Dear Readers,
Minority shareholdings and interlocking directorships between competitors are, and have always been, a widespread practice in certain industries. Given that, on their face, such links may influence companies’ competitive behavior, they naturally attract the attention of competition authorities, litigants, and courts worldwide. The articles in this Chronicle address the current thinking of the antitrust communities across these bodies as they grapple with this phenomenon in a contemporary context. In particular, in the U.S., this debate plays out within the context of section 8 of the Clayton Act.
Florence Thépot leads off this edition of the CPI Antitrust Chronicle with an article highlighting the potential anticompetitive risks on both sides of the Atlantic raised by interlocking directorates between competitors, as facilitating collusion, and possibly reducing the intensity of competition, especially if combined with financial links. The winds of enforcement may be picking up.
Yaron Nili provides a short overview of horizontal directors from corporate and antitrust perspectives and concludes with a discussion of recent FTC and DOJ enforcement showing the increased attention to the topic by both regulators and academics.
Nana Wilberforce, Leon B. Greenfield, & Álvaro Mateo Alonso open by noting how the U.S. Department of Justice and Federal Trade Commission both have recently announced an aggressive approach to enforcing Section 8 of the Clayton Act, which (with some exceptions) absolutely prohibits director or officer interlocks between competing corporations. Their prescient article describes Section 8’s statutory text and considers the harms to competition Section 8 seeks to prevent; outlines the U.S. agencies expanded approach to enforcement; describes how the statute’s boundaries may be tested and some recurring unsettled issues; and contributes thoughts regarding the future of Section 8 enforcement. Although a more aggressive approach to Section 8 enforcement can bring benefits in some circumstances, it is important that the agencies respect the limits of the statute and do not overreach.
Nandu Machiraju, Darley Maw & Daniel Gao follow up with a similar article. Consistent with the Biden administration’s push for vigorous antitrust law enforcement, enforcers have begun to employ Section 8 to target interlocking directorates. Upon closer review, however, in the authors’ view, the 1990 amendments to the statute make it ill-suited as a tool to address elements of the administration’s ambitious agenda.
William H. Rooney, Wesley R. Powell, Jeffrey B. Korn, Agathe M. Richard, E. Claire Brunner & Colin J. Lee develop further on this theme. In recent months, the Department of Justice has said that it will ramp up efforts to investigate what it considers to be anticompetitive board overlaps in various industries. The authors expect the Federal Trade Commission to follow suit in the current enforcement environment. In light of these recent developments, their article explores some ambiguities that exist in the application of Section 8 and discuss steps that may help avoid possible allegations of collusion that could arise from board or officer links between competitors.
Taking a slightly broader perspective, Michelle Hale & Jake Philipoom discuss how the Department of Justice Antitrust Division has recently been investigating public companies for possible violations of Section 8 of the Clayton Act, 15 U.S.C. § 19, based on information listed in the Risk Factors section of their annual and quarterly SEC filings. The article seeks to address who is a “competitor”?
Section 8 prohibits “interlocking directorates,” situations in which an individual or entity serves as a director or officer of two corporations that are “competitors.” So far, the Departments efforts have appeared to focus on interlocks in which one company named the other as a competitor in a public filing. In this article, the authors explain that the “competitors” listed in a public company’s SEC filings are not necessarily competitors within the meaning of Section 8. This is nonetheless an open question from the point of view of regulators or courts.
All of the above articles touch on very timely themes that are once again on enforcers’ radar screens. This is a vital debate that will play out directly over coming weeks, months, and years.
As always, many thanks to our great panel of authors.
Sincerely,
CPI Team
