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Private equity firms are so terrified of antitrust watchdogs they may have withheld information about deals, DOJ official says

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The US Justice Department is looking into whether some private equity firms intentionally withheld information from antitrust enforcers during deal reviews to avoid the possibility of acquisitions being blocked, a senior official said Wednesday.

The move comes as top enforcers at the Federal Trade Commission and the DOJ’s antitrust division are taking a close look at the multitrillion-dollar private equity industry under Biden Administration’s aggressive antitrust enforcement agenda. 

Richard Mosier, former special counsel for private equity in the DOJ’s antitrust division, said the agency has “renewed focus” on making sure that private equity firms comply with the federal law known as the Hart-Scott-Rodino or HSR Act. In addition to a notification form, the law requires a submission of documents including studies, analyses and reports prepared for the company’s board or executives about a deal.

Mosier said the concerns largely revolve around companies’ failure to turn over all required documents and the agency isn’t looking at “accidental” situations where a company forgets about one or two things.

Companies that “try to game the system, they run the risk of having that HSR and perhaps prior HSRs scrutinized. The person who signs the form opens themselves up to liability,” said Mosier, speaking at a conference in Washington. 

Comments by some FTC commissioners including Chair Lina Khan display an “open animus towards a specific business model” used by private equity, said Rebekah Goshorn Jurata, general counsel for the American Investment Council, a lobbying group for the industry. “It’s unfounded and not based on empirical data or evidence,” she said, speaking at the same event.

Mosier declined to name any companies caught up in the probe. But KKR & Co. previously disclosed that the Justice Department was looking at the accuracy of its merger notification filings for some transactions in 2021 and 2022. In December, the company said it received a grand jury subpoena over the accuracy of its filings, an indication that the agency had opened a criminal probe.  

KKR declined to comment. The Justice Department didn’t immediately respond to a request for comment.

Mosier in February transferred to the Federal Trade Commission, where he is now focused on mergers and conduct focused on hospitals and physician groups.

He cited February remarks by another senior DOJ official who said private equity firms must fully comply with the merger notification law and that failure to provide disclosure represents “an existential threat” to merger enforcement.

The DOJ also has a sweeping investigation of overlapping board seats that is focused on the sector. The enforcement push relies on a rarely invoked antitrust prohibition against so-called interlocking directorates, where the same individuals or entities have board seats at competing businesses. In February, the FTC also launched an inquiry into private equity firms’ investments in the healthcare sector. 

–With assistance from Yiqin Shen and Allison McNeely.

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