On September 21, 2023, the FTC announced an enforcement action in the Southern District of Texas against private equity firm Welsh, Carson, Anderson & Stowe (WCAS) and its portfolio company U.S. Anesthesia Partners (USAP), alleging a decade-long scheme to monopolize hospital anesthesia practices and otherwise lessen competition for anesthesia services in the Houston, Dallas and Austin metro areas through anticompetitive acquisitions and other unlawful agreements with competitors. The Complaint alleges three related courses of conduct that, individually and in combination, have had the anticompetitive effect of increasing reimbursement rates (i.e., raising prices) for in-hospital anesthesia services in the three Texas metro areas. The alleged conduct includes:
- Monopolizing and lessening competition in the relevant markets through a “roll-up” acquisition strategy;
- Entering into price-fixing agreements with independent anesthesia practices that shared hospital customers in Houston and Dallas; and
- Entering into a market allocation agreement with a “significant potential competitor” (whose identity is redacted).
Both Lina Khan at FTC and Jonathan Kanter at DOJ have made targeting PE roll-ups a key pillar of their M&A enforcement agenda, and the Complaint focuses primarily on this aspect of the alleged violations. Yesterday’s press release quotes Lina Khan as saying that “[t]he FTC will continue to scrutinize and challenge serial acquisitions, roll-ups, and other stealth consolidation schemes that unlawfully undermine fair competition and harm the American public.”
Whether or not yesterday’s complaint results in a trial, it is an important messaging tool for the FTC. The key takeaways are:
- Private equity roll-ups, especially in the healthcare space, remain high on the FTC’s agenda.
- The FTC’s enforcement priorities extend retroactively to prior acquisitions and conduct (e.g., the most recent acquisition at issue here was in 2020).
- The FTC will extend liability to private equity funds and management companies where they have taken an active role in the alleged anticompetitive conduct.
To view and print the full memorandum, please
click here.