Private Equity 'Club Deals' and European Competition Policy: A Primer

Abstract

In the US, private equity 'club deals' have raised controversy as to potential risks of price fixing by consorting private equity firms. Surprisingly in Europe, private equity has managed to slip through the notorious far-reaching hand of the European Commission. This purpose of this paper is to shed an initial light on the issue of private equity consortia and how they fit in the contemporary European competition regime. Two essential competition concerns that have been brought up (1) private equity consortia entail a Monopsony setting. In an auction, the number of bidders are restricted, as a result that the bidding prices will drop below the competition price. (2) Private Equity consortia members share sensitive information in an auction in order to rig the bidding process (bid-rigging). Both concerns are examined against the background of the current European competition law framework. The first concern is examined in the light of the contemporary E.C. Merger Control regime. The second competition concern is subjected to article 81 §1 EC. The outcome of this paper is that there are, hitherto, no genuine competition impediments by private equity consortia. It appeared that the counterfactual used in a Monoposony setting did not apply in the case of private equity consortia. Similar to the US, in Europe private equity consortia operate in a plural market. The trend of private equity consortium is often compensated by other players that also participate (strategic players). Regarding the bid-rigging concerns, there was no actual empirical data available to determine the activities in Europe. We therefore assume that these practices have not (yet) occurred in the European situation.

Keywords: Private Equity, cross-border, M&A, European Competition Policy, Competition Law, US, Blackstone, Merger Control, 81, club deals, notification, EMCR, Global, GDS