During the recent Spring 2022 Enforcers Summit, Department of Justice (DOJ) Antitrust Division chief, Assistant Attorney General for Antitrust Jonathan Kanter, announced that interlocking directorates will face increased scrutiny from the DOJ.
Under Section 8 of the Clayton Act, 15 U.S.C. § 19, the DOJ is authorized to bring an action when an individual simultaneously serves as a director or officer of two qualifying companies that are “by virtue of their business and location of operation, competitors.” The main concern with such overlaps is that they will lead to improper exchanges of competitively sensitive information between competitors or, in the worst-case scenario, facilitate unlawful coordination or conspiracies. Section 8 is a forward-looking statute that makes such arrangements per se unlawful (meaning the interlock is unlawful regardless of any potential procompetitive justifications) when the relevant jurisdictional thresholds are met and no statutory exceptions apply.
In his opening remarks at the Enforcers Summit, Assistant Attorney General Kanter stated, “[The DOJ] is committed to litigating cases using the whole legislative toolbox that Congress has given us to promote competition. One tool that I think we can use more is Section 8 of the Clayton Act . . . . For too long, our Section 8 enforcement has essentially been limited to our merger review process. We are ramping up efforts to identify violations across the broader economy, and we will not hesitate to bring Section 8 cases to break up interlocking directorates.”
Government challenges to interlocking directorates have been relatively rare, with only three such enforcement actions since 1994. Most recently in June 2021, the DOJ issued a press release stating that the two top executives of a talent and media agency resigned their positions on the board of directors for a competing business after the DOJ expressed concerns that the directors’ positions would make it difficult for the two businesses to continue competing independently.
Taken together, these two announcements within the last year serve as a reminder for large companies of the importance of implementing an effective antitrust compliance program that considers the potential competitive implications of competitors having overlapping directors or officers. And even for smaller businesses where Section 8’s jurisdictional thresholds are not met or some other exception applies, companies and individuals must remain vigilant about anticompetitive conduct that could result from interlocks, such as anticompetitive information exchanges and horizontal competitor agreements.
In addition to Assistant Attorney General Kanter discussing the important role of Section 8 enforcement, the Enforcers Summit also focused on labor competition issues such as the DOJ’s ongoing no-poach investigations and criminal enforcement actions. Assistant Attorney General Kanter also discussed the DOJ’s interest in potentially bringing criminal monopolization cases under Section 2 of the Sherman Act, which the DOJ has not successfully prosecuted since the late 1970s.
The law surrounding interlocking directorates is nuanced and complex, and involves a fact-intensive inquiry into the size and scope of the potentially competing business segments of the relevant parties. Businesses with questions or concerns relating to the antitrust implications of directors’ board service should consult with antitrust counsel.
