On September 15, 2025, the Federal Trade Commission (FTC) announced that three directors of privately held Sevita Health agreed to step down from its board of directors in response to the FTC’s allegation that their continued presence on the board violated Section 8 of the Clayton Act. Section 8 prohibits persons from simultaneously serving as directors or officers of competitors.
Although the previous chair of the FTC had signaled that the agency would be taking more aggressive action under Section 8 — specifically, going to court and seeking judicially enforceable consent orders, rather than merely obtaining resignations — there was no complaint and settlement in the Sevita case. Consistent with recent enforcement initiatives of Section 8 by the Antitrust Division of the Justice Department, the FTC currently appears to be content with a more low-key enforcement policy. The consequences of a Section 8 violation, other than some adverse publicity, do not appear at this time to be severe. However, with the new premerger filing reports under the Hart-Scott-Rodino (HSR) Act soliciting information on overlapping directorates, the chances that possible Section 8 violations will come to the attention of the agencies have increased. Companies in the private equity space would therefore do well to pay closer attention to Section 8 issues.
A brief overview of Section 8
Section 8 of the Clayton Act, titled Interlocking Directorates and Officers, prohibits a person from serving at the same time as a director or officer of two corporations that are competitors “so that the elimination of competition between them would constitute a violation of any of the antitrust laws.” Although the statute refers to corporations, the agencies have taken the position that the prohibition on interlocks also applies where one or both of the competitors is another form of entity. In the not uncommon situation in which a private equity firm has a majority interest in two entities that operate in the same business space, the application of Section 8 of the Clayton Act to common directors of the two businesses will turn on whether the businesses would violate the antitrust laws were they to engage in concerted activity. The law in this area does not appear to be particularly well developed, and the application of the antitrust laws to such situations is likely to turn on particular facts.
Not all competitors are subject to the prohibition on common directors and officers. There are certain de minimis thresholds, with the dollar amounts being reset every year according to changes in the gross national product. For 2025, the statute does not apply if both of the entities have capital, surplus and undivided profits of $51,380,000 or less, or the competitive sales of either entity are less than $5,138,000, or the competitive sales of either are less than 2% of the entity’s total sales, or the competitive sales of each entity are less than 4% of that entity’s total sales.
Enforcement of Section 8 over the years has been spotty. The statute “has rarely been enforced in the over 100 years since its passage, and even less so in the past four decades.” In the 1970s and 1980s, the FTC obtained consent orders for violations of Section 8 on multiple occasions, but the pace of enforcement subsequently slowed to a crawl. In the current decade, however, the Department of Justice has again been invoking the prohibition on interlocking directorates, albeit through informal action rather than by seeking judicial remedies.
In the Matter of EQT Corporation
In October 2023, the FTC finalized a consent order relating to the acquisition by EQT Corporation of certain natural gas assets of Quantum Energy LP, both companies being natural gas producers in the Appalachian Basin. The matter involved a slew of antitrust issues, including cross-ownership of shares, information access and other entanglements between competitors. Among the issues for which the agency obtained relief was a violation of Section 8. Under the terms of the parties’ transaction, Quantum would have been entitled to representation on the board of EQT. This was prohibited under the consent order. Commenting on this aspect of the consent order, then-FTC Chair Lina Khan stated:
The action is notable not just because it signals a return to the Commission’s prior approach of seeking binding prospective relief through consent orders, but also because it expands upon remedies previously sought. Notably, the proposed order [which was subsequently finalized] includes a prior approval provision that prohibits Quantum from taking a seat on the boards of any of the top seven natural gas producers in the Appalachian Basin, accounting for a substantial majority of the market.
In fact, however, this is the last occasion on which the FTC obtained an order on consent with respect to a violation of Section 8.
Sevita Health
On Sept. 15, the FTC announced that three persons resigned from the board of directors of Sevita Whole Health LLC, doing business under the name Sevita Health. According to the FTC press release, Sevita Health is a provider of services, including residential facilities, to individuals with intellectual and developmental disabilities. These same three persons, according to the FTC, also served on the board of directors of another provider in this business space, presumably with geographic overlap — Beacon Specialized Living Services Inc.
The FTC’s release provides no further information regarding either Sevita Health or Beacon, but apparently both are owned by private equity investors. There is no indication of how the director overlap came to the attention of the agency, although both Sevita and Beacon are reported to have engaged within the past 14 months in acquisitions of businesses providing services to persons with disabilities that may have been reportable under the Hart-Scott-Rodino Act.
The FTC does not appear to have taken any formal action against the resigning directors under Section 8 of the Clayton Act, and — similar to the Department of Justice — was content with the departure of the directors from one of the boards.
Deputization
The agencies have taken the position that Section 8 may be violated when a company appoints an agent, deputy or representative to serve on the board of a competitor. This is often referred to as deputization. By similar logic, the agencies can be expected to argue that a company may violate Section 8 by placing representatives on the boards of two other entities that are in a competitive business relationship, even if the representatives are different individuals. Indeed, it has been reported that, in six of the 12 instances of Section 8 overlaps that the Department of Justice unwound in 2022 and 2023, different, but presumably commonly appointed, individuals occupied positions on the competitors’ boards.
According to the FTC press release, the individuals who resigned as directors from the board of Sevita Health were the same persons who served as directors of Sevita Health’s competitor. However, like the Department of Justice, the FTC may very well assert Section 8 violations on a theory of deputization, where a private equity investor appoints different individuals to the board of competing portfolio companies in which it is invested. Whether these individuals are deemed agents of the investor such that the deputization theory applies, or are trusted individuals who are independent of the investor, will be a question of fact and circumstances. A finding of independence would be unlikely, though, where a director is an officer or employee of the investor.
Section 8 and the new Hart-Scott-Rodino forms
New premerger notification forms, one for the acquiring person and one for the acquired person, became effective on Feb. 10. The new acquiring person form requires disclosure of certain information regarding officers and directors who serve in those capacities with other companies that may be competitors. The filer must provide the following:
- For entities controlled by the acquiring person with which there is a business overlap or a supply relationship with the target, a list of officers and directors who also serve as an officer or director of any other entity that derives revenue in the same NAICS codes reported by the target
- For all entities that the acquiring entity controls or is controlled by, a similar list of officers and directors
Companies that report revenues in the same NAICS codes may be in competition with one another, and directors and officers who simultaneously serve two such entities could potentially be in violation of Section 8. In situations where a private equity investor controls an acquiring entity on whose board it has placed its representatives, and has similarly placed those representatives on boards of other investee companies in a similar business, the overlap will be exposed if the companies have revenues in the same space as the target.
In the release that promulgated the new forms, the FTC stated that overlaps of this sort were relevant to its transactional analysis and that “when the Agencies do become aware of existing or potential interlocks created by a reported transaction, they typically seek to remediate them consistent with the Agencies’ enforcement authority and before consummation of the transaction.” However, the FTC also asserted that it had the authority to gather information on the HSR form for purposes of enforcement of the antitrust laws generally, including Section 8 of the Clayton Act. With overlaps in the private equity space likely more common but potentially harder to detect than in the public company arena, the data assembled through the premerger forms may provide the agencies with another avenue of discovery of overlapping directorates.
Takeaways from recent Section 8 agency actions
Recent actions of the antitrust agencies demonstrate that they are committed to increased activity under Section 8 of the Clayton Act. Upon discovery of a possible violation of Section 8, the agencies may not necessarily be satisfied with just the resignation of an interlocked director and may take more forceful action. In a joint statement of interest just before the change in administration, the agencies asserted that “having a person resign from a corporate board is not sufficient on its own to moot a claim under Section 8 of the Clayton Act.”
Nevertheless, the recent instances in which the agencies have uncovered interlocks have almost always resulted in nothing more than agreements to resign. A “fix” through resignation that does not entail additional burdens on the parties seems consistent with the vigorous but more practical bent of the agencies in the current administration toward antitrust enforcement. This is in keeping with the agencies’ regard of Section 8 as a prophylactic statute meant to prevent actual antitrust harms that could arise through the sharing of competitively sensitive information via interlocking directorates. The EQT/Quantum case, in which the FTC did require a consent order, is probably not an outlier in this regard, even accounting for a change in administration. At issue there was not just a potential Section 8 violation but a host of other elements that were problematic from an antitrust standpoint.
There might be a temptation therefore to view an interlocking directorate as a low-risk proposition in the private equity space. An investor in two competing businesses may find it efficient to have its representatives who are knowledgeable in the particular business discipline serve on the board of directors of both, especially if the downside of being caught is nothing more than being in the same place it would have been had it complied with Section 8 in the first instance. Indeed, in the Sevita Health matter, the only public disclosure was of the names of the two competing companies. There was not even a mention of the private equity firm or firms that may have arranged for the three directors to serve on both boards.
Such complacency, however, may be misplaced. While the agencies may be content with mere resignation the first time around, it is plausible that they will not be so inclined with an investor found to be a serial offender under Section 8, even after just the second violation. The risk of future violation appears to be an important element of the enforcement calculus under Section 8. Also, if a Section 8 violation is coupled with other antitrust infringement, such as the exchange of antitrust sensitive information between competitors or a roll-up resulting in excessive market concentration, the Section 8 offense may compound the issues and up the ante of enforcement. Private investment firms that are acquisitive, and hence likely to be filing — or investing in companies that file — under the HSR Act, may have reason to be especially careful. The new disclosures required concerning director and officer overlaps may lead the agencies straight to their door on Section 8 issues. And there is no guarantee that the names of the investors behind the interlocks will not in the future appear in the agencies’ public disclosures regarding Section 8 violations they have cured.
Private equity investors need not automatically disqualify their representatives from simultaneously occupying board positions in investee companies that are in similar businesses. The businesses may be in adjacent but not the same spaces. Although the businesses may be reporting revenues in the same NAICS codes, a NAICS code overlap does not necessarily indicate a competitive overlap. Also, the businesses may be in a vertical relationship to which Section 8 does not apply, rather than a horizontal relationship. They may be potential but not actual competitors or may be beneath the de minimis overlap thresholds of the statute. The companies may be in the same business but without geographic overlap.
Even in circumstances where the investee companies are competitors, the private equity investor may avoid application of Section 8 by appointing to the board of at least one of the companies directors who are in fact independent of the investor but in whom the investor reposes trust.
Nevertheless, recent agency action under Section 8 comes as a reminder that interlocking directorates are on the agencies’ enforcement agenda. It is also relatively low-hanging fruit, for which the agencies can publicly credit themselves when they take down overlaps. Accordingly, a Section 8 analysis should always precede the deployment by private equity investors of their appointees on boards of companies engaged in related businesses.
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