Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters.

Antitrust Issues

Antitrust enforcement faces significant challenges when dealing with private equity roll-ups and mergers. Brendan Ballou highlights the complexity of these cases, where the Department of Justice (DOJ) and Federal Trade Commission (FTC) must navigate intricate corporate strategies that often seem straightforward in their intent to lessen competition 1. Despite limited resources, both federal and state authorities, along with private litigants, have the power to enforce antitrust laws, although success is often hindered by technical legal defenses 2.

The basic laws of antitrust apply to everybody, whether it's a gigantic multibillion dollar acquisition, or if it's a small purchase of an OB GYN or veterinary or dermatology clinic.

--- Brendan Ballou

Public awareness and civic-minded litigation are crucial in addressing these issues, even though many cases end in defeat due to technicalities rather than the merits of the case.

   

Judicial Dynamics

Judges often face difficulties in ruling against complex corporate structures typical of private equity ownership. Brendan Ballou explains that judges can be influenced by the formidable presence of corporate lawyers and the potential economic consequences of their rulings 3. This dynamic is compounded by the legal challenges of holding private equity firms accountable for their portfolio companies' actions, as the doctrine of piercing the corporate veil is rarely successful 4.

It's almost impossible for a private equity firm to be held legally responsible under common law veil piercing arguments.

--- Brendan Ballou

The interplay with bankruptcy further complicates accountability, as creditors often struggle to recover their investments from strategically structured companies.