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In a running gag on The Simpsons, diabolical clown Sideshow Bob cannot stop stepping on rakes as he carries out various ill-fated schemes to murder Bart Simpson.
Life imitates art. Federal Trade Commission Chair Lina Khan keeps stepping on rakes in her quest to regulate the entire economy, this time losing a case against private equity firm Welsh, Carson, Anderson, & Stowe.
In a fawning profile published in the Washington Post on Tuesday morning, Steve Pearlstein mentioned Khan’s case against Welsh Carson, characterizing it as a death blow to private equity:
For the first time, the FTC sued a private equity fund, challenging the industry’s appetite for creating virtual monopolies. In this case, a fund had bought nearly every anesthesiology practice in Texas. Judging from the howls of protest from Wall Street, the suit poses a significant threat to the hugely profitable business model of “rolling up” small firms in often-overlooked markets
The FTC’s case alleged that U.S. Anesthesia Partners consolidated the anesthesiology market in Texas, and then used its monopoly power to raise prices on patients and small businesses to the tune of tens of millions of dollars. In a clear attempt to take a swing at an industry that the Biden administration disfavors politically, the FTC alleged that Welsh Carson’s 23 percent stake in U.S. Anesthesia Partners amounted to effective control of a monopoly. The court found that by targeting noncontrolling monitory investors, such as Welsh Carson, the FTC expanded its “reach further than any court has yet seen fit.”
Hours after Pearlstein’s puff piece ran, Texas federal judge Kenneth Hoyt dismissed the FTC’s case against Welsh Carson and allowed the antitrust case against U.S. Anesthesia Partners to continue.
Hoyt found that “receiving profits from an entity that may be violating antitrust laws is not an ongoing antitrust violation.” Hoyt also noted that Welsh Carson only held two out of U.S. Anesthesia’s fourteen board seats, debunking the FTC’s allegations that Welsh Carson masterminded a monopolization scheme. The FTC’s goal in bringing the case was to increase private equity’s legal liability over their portfolio companies, chilling investment across the board and damaging one of Biden’s top political targets.
Per Axios, “The Biden administration took a big swing against private equity. And it missed.” As of this writing, Pearlstein has not updated his piece to indicate that the FTC lost its case.
Being an apologist for Khan and her agenda means never having to say you’re sorry. The Wall Street Journal Editorial Board put it best: “Ms. Khan keeps losing cases because she ignores the consumer welfare standard and other bedrock antitrust principles. Yet she trumpets legal defeats as victories and keeps grinning like she’s winning.”
The FTC needs to quit operating beyond its remit. If Chair Khan continues on this path, her legacy will be best known for weaponizing FTC and arbitrarily targeting firms she finds distasteful and make for an easy political target.