Our former Prospect intern Jack Styler recently wrote a terrific piece in The Provincetown Independent revealing how a private equity company is seeking to roll up the humble business of propane and heating oil supply and delivery on Cape Cod. F.A. Days and Sons, a three-generation family company with 7,000 accounts, was sold to Inyarek Partners, a PE outfit which in turn created a platform called Guardian Propane Partners to dominate local propane supply.

It’s not clear what other Cape Cod acquisitions are planned, but the rollup business model calls for seeking market dominance and thus pricing power, often in what was once a mom-and-pop industry. In the past decade, private equity rollups have acquired a wide range of sectors including nursing homes, medical specialties, funeral parlors, trailer parks, ski slopes, veterinary practices, as well as such home services as HVAC, plumbing, electrical contractors, roofing, and pest control.

More from Robert Kuttner

The target sectors are often small, family-owned, and with lots of independent suppliers, which allows consumer choice and competition based on quality, price, and reputation—just the way capitalism is supposed to work. A rollup allows the acquiring PE company to dominate a local market and amass pricing power. For the seller, who may be a family-owned business, the sale allows an exit strategy and even a small windfall in sectors where there may be few buyers.

Typically, the PE partners put little of their own cash into a deal, but borrow most of the money, and then pile the debt onto the books of the operating company. Following the acquisition, the new PE owner may run the company for a while and reap supernormal profits, or may extract so much money from the operating business that it will be driven into bankruptcy, by which time the PE company has made back its own investment many times over.

For the most part, rollups fall between the cracks of existing laws and enforcement concepts.

You might think this entire business strategy, which aims for local monopoly pricing power, would be illegal under the antitrust laws. It surely ought to be; but for the most part, rollups fall between the cracks of existing laws and enforcement concepts, because the process of concentration occurs gradually.

When Republican Sen. John Sherman of Ohio wrote the 1890 antitrust act that bears his name, large national trusts and not local rollups were the targeted abuse. The follow-up Clayton Act of 1914 comes closer to being a potential remedy. Section 7 prohibits anti-competitive mergers and gives the Federal Trade Commission (FTC) and the Department of Justice (DOJ) authority to review and block mergers. It also authorizes individuals and businesses harmed by anti-competitive actions to sue in federal court and potentially recover triple damages.

In 1950, Congress strengthened the Clayton Act to make clear that anti-competitive mergers and acquisitions are illegal per se, even before they demonstrate pricing power. Other legislation, the Hart-Scott-Rodino Act of 1976, requires large prospective mergers to give advance notice. One problem is that rollup acquisitions often fall under the threshold that would trigger the advance notice provision, so the private equity firm can acquire dominance in a local market bit by bit without scrutiny.

In 2023, the FTC under chair Lina Khan and the DOJ Antitrust Division under Jonathan Kanter released new merger guidelines, which for the first time addressed the abuse in a strategy of “serial acquisitions,” which characterizes rollups. For the most part, however, even under the Biden administration’s revival of antitrust under Khan and Kanter, Clayton Act authority has seldom been used to review or block rollups, which remain a somewhat novel abuse.

One exception is an almost unbelievably brazen rollup that sought to take over and monopolize, of all things, anesthesiology practices in Texas. A private equity firm, Welsh, Carson, Anderson & Stowe, created an entity called U.S. Anesthesia Partners (USAP). By the time the FTC filed suit in 2023, USAP had managed to buy up about 70 percent of Texas anesthesiology practices.

The FTC found that “USAP systemically bought up nearly every large anesthesia practice in Texas in a roll-up scheme to create a single dominant provider with the power to demand higher prices.” USAP has offered to settle the suit, and is now in negotiations with the FTC over what it must sell off. The settlement will have to be approved by a U.S. District Court judge.

NOT SURPRISINGLY, THE FTC AND DOJ under Trump have been far less interested in antitrust enforcement generally, much less in challenging rollups. However, one sleeper is the potential of lawsuits at the state and local level, as authorized by the Clayton Act.

The Prospect in your inbox

Subscribe for analysis that goes beyond the noise.

At this writing, dozens of municipalities are suing to challenge a private equity rollup of the companies that make fire engines (is nothing sacred?). As a remedy, they are asking both for damages to compensate for the price-gouging and for divestiture.

This is another sector where historically there were multiple suppliers and normal competition to discipline prices. About a decade ago, a Wall Street private equity company, American Industrial Partners, saw an opportunity for a rollup.

After a series of mergers and acquisitions, there are now just three major suppliers where there used to be more than ten. Just one consolidated producer, now rebranded as REV Group, now manufactures most chassis and custom apparatuses. The result is unprecedented shortages and price increases.

According to the International Association of Fire Fighters, “The average price of a new fire engine has roughly doubled since 2020, and wait times that once ran about 18 months now stretch up to four and a half years. The result: departments keep aging, sometimes unsafe, apparatus in service far longer than they should.”

According to the complaint in one lawsuit in Los Angeles, “To further capitalize upon its consolidation scheme, AIP debuted REV Group on the public markets through an initial public offering (‘IPO’) in January 2017. While continuing to portray its brands to fire departments as steeped in tradition and local community-building, in its prospectus, REV Group marketed itself to Wall Street rather brazenly as an ‘Experienced Consolidator,’ telling potential investors that the status quo of small and fragmented manufacturers presented ‘an opportunity for market leadership’ and ‘acquisitive growth.’”

There are actually different categories of lawsuits against the fire engine rollup being brought by public entities. Los Angeles County and 21 other municipalities are suing for damages under what is called a “mass tort” action. Philadelphia and Milwaukee and several others have filed a class action suit. And three of the California public entities suing for damages are also making claims on behalf of the broad public, as allowed under California law.

Catherine Simonsen, the former FTC official whose law firm is lead co-counsel in the Los Angeles and related suits, observes, “With these rollups, smaller acquisitions often don’t get brought to the attention of the agencies. That helps explain why they fly under the radar.” But Simonsen adds that a series of small acquisitions in a rollup can create illicit monopoly power just as surely as one big one.

Back in 1962, the U.S. Supreme Court recognized that reality in the Brown Shoe case. The court held that “Imminent monopoly may appear when one large concern acquires another, but it is unlikely to be perceived in a small acquisition by a large enterprise … Where several large enterprises are extending their power by successive small acquisitions, the cumulative effect of their purchases may be to convert an industry from one of intense competition among many enterprises to one in which three or four large concerns produce the entire supply.”

These lawsuits by public entities are a novel strategy to enforce a well-established doctrine of illegal concentration against a novel form of predation. If the suits succeed, they would almost surely shut down the rollup of fire engines, suggest a new path for contesting other rollups, and help produce a road map for the next antitrust officials in the spirit of Khan and Kanter to pick up where they left off.

And since rollups are almost entirely a business model of private equity companies (which do a lot of other economy damage), another strategy would be to put private equity out of business as a wholly parasitic sector. Sen. Elizabeth Warren’s Stop Wall Street Looting Act would essentially do that, by taking away PE’s special tax breaks, requiring essentially the same disclosures as publicly traded companies, prohibiting extractions of special dividends at the expense of the operating company, and constraining other forms of predatory behavior.

Warren has launched a bipartisan investigation with Republican Sen. Jim Banks of Indiana on how the rollup of fire engines is harming firefighters. “I hear from firefighters across the country that their jobs are harder and more dangerous because private equity has hiked fire truck prices and created shortages and delays,” she told me. Warren is now working on new antitrust legislation that would make the statutory prohibition of rollups more explicit.

Extreme economic concentration goes hand in hand with extreme wealth concentration. Both are bad for ordinary Americans, the constituency of Democrats. When they return to legislative and executive power, Democrats should be ready with a comprehensive anti-concentration agenda.

Update, June 16: This article has been updated with a comment from Sen. Warren.

Before you go.

I hope that you found this article interesting and thought-provoking. The reason we’re able to publish stories like this — free of programmatic ads and never behind a paywall — is because readers like you step up to support our work. 

The Prospect doesn't answer to advertisers or billionaire owners. We answer to you and to our commitment to pursuing the truth, wherever that leads us. 

Independent, reader-supported journalism is critical at a time when the free press is under assault. 

If you believe this kind of reporting should exist and remain free to read, we hope you'll consider chipping in. Every contribution, however modest, makes a real difference.

David Dayen
Executive Editor