should be careful about punishing companies simply for being big. GE's practices, on the other hand, may be unnecessarily harmful to consumers. However, we feel that we cannot form any strong opinions without reading the articles in their entirety. (It would be really helpful, if at all possible, if everyone could choose articles that are freely accessible,
just because it can sometimes be a little difficult for us to form an opinion without knowing full details of the article(s). Thanks in advance!)
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