Yesterday, the DOJ announced that seven directors have resigned from corporate board positions in response to concerns by the Antitrust Division that their roles violated the Clayton Act’s prohibition on interlocking directorates. I blogged last month that inquiries were underway.
The DOJ’s press release identifies five companies – so far – that have lost directors as a result of the alleged interlocks (see this WSJ article for more color). In three instances, a director was serving simultaneously on the boards of two companies that could be deemed competitors. In two instances, investment firms were also implicated – because they had one or more representatives on the boards of potentially competing companies. John warned earlier this year that this Clayton Act issue could be a big problem for private equity, and that appears to be playing out.
The DOJ announcement offers these parting words:
Companies, officers, and board members should expect that enforcement of Section 8 will continue to be a priority for the Antitrust Division. Anyone with information about potential interlocking directorates or any other potential violations of the antitrust laws is encouraged to contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or email@example.com.
Be a hero, not a zero: remember the Clayton Act when you send out your D&O questionnaires, and get out in front of this issue with your directors. Our 95-page “D&O Questionnaire Handbook” includes a sample question to identify relationships that could be problematic, and you can use this enforcement sweep to explain why you’re adding it now.
If you’re already aware of potential interlocks, it would be prudent to address them sooner rather than later. For example, if your company identifies as a competitor in its disclosures a company where one of your directors sits on the board, that could put you in the DOJ’s cross-hairs. You may need to have some difficult conversations, and consider a succession plan if the director wants to stay on the other board.
– Liz Dunshee