April 22, 2022

Interlocking Directorates: DOJ Will Broaden Scrutiny Beyond M&A Review

Section 8 of the Clayton Act prohibits competitors from having overlapping directors or managers, regardless of whether any anticompetitive conduct actually occurs. That’s an issue that usually arises in proxy contests or M&A transactions, but in a recent speech, the DOJ’s antitrust chief Jonathan Kanter indicated that the agency will intensify its scrutiny of interlocking director issues outside of the merger review context. Here’s an excerpt from Faegre Drinker’s memo on his comments:

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 to 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.

The memo says that, taken together, Kanter’s comments and the DOJ’s June 2021 press release are a reminder to large companies of the need for an effective antitrust compliance program that considers the potential competitive implications of competitors having overlapping directors or officers. It goes on to say that smaller businesses not meeting Section 8’s jurisdictional thresholds must also remain vigilant for anticompetitive conduct that might result from board interlocks.

John Jenkins