On October 19, 2022, the U.S. Department of Justice’s (DOJ) Antitrust Division announced that seven directors had resigned from their respective corporate board positions in response to concerns of interlocking directorates.1 This announcement followed reports that DOJ had issued letters to numerous public companies, investors, and individuals last month. The letters reportedly indicated that DOJ was examining potential interlocks and advised the targets of the risk of potential enforcement actions.2 DOJ’s muscular posture toward enforcement under Section 8 of the Clayton Act is only the “first in a broader review of potentially unlawful interlocking directorates.”3
Section 8 Legal Framework
Section 8 of the Clayton Act prohibits an individual from simultaneously serving as an officer or director on the boards of two or more “competing” corporations (otherwise known as an “interlocking directorate”).4 A breach of Section 8 is a strict liability or per se offense. Nevertheless, an interlocking directorate is exempt from Section 8 in the following circumstances:
The typical remedy is injunctive relief (e.g., removing the individual from one of their positions to eliminate the interlock). Private parties are also able to pursue private actions and technically can seek damages, though we are not aware of any instance where a plaintiff has successfully obtained damages under a Section 8 claim.
In general, Section 8 addresses two types of interlocking directorates:
Closer Analysis of DOJ’s Most Recent Enforcement Action
The recent resignations follow a string of DOJ enforcement actions.8 The resignations occurred in five different matters. All the resignations seemingly involved direct interlocks, and two also may have involved indirect interlocks.
Section 8 is expected to continue to be a priority in DOJ’s enforcement agenda, and the recent issuance of letters show that DOJ will be scrutinizing potential interlocks. As a result, corporations should consider taking steps to mitigate Section 8 liability. In particular:
1 See DOJ, Directors Resign from the Boards of Five Companies in Response to Justice Department Concerns about Potentially Illegal Interlocking Directorates [“DOJ Announcement”].
2 See LexBlog, Word on the Street: DOJ Issuing Inquiries Into Director Interlocks.
3 See DOJ Announcement.
4 15 U.S.C. § 19, s. 1.
5 Id. at s. 2. These dollar figures are adjusted annually.
6 See Reading Int’l, Inc. v. Oaktree Capital Mgmt. LLC, 317 F. Supp. 2d 301 (SDNY 2003).
7 See United States v. Crocker Nat’l Bank, 656 F.2d 428, 450 (9th Cir. 1981) and In re Borg-Warner Corp., 101 F.T.C. 863, 925, modified, 102 F.T.C. 1164 (FTC 1983).
8 See e.g., DOJ, Press Release, Tullett Prebon and ICAP Restructure Transaction after Justice Department Expresses Concerns about Interlocking Directorates (July 14, 2016) and DOJ, Press Release, Endeavor Executives Resign from Live Nation Board of Directors after Justice Department Expresses Antitrust Concerns (June 21, 2021).
9 “Officer” is defined as an “officer elected or chosen by the Board of Directors.” 15 U.S.C. § 19(a)(4). The authors would like to thank Milinda Yimesghen (TO) for her contributions to this article.
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