October 28, 2022

Antitrust: European Regulators to Follow US Lead on Private Equity?

Private equity has become one of U.S. antitrust regulators’ prime targets during the Biden administration, and this Freshfields blog says that European regulators appear ready to follow the DOJ & FTC’s lead. Here’s an excerpt:

The focus on PE in the US may inspire other regulators, in particular across the Atlantic. In Germany, a draft law is being discussed which would grant the Federal Cartel Office broad powers to address perceived “disruptions” of competition. Those powers are likely to include oversight of cross-ownerships and interlocking directorates. In 2020, the European Commission requested a study on the effects of common shareholdings by institutional investors and asset managers on European markets.

While no major enforcement action has been taken since the report, the headlines generated by the DOJ may inspire the European Commission to have a renewed look at these issues in Europe. And in the UK, while the Competition and Markets Authority has recognized that highly leveraged private equity acquisitions are unlikely in themselves to impact competition, it has demonstrated a willingness to follow the European Commission in pursuing private equity owners for potential antitrust violations by their portfolio companies, as demonstrated most recently in relation to its case against excessive pricing for thyroid drugs.

The blog also points out that  EU’s proposed new merger notification forms would compel disclosure of all material shareholdings (including non-control stakes) and directorships in competitors or businesses operating in vertical markets. Holdings by customers and competitors would also have to be disclosed.

These new disclosure obligations are expected to prompt greater scrutiny during merger review of the effect on competition of minority positions in portfolio companies that compete with or operate in markets that are adjacent to the target’s and will likely increase regulators’ demands for “ring-fencing” measures.

John Jenkins