Under the old guard of the prior administration, private equity was repeatedly under fire for alleged "flip and strip" tactics that were supposedly "at odds with competition." Now, with new enforcers in place, a different landscape appears to be taking shape. Recent FTC and DOJ moves—a final consent order against PE shop Welsh Carson and a statement of interest backing Texas in its suit against institutional investors for ESG policies—may be the first signals of a new enforcement policy focused on traditional theories of harm applied against a broader (and more novel) set of targets.
KEY TAKEAWAYS
- Continued Willingness to Scrutinize Conduct of Minority Investors: The FTC and DOJ are continuing to exercise their antitrust oversight with investment management firms whose shareholdings may be used to coordinate or encourage anticompetitive strategies. In a departure from the prior administration, this oversight is not focused on private equity as a business model but rather appears to be limited to fact patterns involving any type of investor that could support traditional antitrust theories of harm.
- Traditional Scope of Potential Antitrust Liability: While the prior administration expressed special ire for serial "roll-up" acquisitions like those exemplified by the recent action against Welsh Carson, recent comments and early actions by the Trump administration's antitrust enforcers highlight a different scope of potential liability that the agencies may pursue against minority investors, ranging from unilateral conduct and monopolization to industry-wide concerted action, where the agencies view the facts as consistent with these traditional antitrust theories of harm.
- Proactive Risk Assessment: It is important for
private equity firms, institutional investors, other firms with
broad investments, as well as board members and in-house counsel to
be aware of the potential for antitrust liability regarding actions
that could affect competition between investment holdings.
- The more active a role the investor takes in influencing its holdings' behavior, and the higher the level of control exercised, the greater the potential for antitrust scrutiny.
- Proactive evaluation of antitrust risk in consultation with legal counsel is advisable, particularly with regard to transactions involving investments across horizontal competitors or strategies pursued jointly (whether explicitly or implicitly) with other investors that might be construed as facilitating coordinated market behavior between investment holdings. Baker Botts has extensive experience advising investment firms across a wide variety of industries with antitrust risk assessments in a rapidly changing landscape and stands ready to help clients navigate these latest developments with a new administration.
OVERVIEW
Under the prior administration, private equity firms found themselves repeatedly in the crosshairs of the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ). Commentary from top agency officials made clear that this scrutiny was not merely a result of straightforward application of the antitrust laws but rather rooted in fundamental criticism of the business model of private equity. For example, former FTC Chair Lina Khan accused private equity actors of "concerning extractive practices," including a "flip and strip approach" that "undercut long-term value,"1 while former Assistant Attorney General Jonathan Kanter accused private equity of using a "business model" that is "designed to hollow out or roll up an industry and essentially cash out" was "often very much at odds with the law, and very much at odds with the competition we're trying to protect." 2
With a new administration and new antitrust leadership at FTC and DOJ now in place, enforcement attitudes and priorities are expected to change, with recent commentary from FTC Chairman Andrew Ferguson disavowing any "antipathy toward private equity."3 The recent resumption of the "early termination" process for Hart-Scott-Rodino Act filings seems to preliminarily bear that out, with many early termination grants for transactions involving private equity.4
While the full extent of these policy changes is still very much in flux,5 two recent antitrust enforcement actions by the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) provide some early insights into the new administration's policy toward targeted minority investors, including private equity and institutional investors. These actions are: (1) the FTC's final decision and consent order against Welsh, Carson, Anderson & Stowe ("Welsh Carson") issued on May 19, 2025, and (2) the May 22, 2025, joint Statement of Interest by the FTC and DOJ in Texas v. BlackRock Inc. in support of potential liability under the antitrust laws for institutional investors allegedly coordinating to push for reduced coal production.
FTC FINAL DECISION AND CONSENT ORDER AGAINST WELSH
CARSON
The FTC recently finalized a consent order resolving an administrative antitrust case against Welsh Carson related to serial acquisitions of anesthesiology practices across Texas by its affiliated portfolio company, U.S. Anesthesia Partners (USAP). Welsh Carson created USAP in 2012 and went on to purchase several other anesthesiology practices in the Houston, Dallas, Tyler, Austin, Amarillo, and San Antonio areas, including an acquisition of by far the largest anesthesiology provider in Houston. USAP allegedly used these acquisitions to raise prices of anesthesiology services to match its own higher rates, and entered price-setting agreements with competitors to bill those physicians' work under its own (again, higher) rates.6 FTC alleged that Welsh Carson was the "mastermind" behind USAP's acquisition and contracting strategy and exercised substantial control and influence over its "monopolization scheme."7
Although a district court dismissed the FTC's case against Welsh Carson in May 2024, holding that the FTC could not show that Welsh Carson was "violating" or "about to violate" the antitrust laws based on a mere 23 percent ownership stake in USAP,8 the FTC opted to continue its enforcement efforts against Welsh Carson through its own administrative proceedings. The FTC first announced its consent order negotiated with Welsh Carson in the last few days of the Biden administration on January 17, 2025, and opted on May 19 to issue its final decision without modification.9 When the initial consent order was issued earlier this year, then-Commissioner Ferguson issued a concurring statement that took aim at the majority's characterization of the case as "extraordinary because it involves 'private equity' and 'serial acquisitions,'" implying "antipathy toward private equity."10 In the now-Chairman's view, the case against Welsh Carson was instead "a routine law-enforcement matter reflecting a traditional approach to competition law" and he saw "no reason for the Commission to single out private equity for special treatment."11
Key elements of the final decision include:
- Restrictive Measures: The order restricts Welsh Carson's involvement with USAP by limiting its board representation to a single non-chair seat and by requiring the firm to refrain from increasing its pro rata ownership or gaining additional management rights in USAP.12
- Future Transaction Oversight: The order obligates Welsh Carson to notify the FTC prior to future acquisitions or investments in anesthesia or any other "hospital-based physician practices" of the same type and in the same area as any asset already controlled by Welsh Carson. It also requires explicit FTC approval for investment in any anesthesia business anywhere in the United States by Welsh Carson or any entity it controls.13
- Cooperation with Ongoing Litigation: While Welsh Carson is dismissed as a defendant as a result of the consent order, it is required to cooperate with the FTC in the ongoing litigation against USAP, agreeing not to object to third-party subpoenas, provide information on former employees, and authenticate documents.
- Ongoing Reporting to FTC: Welsh Carson is required to submit regular compliance reports to FTC and notify the FTC regarding any changes to its corporate structure, such as the formation of new investment entities, or the dissolution or consolidation of any Welsh Carson entities.
The fact that the final consent order was issued without modification despite the change in administration is perhaps best viewed as reflecting the bipartisan (in result, if not in reasoning) nature of the initial settlement with Welsh Carson. As now-Chairman Ferguson noted in January 2025: "That Welsh Carson is a private equity firm is irrelevant; the antitrust analysis would be the same if Welsh Carson were, for example, an individual or institutional investor."14
FTC AND DOJ STATEMENT OF INTEREST IN TEXAS V.
BLACKROCK INC.
On May 22, 2025, the FTC and DOJ jointly filed a statement of interest in the case Texas v. BlackRock Inc., arguing in favor of the application of both Section 7 of the Clayton Act and Section 1 of the Sherman Act to allegedly coordinated conduct among institutional investors to reduce output in the coal industry. Chairman Ferguson's statement accompanying the announcement of the filing called it part of President Trump's effort "to fight left-wing ideologues who seek to make us weaker and poorer under the guise of ESG [environmental, social, and governance standards] . . . in the name of climate change scaremongering."15
While it may be tempting to view the joint statement as purely political in light of such rhetoric, the filing itself takes a more measured approach, reflecting the agencies' interpretation of antitrust law as covering minority investors when their actions are alleged to negatively impact competition.
The underlying lawsuit, spearheaded by Texas Attorney General Ken Paxton, alleges that institutional investors BlackRock, State Street, and Vanguard violated the Clayton and Sherman Acts by adopting a "common strategy" through the NetZero Asset Managers Initiative and Climate Action 100+ initiative that resulted in each investor pressuring its coal producer holdings to meet "specific target reductions for coal production."16 In response, the investors argued for a broad interpretation of the Clayton Act's safe harbor for purchases "solely for investment" and not used to "bring about . . . the substantial lessening of competition" that would provide "bright-line protections to passive minority investors."17
The agencies' statement argues instead for a narrower reading of the "passive investor" exception, and a broader reading of Section 1 of the Sherman Act that could also apply to minority investors:
- Narrow Interpretation of the Passive Investing Safe Harbor: According to the DOJ and FTC, the Clayton Act exception should be read to protect only truly passive investors, i.e. those that take no action that could result in a substantial lessening of competition among "horizontal shareholdings" even if the investor does not have control over any of those investments.18
- Clayton Act Liability for "Use of Stock": The statement of interest asserts that the Clayton Act captures not just mergers and acquisitions that prospectively may lessen competition, but also any other "use of stock" that may have, or had, a similar effect under 15 U.S.C. § 18. This includes, under FTC and DOJ's interpretation, situations where "a partial owner can leverage its holding to control or influence business decisions at competing businesses."19
- A Broad View of Concerted Action: With regard to Texas's Sherman Act Section 1 allegations, the agencies took issue with the defendant investors' narrower interpretation of the concerted action requirement. Rather than requiring a simultaneous agreement among the alleged conspirators, DOJ and FTC argue that "sequential public commitments that discuss industry-wide output reduction targets" could provide sufficient inference of concerted action to sustain a Section 1 claim. This was true, according to the agencies, regardless of the motivation of those commitments to support environmental goals rather than short-term profit.20
While the application of these theories of harm against shareholder activism by minority institutional investors is novel, the joint statement grounds its arguments in traditional antitrust principles. The notions that the Clayton Act can apply to minority investors that acquire stock, or that Section 1 of the Sherman Act can reach "tacit collusion" without an explicit verbal or written agreement, for example, are long-established as general concepts of U.S. antitrust law. As such, the joint statement could be seen as another example of enforcement focused on basic antitrust principles—not the "antitrust revolution" sought by the prior administration, but a more modest evolution of existing principles applied to new facts.
Footnotes
1 Remarks by Chair Lina Khan, Private Capital, Public Impact Workshop on Private Equity in Healthcare, at 2 (Mar. 3, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/2024.03.05-chair-khan-remarks-at-the-private-capital-public-impact-workshop-on-private-equity-in-healthcare.pdf. Chair Khan's remarks also mentioned perceived "competition problems" with other forms of investment management, including "institutional investors in public equities markets." Id. at 4 n.22.
2 James Fontanella-Khan, "Private equity moves into the antitrust spotlight," Financial Times (May 23, 2022), https://www.ft.com/content/f222e618-dc96-4204-8a27-00e0a9316236.
3 Concurring Statement of Commissioner Andrew N. Ferguson, In re US Anesthesia Partners, FTC No. 2010031, at 1 (Jan. 17, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/welsh-carson-ferguson-statement-final.pdf.
4 Federal Trade Commission, Legal Library: Early Termination Notices (Jan. 21, 2025 through May 30, 2025), https://www.ftc.gov/legal-library/browse/early-termination-notices?sort_by=field_date&items_per_page=100&search=&field_competition_topics=All&field_consumer_protection_topics=All&field_federal_court=All&field_industry=All&field_case_status=All&field_enforcement_type=All&search_matter_number=&search_civil_action_number=&start_date=01%2F21%2F2025&end_date=.
5 Another recent development—which could be viewed alternatively as presaging a continued focus on private equity or a more friendly approach toward it—is the DOJ's hiring of Bill Rinner, former senior regulatory counsel for Apollo Global Management Inc. to oversee merger enforcement. See David Hatch, "Apollo's Washington Counsel Lands at DOJ Antitrust Division," The Deal (May 14, 2025), https://pipeline.thedeal.com/article/00000196-cee0-dc8c-ad97-dee73af40000/deal-news/regulation/apollos-washington-counsel-lands-at-doj-antitrust-division.
6 See FTC v. U.S. Anesthesia Partners, Inc., No. 4:23-CV-03560, 2024 WL 2137649, at *2-3 (S.D. Tex. May 13, 2024).
7 Id. at *5.
8 Id. at *4-6.
9 Federal Trade Commission: FTC Approved Final Order with Welsh Carson (May 20, 2025), https://www.ftc.gov/news-events/news/press-releases/2025/05/ftc-approves-final-order-welsh-carson.
10 Concurring Statement of Commissioner Andrew N. Ferguson, In re US Anesthesia Partners, FTC No. 2010031, at 1 (Jan. 17, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/welsh-carson-ferguson-statement-final.pdf.
11 Id. at 1-2.
12 Decision & Order, In re Welsh, Carson, Anderson & Stowe XI, L.P., FTC No. C-4818, at 6 (available at https://www.ftc.gov/system/files/ftc_gov/pdf/2010031c4818welshcarsonorder.pdf).
13 Id. at 6-7.
14 Ferguson Concurring Statement (see note 9), at 1.
15 Federal Trade Commission, FTC and DOJ File Statement of Interest in Energy Collusion Case Against BlackRock, State Street, and Vanguard (May 22, 2025), https://www.ftc.gov/news-events/news/press-releases/2025/05/ftc-doj-file-statement-interest-energy-collusion-case-against-blackrock-state-street-vanguard.
16 Statement of Interest of the Federal Trade Commission & the United States of America, Texas v. BlackRock, Inc., No. 6:24-cv-00437-JDK, at 25 (May 22, 2025), available at https://www.ftc.gov/system/files/ftc_gov/pdf/StatementofInterest-TexasvBlackRock.pdf.
17 Id. at 8.
18 Id. at 13.
19 Id. at 14.
20 Id. at 23-24.
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