The agency's new chair, unlike his predecessor, stated that the situation had little to do with private equity ownership.
The Federal Trade Commission's settlement agreement with Welsh, Carson, Anderson and Stowe highlighted the difference in perspective on private equity antitrust enforcement between the agency's outgoing and incoming chair.
While FTC commissioners voted 5-0 to accept the settlement, Lina Khan and her successor Andrew Ferguson diverged in their statements on their decision, with the former striking a critical tone of private equity and the latter downplaying its relevance in the matter.
The deal reached with Welsh Carson includes no monetary penalties or admission of wrongdoing, but freezes the private equity firm's investments in U.S. Anesthesia Partners (USAP) at current levels and reduces its board representation to a single, non-chair seat. Welsh Carson will also be required to obtain prior approval from the FTC for any future investments in anesthesia nationwide, as well as for certain acquisitions by any anesthesia group majority-owned by the company nationwide. Finally, the firm will have to provide a 30-days advance notice for certain transactions involving other hospital-based physician practices nationwide.
The agency sued Welsh Carson and USAP in September 2023 for an alleged anti-competitive scheme of rolling-up anesthesia groups in Texas.
However, a federal judge removed Welsh Carson from the case in May 2024, deeming that firm was not liable due to its minority stake in USAP.
Before reaching the settlement, the FTC threatened Welsh Carson with a separate administrative antitrust case, forcing the firm's hand.
"In a last-minute effort to claim a political victory, the outgoing FTC leadership threatened to relitigate in its captive administrative court the exact same overreaching claims that were dismissed last year by an independent federal judge unless we agreed to a settlement by Inauguration Day," Welsh Carson said in a statement. "Despite our confidence in prevailing again in any repeat of this case, we made the decision to agree to a benign notice settlement that will not affect our business in any respect and involves no admissions of wrongdoing or monetary penalties. This allows us to put a politically motivated matter behind us and avoid additional expense and distraction. At WCAS we remain most proud of our reputation and legacy of being a private equity firm of the highest integrity."
In her statement, Khan pointed to tactics used by private equity firms to prioritize their own profits over providing quality, affordable care.
“Like other private equity firms, Welsh Carson uses a complex maze of related entities and funds to carry out its business," she wrote. "Indeed, the Commission's complaint in this matter identifies no fewer than seven different Welsh Carson affiliates as defendants, including two separate private equity funds."
Ferguson, meanwhile, released his own statement in which he pushed back on the significance of private equity involvement in the case.
"The press release and the chair's statement both suggest that this case is extraordinary because it involves 'private equity' and 'serial acquisitions,' and hint at antipathy toward private equity. I write to pierce through this breathless rhetoric to make clear that this case is an ordinary application of the most elementary antitrust principles," Ferguson wrote.
"That Welsh Carson is a private equity firm is irrelevant; the antitrust analysis would be the same if Welsh Carson were, for example, an individual or institutional investor. Section 7 prohibits mergers that may substantially lessen competition or tend to create a monopoly. In most of our Section 7 cases, we are predicting the likely effects of a transaction before it takes place. Here, however, we did not have to predict anything. Welsh Carson made acquisitions. As alleged in the complaint, those acquisitions demonstrably created monopoly power and Welsh Carson wielded that power to raise prices. That is exactly what Section 7 prohibits anyone from doing. There is thus no reason for the commission to single out private equity for special treatment."
Under the Trump administration, regulatory oversight of M&A is expected to ease up, especially as it relates to private equity.
Ferguson's explanation of the decision to settle with Welsh Carson provides insight into how the FTC may hold private equity companies accountable going forward.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
The FTC's settlement with Welsh, Carson, Anderson and Stowe prevents the private equity firm from increasing investments in U.S. Anesthesia Partners, limits board representation, and requires prior FTC approval for future investments in anesthesia groups nationwide.
FTC commissioners disagreed in their statements, with outgoing chair Lina Khan criticizing private equity practices, while incoming chair Andrew Ferguson emphasized standard antitrust enforcement principles without singling out private equity.
The case highlights a shift in antitrust views in the Trump administration, with a likely easing of regulatory scrutiny on private equity.