CE Director Professor Simon J. Wilkie, Professor Melanie Stallings Williams, CE Director Dr. Michael A. Williams, CE Principal Wei Zhao, and Christopher Burke, Stephanie Hackett and David Mitchell to publish an upcoming article entitled “Masters of the Universe: Bid Rigging by Private Equity Firms in Multibillion Dollar LBOs” in the University of Cincinnati Law Review.

 

The article analyzes aspects of a case involving a shareholder class of investors with antitrust claims against the world’s largest private equity (“PE”) firms.  The Dahl v. Bain Capital Partners, LLC case began in 2007 when a proposed class of shareholders alleged that the world’s largest PE firms had violated the Sherman Act, 15 U.S.C. §1, by conspiring to suppress the prices paid to shareholders in several large leveraged buyouts (“LBOs”).  After nearly seven years of litigation, in 2014, the shareholder class settled their antitrust claims for an agreed payment of $590.5 million.

 

The Dahl case extends the use of economic analysis, and specifically auction theory, in antitrust matters, including class action cases.  Dahl was not an ordinary case in that it did not involve either a commodity or a sellers’ cartel.  Instead, it involved a buyers’ cartel which, plaintiffs alleged, conspired to drive down the price of a number of unique, large LBOs during the mid-2000’s. The case was also notable because of the Plaintiffs’ decision to use auction theory to demonstrate both the existence of antitrust violations and the extent of damages.  In particular, the Dahl case extends the use of economic analysis in antitrust by using auction theory to (1) specify and empirically test plus factors used to evaluate the likelihood of collusion; (2) provide a methodology utilizing evidence common to class members to demonstrate that members of a proposed class incurred a common impact as a result of the alleged collusive conduct; and (3) provide a methodology based on generally accepted economics that can be used reliably to quantify class-wide damages.