United States: FTC Continues Targeting Private Equity with Challenge Against "Roll-Up" Acquisition Strategy

In brief

On 21 September 2023, the Federal Trade Commission (FTC) announced that it was suing private-equity firm Welsh, Carson, Anderson & Stowe (WCAS) and its minority-owned portfolio company, U.S. Anesthesiology Partners, Inc. (USAP) for allegedly undertaking an anticompetitive acquisition strategy to "roll-up" multiple Texas-based aesthesia practices.1 In the action, the FTC alleges violations of Section 7 of the Clayton Act and Sections 1 & 2 of the Sherman Act, and is pursuing expansive relief—including limitations on the ability of WCAS to make acquisitions in the future.


The FTC alleges that USAP and WCAS "executed a multi-year anticompetitive scheme to consolidate anesthesiology practices in Texas, drive up the price of anesthesia services provided to Texas patients, and boost their own profits."2 As a result of this scheme, the FTC contends that Texans have expended tens of millions of dollars more on anesthesia services. In summary, the FTC's complaint alleges that USAP and WCAS engaged in a three-part strategy to monopolize the Texas anesthesiology market.

  • First, the companies executed a roll-up scheme, systematically buying up nearly every large anesthesia practice in Texas.
  • Second, the companies drove up prices by reaching price-setting agreements with the remaining independent practices.
  • And third, USAP purportedly struck a deal with its most significant competitor to keep it out of USAP's territory.

Key takeaways

  • This is a landmark case for the FTC—both because the challenge is principally based on serial acquisitions and that a minority investor in the acquiring company is named as a defendant.
  • The additional allegations of unlawful coordination with rival anesthesia service providers allegedly derive from the anticompetitive roll-up acquisitions—highlighting that scrutiny of any potentially anticompetitive acquisition can trigger scrutiny of related business practices that may warrant an independent challenge.
  • The FTC's complaint reinforces the hostility and general opposition expressed by Chair Lina Khan toward consolidation driven by private-equity acquisitions, particularly in the healthcare space.3
  • This lawsuit alleges that more than a dozen acquisitions (since 2012)—none of which required notification under the Hart-Scott-Rodino Act (HSR)—are illegal "whether considered individually or as a series." Regardless of whether the FTC prevails in the action, the complaint stands as a reminder that non-reportable transactions may be scrutinized and challenged many years after closing.
  • The FTC alleges that certain of USAP's acquisitions violate Section 5 of the FTC Act despite not increasing concentration sufficiently to constitute a violation of Section 7 of the Clayton Act (the statute traditionally relied upon to challenge allegedly illegal M&A activity). This case represents an opportunity for federal courts to opine on this expansive view of Section 5.
  • Private equity firms and other companies considering or pursuing a "roll-up" strategy should seek counsel to manage and possibly mitigate the inherent antitrust risks associated with the strategy.

In depth

In 2012, WCAS announced the formation of USAP, "a single-speciality physician services organization focused on anesthesia and perioperative care."4 They now have grown and have over 700 anesthesia facility partners in 12 states and Washington, D.C., servicing more than two million cases annually.5

The FTC's lawsuit focuses on USAP's conduct in Texas. It asserts that WCAS and USAP concocted an anticompetitive scheme to drive up the prices of anesthesia services offered to Texas patients in order to increase their profits. The FTC contends that WCAS created USAP for the purpose of executing a large-scale consolidation scheme that would create a "dominant provider with the power to extract high prices." To further the success of the roll-up, the FTC asserts that USAP entered into or maintained price-setting arrangements with the remaining independent anesthesia groups in Texas. Finally, USAP and WCAS are alleged to have entered into a market allocation agreement with another large provider to ensure that USAP was the only provider in certain areas of Texas. As a result of the scheme, USAP is the dominant provider of anesthesia in Texas—according to the FTC, it is four times larger than the next largest competitor.

Apart from the alleged antitrust violations, the FTC's complaint also includes allegations that certain of USAP's acquisitions represent unfair methods of competition under Section 5 of the FTC Act. This follows the FTC's policy announcement late last year outlining its broad interpretation of the scope of unfair methods of competition under Section 5. While the FTC concedes that these acquisitions did not increase market concentration, it nevertheless contends they represent an unfair method of competition largely due to the fact that USAP raised each practice's rates after completing the acquisition.

The FTC is asking the federal court to enjoin USAP and WCAS from undertaking "similar and related conduct in the future" and other structural relief required to restore competition across Texas.

As we highlighted in June, new proposed HSR requirements related to corporate structures and relationships suggest that the agencies will apply greater scrutiny to mergers and acquisitions by private equity firms and other financial purchasers.

The DOJ has echoed the FTC's intent to scrutinize private equity transactions. In May 2022, in an interview with the Financial Times, Assistant Attorney General Jonathan Kanter of the U.S. Department of Justice Antitrust Division stated: "[m]any of the mergers we're confronting are as a result of [private equity] roll-ups... If we're going to be effective, we cannot just look at each individual deal in a vacuum."6

We expect that both the DOJ and FTC intend to pursue similar enforcement actions against companies that deploy a "roll-up" acquisition strategy.

1 https://www.ft.com/content/93103af9-768a-4545-9166-20389c254edc

2 Press Release, Federal Trade Commission, FTC Challenges Private Equity Firm’s Scheme to Suppress Competition in Anesthesiology Practices Across Texas (21 September 2023), https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-challenges-private-equity-firms-scheme-suppress-competition-anesthesiology-practices-across?utm_source=govdelivery

3 FTC v. US Anesthesia Partners, Inc., Complaint for Injunctive and Other Equitable Relief, available at https://www.ftc.gov/system/files/ftc_gov/pdf/2010031usapcomplaintpublic.pdf.

4 Press Release, US Anesthesia Partners, Welsh, Carson, Anderson & Stowe and Healthcare Industry Veteran Announce Formation of US Anesthesia Partners, Inc, https://www.usap.com/news-and-events/news/welsh-carson-anderson-stowe-and-healthcare-industry-veteran-announce-formation.

5 US Anesthesia Partners, Who We Are, https://www.usap.com/about/who-we-are

6 James Fontanella-Khan and Stefania Palma, Crackdown on Buyout Deals Coming, Warns Top US Antitrust Enforcer, Financial Times (19 May 2022), https://www.ft.com/content/7f4cc882-1444-4ea3-8a31-c382364aace1?utm_source=newsletter-hubwire&utm_medium=email&utm_campaign=pe-hub-wire-subscriber&utm_content=20-05-2022.

Copyright © 2024 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.