Private equity acquisitions grew tenfold over the past two decades. Over the same period, their focus shifted from financial engineering to industry consolidation, raising antitrust concerns. Heightening these concerns, privately backed acquisitions of competitors historically escaped detection by federal antitrust authorities in their incipiency because they fell below the reporting thresholds of the Premerger Notification Program. However, academic studies and agency investigations are now unearthing these transactions. Most salient is a recent complaint filed by the Federal Trade Commission challenging a series of acquisitions stretching back ten years.

In the wave of litigation that is likely to follow this “groundbreaking” case, serious problems may arise. Even after remedies are factored in, these transactions could be profitable for the firms that formulated and financed them, undermining deterrence. Moreover, the damages, which will accrue over several years and be statutorily tripled, could far exceed what portfolio companies can pay, which may be limited by factors such as their indebtedness. Ultimately, whether future antitrust violations are deterred and victims are paid the sums they are awarded depends critically on whether private equity funds that formulated and financed the portfolio companies’ acquisitions are held liable.

This paper provides the first evidence that privately backed consolidation extends far beyond what the FTC’s recent lawsuit alleges. Next, it identifies the unique features of these transactions that limit deterrence and restitution. Finally, it introduces a novel doctrinal framework to determine the liability of private equity funds that finance and direct mergers among rival firms.