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18 Va. L. & Bus. Rev. 51 (2023-2024)
Misaligned Measures of Control: Private Equity's Antitrust Loophole

handle is hein.journals/valbr18 and id is 51 raw text is: VIRGINIA LAW & BUSINESS REVIEW VOLUME 18 FALL 2023 NUMBER 1 MISALIGNED MEASURES OF CONTROL: PRIVATE EQUITY'S ANTITRUST LOOPHOLE Aslihan Asil John M. Barrios Thomas G. Wollmannt ABSTRACT Agencies and legislators have raised concerns that acquisitions backed by private equity (PE) threaten competition, but few, if any, have offered explanations as to why they pose a unique threat. In this article, we argue that many PE-backed acquisitions may avoid antitrust enforcement because they escape detection. Under the Hart-Scott-Rodino Antitrust Improvements Act, parties intending to merge must notify federal authorities and wait for clearance. However, various exemptions exist based on the size of the transaction, parties involved, and proportion of control conferred by the merger. Recent work demonstrates that to polkce mergers effectively, agencies must be informed about transactions in their incipieny, meaning that in many economically important industries, the contours of the premerger notification program under the Act are, in practice, the same as the contours of the substantive legal standard. We show that when the Act's exemptions are applied to PE's standard investment structure, which use an array of intermediate specialpurpose vehicles to minimize taxes, share risks, and distribute fees, PE-backed acquisitions that mould othenise be reportable may be exempt. We support our argument nith merger and filng data. t J.D. 2021, Yale Law School and PhD Candidate, Yale University; Assistant Professor, Olin Business School at Washington University in St. Louis and Faculty Research Fellow at the National Bureau of Economic Research; Associate Professor of Economics, University of Chicago Booth School of Business and Faculty Research Fellow at National Bureau of Economic Research. Conversations with John Asker, Ian Ayres, Dave Balan, Florian Ederer, Daniel Francis, Austan Goolsbee, Al Klevorick, Fiona Scott Morton, Paulo Ramos, Nancy Rose, Bilal Sayyed, and Katja Seim inspired and improved this article. All errors are the authors' own. Copyright © 2023 Virginia Law & Business Review Association 51

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