Judge Expands Antitrust Action
A federal judge expanded the scope of an antitrust suit against several of the world’s biggest private equity firms in an effort to determine if an elaborate “bid rigging” scheme took place in the “conspiratorial era” of 2005-08.
Among the deals being examined are those that took Clear Channel and Harrah’s Entertainment private.
The suit, filed in 2007, accused 11 firms including Blackstone Group and Kohlberg Kravis Roberts of a giant conspiracy to game the market for multibillion-dollar takeovers by pooling their money to buy companies together and limit competition. Judge Edward Harrington of the U.S. District Court in Massachusetts added 10 more private equity firms to the suit Sept. 7, according to the New York Times.
At issue is whether “club deals” popular during the decade were illegal attempts by the companies to drive down the price of acquisitions.
It’s hard to know what goods the plaintiffs have on the PEs thanks to a protective order issued early in the case that keeps evidence from public view. But the New York Times reports that millions of pages of documents have already been produced and the PE defendants have already racked up more than $100 million in legal fees.
Skeptics say the suit is unfounded, and one used Clear Channel as an example. CNNMoney’s Dan Primack wrote: “Among the deals now open to plaintiff scrutiny is Clear Channel – a transaction in which lawsuit defendants Bain Capital and THL partners beat out a rival bid from fellow defendants Blackstone Group, KKR and Providence Equity Partners.
“Did they simply choose not to be ‘anti-competitive’ on this one? Or was it all an elaborate ruse to throw (hospital operator) HCA and Harrah’s shareholders off the scent?”
Primack concedes, however, that if reports of highly embarrassing emails between private equity execs prove true, all bets are off.