FTC Finds Certain Private Equity Consolidations Potentially Violating Legal Boundaries

**The Impact of Roll-Up Strategies on Market Competition: A Closer Look by Federal Antitrust Regulators**

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Private equity investors frequently employ roll-up strategies to gain significant market share in specific industries. However, such strategies have recently attracted attention from federal antitrust regulators. The Federal Trade Commission (FTC) and the Justice Department’s antitrust division are closely examining the legality of roll-up strategies, particularly when a single company acquires multiple smaller firms in the same industry. This article explores the potential anticompetitive implications of these strategies and the regulatory scrutiny surrounding them.

**Regulatory Concerns and Anticompetitive Impact**

The FTC and the Justice Department’s antitrust division are investigating whether roll-up strategies unfairly reduce competition in markets. While individual acquisitions may not raise legal concerns, the cumulative effect of multiple acquisitions can lead to significant market consolidation. According to FTC Chair Lina Khan, firms undergoing a series of acquisitions can potentially dominate a market, thereby limiting competition.

**Proposed Changes to Merger Guidelines**

In an effort to address these concerns, the FTC has proposed an update to its merger guidelines. This update expands the list of information and documents that firms must provide when notifying the government of a large attempted merger. If implemented, these changes could significantly increase the amount of time private equity firms spend preparing paperwork for each acquisition. An analysis by law firm WilmerHale suggests that the time spent on paperwork could quadruple to 144 hours per acquisition. Moreover, the proposed changes would empower the FTC to conduct more frequent and rigorous investigations into transactions involving private equity funds, increasing the burden associated with antitrust notifications.

**The Role of Roll-Ups in Consolidating Fragmented Markets**

Private equity firms often use roll-up strategies to consolidate fragmented markets by acquiring multiple companies and transforming them into a single, full-scale business entity. For example, the FTC previously blocked JAB Consumer Partners from acquiring veterinary clinics in order to prevent further consolidation of control in the industry. However, the use of roll-ups in fragmented markets is now being questioned due to concerns about potential anticompetitive effects.

**The FTC’s Notice in Light of Recent Events**

The FTC’s focus on roll-up strategies comes shortly after the Supreme Court ruled against the FTC’s attempt to prevent tech giant Microsoft from acquiring Activision Blizzard, a major video game-maker. This ruling was seen as a setback for the Biden administration’s antitrust enforcement efforts and its campaign against anticompetitive practices. The FTC’s renewed scrutiny of roll-up strategies may indicate an increased determination to address potential anticompetitive behavior.


As federal antitrust regulators examine the legality of roll-up strategies, private equity investors and industry leaders in various sectors will need to be mindful of potential antitrust concerns. The proposed changes to the FTC’s merger guidelines could significantly impact the time and resources required for private equity firms to pursue acquisitions. It remains to be seen how regulatory scrutiny and potential enforcement actions will shape the future of roll-up strategies and market consolidation in the private equity landscape.

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