In OJ Commerce, LLC v. KidKraft, Inc., (11th Cir.; 5/22), the 11th Cir. held that a private equity firm can’t conspire with its portfolio company within the meaning of the Sherman Act. Here’s the intro from a Latham memo on the decision:
On May 24, 2022, the United States Court of Appeals for the Eleventh Circuit held that a private equity firm and its majority-owned and -controlled portfolio company could not, as a matter of law, engage in an antitrust conspiracy under Section 1 of the Sherman Act in OJ Commerce, LLC v. KidKraft Inc. The Eleventh Circuit held that a company “ordinarily cannot conspire with an entity it owns and controls and with which it does not compete,” applying a functional framework for analyzing the ownership structures of private equity firms, which considers whether the entity is majority-owned and -controlled by the sponsor, and whether the two companies compete.
The memo says that this decision reduces the risk that PE funds & portfolio companies face under Section 1 of the Sherman Act in the 11th Cir. & jurisdictions that follow its lead. But it cautions that there’s no certainty that the DOJ or FTC will follow the Court’s lead. In that regard, I’ve previously blogged about how the antitrust enforcement agencies have increasingly turned to the Sherman Act when it comes to M&A enforcement proceedings.
– John Jenkins