Remix: How private equity took over everything

Antitrust Challenges

Antitrust laws face significant challenges when it comes to regulating private equity's influence on market competition. Brendan Ballou highlights how private equity firms can acquire multiple businesses in a sector, like veterinarians in a city, and raise prices without consequence due to lack of alternatives 1. This practice harms consumer welfare and underscores the need for reform in antitrust laws. Nilay Patel points out that while the Department of Justice and Federal Trade Commission are aware of these issues, enforcement is complicated by the distributed nature of acquisitions across local markets 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 OBGYN gyn or veterinary or dermatology clinic.

--- Brendan Ballou

State attorneys general and private litigants also have roles in enforcing these laws, but face challenges due to limited resources and financial incentives 2.

   

Legal Accountability

Legal accountability for private equity firms is fraught with difficulties, particularly in holding them responsible for the actions of their portfolio companies. Nilay Patel explains that while private equity firms often control the operations of their investments, piercing the corporate veil to hold them accountable is extremely challenging due to varying state laws and strong defense litigation 3. Brendan Ballou notes that this legal protection allows firms to evade responsibility, even when they own a significant portion of a company.

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

--- Brendan Ballou

Additionally, private equity firms adeptly use bankruptcy tactics to their advantage, often becoming both the largest owner and creditor of a company, which allows them to manipulate bankruptcy proceedings to offload debts and liabilities 4.