Private equity firm Welsh, Carson, Anderson & Stowe has agreed to a settlement with the Federal Trade Commission that will pare back its role in a portfolio anesthesia practice the regulator accused of anticompetitive behavior.
The deal comes with no monetary penalties but requires the private equity firm to freeze its investments in Texas-based U.S. Anesthesia Partners (USAP) at current levels and reduce its board representation to a single, non-chair seat, according to the proposed consent order.
Further, Welsh Carson will need to secure prior approval for any future investments in anesthesia, as will the anesthesia groups it majority owns, plus give the regulator a 30-day heads up for certain deals involving hospital-based physician practices nationwide.
The FTC had launched its pursuit of USAP and Welsh Carson in 2023, when it alleged that the firm had launched a roll-up scheme when it created the company in 2012. By purchasing numerous major anesthesia groups in Texas, the firm “cost Texans tens of millions of dollars more each year in anesthesia services than before USAP was created,” the FTC said at the time.
However, last spring Welsh Carson looked to have escaped the FTC’s noose when it convinced a federal judge overseeing the case to remove the firm because it had a minority, noncontrolling stake in USAP. The judge denied USAP’s motion to dismiss at the time (and the antitrust case against USAP is not included in Friday’s settlement).
Subsequently, the FTC chose to pressure Welsh Carson with the threat of a separate administrative antitrust case, a spokesperson for the firm said.
“In a last-minute effort to claim a political victory, the outgoing FTC leadership threatened to re-litigate in its captive administrative court the exact same overreaching claims that were dismissed last year by an independent Federal judge unless we agreed to a settlement by Inauguration Day,” the spokesperson said in an emailed statement. “Despite our confidence in prevailing again in any repeat of this case, we made the decision to agree to a benign notice settlement that will not affect our business in any respect and involves no admissions of wrongdoing or monetary penalties. This allows us to put a politically motivated matter behind us and avoid additional expense and distraction.”
The FTC’s press release announcing the settlement suggested that the regulator would be unafraid to threaten an administrative action against other entities that mount a similar legal defense.
“The Commission’s latest action underscores that the common corporate tactic of seeking dismissal of a federal case on Section 13(b) grounds may delay—but will not deny—the FTC’s efforts to challenge anticompetitive conduct,” the FTC wrote. “If necessary, the Commission will bring suit in administrative court to protect consumers from anticompetitive conduct. The settlement here avoids the Commission bringing such an administrative action.”
As suggested by the Welsh Carson representative, the case against USAP and Welsh Carson has become an ideological point of reference for outgoing Chair Lina Khan’s FTC.
The Biden administration had instructed its agencies to more heavily scrutinize private equity investments and other instances of “corporate greed in healthcare.” FTC messaging and events during the subsequent months often highlighted Welsh Carson as a case study of private-equity-backed roll-up schemes. Just this week, it co-released a report with two other federal agencies that outlined public support for policy action against private equity healthcare investors.
Though the commission voted 5-0 in favor of the settlement, statements issued by Khan and Commissioner Andrew Ferguson, who will head the agency under President-elect Trump, struck different tones.
Khan’s statement pointed to “novel” conditions within the agreement that she said were specifically designed with private equity defendants in mind, such as the extension of restrictions to Welsh Carson’s portfolio companies. The agreement is “a valuable blueprint” for future agency action against such entities, she said.
“Like other private equity firms, Welsh Carson uses a complex maze of related entities and funds to carry out its business,” she wrote. “Indeed, the Commission’s complaint in this matter identifies no fewer than seven different Welsh Carson affiliates as defendants, including two separate private equity funds.”
Ferguson instead sought to distance himself from Khan and the agency press release’s suggestions “that this case is extraordinary because it involves ‘private equity’ and ‘serial acquisitions,’ and hint at antipathy toward private equity.”
Welsh Carson’s acquisitions gave it monopoly power that harmed competition and inflicted economic injury on the public, he wrote. Its status as a private equity firm is “irrelevant” to the antitrust analysis that triggered enforcement, he wrote.
Ferguson also reiterated broader support for dealmaking than his predecessor by latching onto Khan’s “red herring” reference of a 2023 Merger Guidelines overhaul.
The commissioner spoke of the guidelines describing “a strategy of multiple acquisitions in the same or related business lines” as a potential violation of Section 7 of the Clayton Act. Ferguson specified that Section 7 does not outright prohibit a pattern of acquisitions, but those that lessen competition or create a monopoly.
“That is what the Complaint accuses Welsh Carson of doing—making acquisitions that in fact tended to create a monopoly and injured vulnerable Americans,” he wrote. “The public should disregard my Democratic colleagues’ rather clumsy attempt to make a run-of-the-mill enforcement matter seem like an avant-garde application of novel provisions of the 2023 Guidelines.”
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