Lina Khan Is Sending a Message to the Private Equity Industry
Nov 16, 2023
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Lina Khan, Chair of the Federal Trade Commission and a prominent antitrust advocate, shares her novel approach to competition law. She discusses her lawsuit against a private equity firm buying up anesthesiology practices in Texas, highlighting its implications for healthcare and market competition. Khan expands on the scary impact of serial roll-up strategies and touches on political pushback against her initiatives. She even reveals insights into how antitrust laws could redefine healthcare dynamics, infused with anecdotes about the complexities of the U.S. system.
The FTC is actively scrutinizing consolidation and lack of competition in healthcare markets, recently filing a monopolization claim against a private equity-backed company that acquired anesthesiology businesses in Texas.
The FTC's research process involves gathering information from a range of sources, engaging the broader public, and ensuring a diverse understanding of market realities to inform its enforcement efforts.
Deep dives
FTC's focus on antitrust in healthcare markets
The Federal Trade Commission's (FTC) chair, Lena Khan, discusses the agency's scrutiny of consolidation and a lack of competition in healthcare markets. The FTC recently filed a monopolization claim against a private equity-backed company that acquired anesthesiology businesses in Texas, eliminating competition and raising prices. Khan highlights the importance of enforcing antitrust laws in healthcare markets due to their significance in everyday life and the problems resulting from consolidation. The FTC has been hearing from market participants across sectors, including healthcare workers, about additional areas where they believe the agency should be scrutinizing. The FTC's focus is not limited to healthcare markets, as it also assesses businesses across the US economy.
Examining industries and gathering information
Khan explains the FTC's research process, which involves staff expertise in drilling into the mechanics of various markets and soliciting information from a range of sources. The agency aims to engage the broader public and regularly holds commission meetings where anyone can provide input. The FTC also opens public dockets to gather information on specific topics. Khan emphasizes the importance of talking to people involved in the markets to understand the realities and challenges they face, rather than relying solely on models and theories. The FTC's understanding of markets is enriched by gathering diverse perspectives and ensuring its enforcement efforts align with market realities.
Enforcement and deterrence in antitrust
Khan highlights the importance of deterrence in antitrust enforcement. She points out that antitrust risk is now discussed early on in deal-making conversations, indicating increased awareness and consideration of antitrust concerns. The FTC's focus on deterrence aims to prevent law violations and encourages entities to comply with antitrust laws from the outset. Khan notes that the agency brings lawsuits when it believes there is a violation, emphasizing the goal of winning the cases. She also mentions that senior deal makers and antitrust lawyers acknowledge the changing landscape in considering and addressing antitrust risks.
Expanding antitrust to protect workers and promote competition
The conversation delves into how antitrust laws protect not only consumers but also workers, including competition in labor markets. Khan emphasizes the FTC's focus on labor market concentration and the harmful effects of non-compete clauses. The agency has brought lawsuits and proposed rules to address non-compete clauses and other anti-competitive practices in labor markets. Khan highlights the importance of protecting workers' wages, promoting competition, and ensuring workers have broader exit opportunities in various industries. She discusses the impact of anti-trust enforcement on workers, competition, and innovation.
Since becoming chair of the Federal Trade Commission, Lina Khan has arguably taken a novel approach to antitrust, one that incorporates broader ideas of what might actually constitute anticompetitive behavior. She's challenged huge tech companies like Amazon and Microsoft, and more recently, filed a lawsuit against a private equity firm that's been buying up anesthesiology companies across Texas. The action is noteworthy because it targets a common PE strategy of "rolling-up" multiple businesses and then consolidating them to eke out market efficiencies. So it's no wonder that PE players have called the FTC lawsuit "terrifying," or that Khan has been named "Wall Street's No. 1 enemy." In this episode, we speak with Lina Khan herself about the case, and whether the principles underlying it could be extended outside of healthcare to other industries with PE involvement. We also talk about political pushback, the FTC's research and examination process, and even... chickens.
