News Release: Antitrust Agencies Must Boost Scrutiny of Private Equity Buyouts


Sept. 18, 2023

Carter Dougherty


Antitrust Agencies Must Boost Scrutiny of Private Equity Buyouts

New merger guidelines should confront the powerful and often insidious role played by Wall Street private equity in fostering monopolization across the American economy, according to a letter submitted by Americans for Financial Reform Education Fund.

The letter, sent to the Department of Justice and the Federal Trade Commission, outlines concrete steps that authorities can take to combat the anti-competitive influence that private equity buyouts have had on industries as diverse as health care, retailing, fast food, and automotive services.  AFREF supports multiple specific aspects of the proposal, and suggests points of potential improvement.

Private equity buyouts constitute the majority of mergers considered by federal antitrust authorities and the Biden administration’s merger review update addresses many unique private equity strategies that have driven corporate consolidation. Monopolistic “roll-ups” of small companies into dominant competitors epitomize this sector’s strong, often outsized, role in consolidation. But private equity minority stakes in companies can harm competition, as does often-overlooked monopsony power.

“With the harms of private equity increasingly clear, policy must now shift toward solutions, and more robust merger guidelines can curb Wall Street’s anti-competitive practices that harm consumers, workers, and communities,” said Patrick Woodall, senior fellow at Americans for Financial Reform Education Fund. “The Biden administration’s proposed guidelines reject decades of acquiescence to merger mania and can tackle private equity practices that have supercharged decades of corporate consolidation. Modernized guidelines would also send a strong signal that some transactions should not make it out of the boardroom.”

Roll-ups have become a key private equity strategy to evade merger review because the individual acquisitions typically fall below the reportable thresholds set at $111 million in 2023 by the Federal Trade Commission. The letter outlines the example of Roark Capital, which built an automotive services giant, Driven Brands, that operates Meineke and Maaco, among others, by acquiring many small providers from individual car washes to oil change chains.

The proposed guidelines would consider sequential mergers as potentially anticompetitive and AFREF recommended these be strengthened by increasing the scrutiny of mergers in the same business line that in aggregate exceed the merger threshold over the previous five years. AFREF also recommended that the agencies review markets where roll-up strategies have already amassed sufficient market power to undermine competition.

“Preventing private equity firms from assembling new monopolies ought to be a no-brainer, now and in the future,” Woodall said. “The right merger guidelines can do that and more.”