Private Equity & Antitrust Law: Primer in the Face of the DOJ’s Investigation of Possible Anticompetitive Behavior

The U.S. Department of Justice (DOJ) is monitoring the private equity industry. According to recent reports in the Wall Street Journal and other publications, the DOJ has contacted some of the leading private equity firms in the U.S. to ask them to provide information concerning their practice of cooperating with competitors in connection with the acquisition of target companies. The DOJ is interested in learning whether private equity firms are tacitly reaching understandings not to compete for the same targets in order to reduce the price they have to pay. According to the financial press, the DOJ is also scrutinizing “club” arrangements pursuant to which multiple PE firms agree to bid for a target together in order to attain the necessary funding and to diversify risk. Although the DOJ inquiries are preliminary and the information requests were not compulsory, the DOJ’s action has raised concerns within the industry. This alert provides a brief primer on applicable antitrust law and identifies safeguards that a private equity firm can adopt to reduce the risk of liability.