Serial acquisitions and roll-up strategies are facing intense scrutiny as the Federal Trade Commission (FTC) and the U.S. Department of Justice’s (DOJ) Antitrust Division request public comment on how these types of transactions impact competition in “any sector or industry” of the U.S. economy, including “housing, agriculture, defense, cybersecurity, distribution, construction, aftermarket/repair, and professional services markets.”¹ In their press release announcing the public inquiry, the FTC and the DOJ emphasized their concern that serial acquisitions, even those below HSR thresholds, allow companies “to amass significant control over key products, services, or labor markets without government scrutiny,” which “can harm competition to the detriment of consumers, workers, and innovation across an entire industry or business sector.” FTC Chair Lina Khan described these acquisitions as “stealth consolidation schemes” and asked that the public weigh in to inform future enforcement efforts.

RFI Seeks Information from Any Sector of the U.S. Economy

According to the agencies, the purpose of this latest Request for Information (RFI) is “to identify sectors of the economy being impacted by serial acquisitions.” To that end, the inquiry solicits:

• responses to questions about the effects of serial acquisitions on competitors, wages, prices, innovation, and the quality and accessibility of relevant products and services;
• information about the business practices of the acquirers, including whether they sold products or services below cost to drive out competitors, forced or incentivized customers to buy exclusively from the acquirer, and more; and
• for serial acquisitions executed by private equity firms specifically, information about the firm’s involvement in the business post-acquisition.

The RFI cites various news articles and recent transactions involving serial acquisitions. For example, the RFI cites TopBuild Corp.’s proposed acquisition of SPI Parent Holding Company (SPI), which was abandoned in April following the DOJ’s competitive concerns.

The current deadline for comments is July 22, 2024, though this could be extended.

For companies engaged in iterative, strategic M&A, this latest development offers a few key takeaways:

• Sectors or industries highlighted by key constituencies are likely to be a focus of future investigations.
• Firms can expect to see more investigations and enforcement efforts targeting both private equity and non-private equity firms engaged in roll-ups and other serial acquisition strategies.
• If implemented, changes to HSR Act will be another tool to identify transactions of interest to the agencies that may have otherwise been missed.

This is just the latest in the agencies’ broader effort to increase merger enforcement, and, in particular, enforcement involving of private equity M&A.

In March 2024, the FTC, DOJ, and Department of Health and Human Services (HHS) jointly launched an inquiry seeking information about private equity acquisitions of healthcare providers and related entities.² As of May 28, 2024, that RFI has received 11,077 public comments, 6,280 of which have been published to the public docket. On the same day that RFI was announced, the three agencies held a virtual workshop that discussed the impact of private equity firms in healthcare markets.

The workshop came on the heels of an FTC enforcement action brought in September 2023 against U.S. Anesthesia Partners, Inc. (USAP) and private equity fund Welsh Carson in federal court, alleging the large Texas-based anesthesia provider and its parent firm engaged in a decades-long anticompetitive scheme in violation of federal antitrust laws. Delivering on its recent promises to increase scrutiny of private equity-backed transactions, the FTC’s complaint accused USAP and Welsh Carson of using a series of roll-up acquisitions, price-setting agreements, and a market allocation scheme to suppress competition and drive-up prices for hospital-based anesthesiology services in Texas.³ The Southern District in Texas recently granted Welsh Carson’s motion to dismiss, holding in part that because Welsh Carlson held only a minority interest and does not have control, Welsh Carson cannot be liable for alleged antitrust violations.

While this latest effort heralds a new era of targeted enforcement, this is not the first time the agencies have expressed concerns over the purportedly anticompetitive effects of some serial acquisitions.

In June 2022, for example, the FTC sued to block private equity firm JAB Consumer Partners from acquiring Ethos, the owner and operator of specialty and emergency vet clinics in nine states. JAB is the parent company of two firms that operate chains of veterinary clinics. According to the FTC, JAB’s proposed acquisition of Ethos was part of its roll-up strategy to “gobble up” smaller competitors in already concentrated regional markets.⁴ The FTC ultimately reached a consent agreement with JAB under which the private equity firm agreed to divest five vet clinics and seek prior approval on acquisitions of any future vet practices within 25 miles of existing or future JAB-owned clinics.

More recently, the FTC cited concerns about serial acquisitions in a lawsuit to block Coach’s parent company, Tapestry, Inc., from acquiring Capri Holdings, the owner of Michael Kors and other fashion brands. The FTC’s complaint alleged that the $8.5 billion fashion merger would eliminate head-to-head competition in the accessible luxury handbag market. In an accompanying press release, the FTC asserted that Tapestry has engaged in a “decade-long M&A strategy through serial acquisitions to achieve its dream of becoming a major American fashion conglomerate,” and that because of the company’s “pattern of serial acquisitions, the acquisition of Capri will further entrench Tapestry’s stronghold, making it harder for new brands to both enter the market and have a meaningful presence.”⁵

Inquiry Reflects Biden Administration’s Aggressive Stance on Merger Enforcement

This RFI reinforces the Biden administration’s ongoing commitment to expand the agencies’ enforcement ambit. It is a follow-on to other actions including the 2023 Merger Guidelines, which recognize that a firm may violate antitrust laws by engaging in serial acquisitions.⁶

In addition, the FTC and the DOJ jointly announced a proposed overhaul of the Hart-Scott-Rodino (HSR) Act filing requirements last June, which if implemented, would impose a considerably greater burden on merging parties. These proposed changes would demand significantly more information about the prior acquisitions of both parties to a transaction, including by expanding the time period for disclosure from five to 10 years, and eliminating the disclosure threshold (currently, reporting is required only for entities with $10 million in sales/assets in year prior to the acquisition).

[1] See Request for Information.

[2] Id.

[3] Complaint, FTC v. U.S. Anesthesia Partners, Inc., No. 4:23-CV-03560 (S.D. Tex. Sept. 21, 2023).

[4] Press Release, Federal Trade Commission, FTC Takes Second Action Against JAB Consumer Partners to Protect Pet Owners from Private Equity Firm’s Rollup of Veterinary Services Clinics (June 29, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-takes-second-action-against-jab-consumer-partners-protect-pet-owners-private-equity-firms-rollup-of-veterinary-services-clinics.

[5] Press Release, Federal Trade Commission, FTC Moves to Block Tapestry’s Acquisition of Capri (April 22, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-moves-block-tapestrys-acquisition-capri.

[6] Guideline 8 states that the agencies may evaluate “multiple acquisitions in the same or related business line” as part of an “industry trend” or “overall pattern or strategy of serial acquisitions by the acquiring firm.”