We’ve written about the Clayton Act problems that can arise if a director simultaneously serves on boards of competing companies. The issue is easy to overlook – and it isn’t a “one & done” analysis for companies, either. M&A and changing businesses can cause companies to fall within the scope of the statute even if they previously hadn’t been competitors.

This Baker McKenzie alert warns that the DOJ & FTC haven’t lost interest in the issue. In fact, the FTC announced last week that its recent efforts resulted in the resignation of several directors. The Baker McKenzie memo recommends these actions:

– Conduct annual analyses of directors’ and officers’ board memberships to detect any emerging Section 8 interlocks. This is especially important in industries involving organic expansion, such as technology and healthcare, where new competition may emerge quickly.

– Include Section 8 compliance reviews as part of integration planning after closing an acquisition. Mergers and acquisitions can create springing interlocks, as officers or directors of newly acquired companies may serve on boards of companies that compete with the acquiring company.

– Expand compliance reviews to assess non-corporate entities. Section 8 can apply to partnerships or limited liability corporations. Accordingly, broad compliance assessments should be made across business units. Assessments should include managers who serve on non-corporate entities in a capacity that could be viewed as analogous to a corporate officer or board of director role.

– Think carefully about the scope of products and geographies when assessing “competitive sales.” Agencies have urged parties to take a “broad view” of competitive sales, noting that it may apply a different analysis for Section 8 than it would in other antitrust cases. It is therefore important to regularly review (and potentially reevaluate) how product and service revenues are categorized and measured as part of any Section 8 compliance audit.

– Develop strong organizational safeguards, such as firewalls between potentially interlocked executives and procedures for directors handling competitively sensitive information. These steps are essential for compliance. An actual or potential interlocking directorate—regardless of whether it constitutes a violation under Section 8—may facilitate, or be perceived to facilitate, a separate antitrust violation under Section 1 of the Sherman Act or Section 5 of the Federal Trade Commission Act. These safeguards should be developed and implemented even if a Section 8 exemption appears to be applicable.

Check out our “D&O Questionnaire” Handbook for more on this issue – as well as this Paul Weiss alert and other memos in our “Conflicts of Interest” Practice Area.

– Liz Dunshee