Section 8 of the Clayton Act prohibits interlocking directorates and officerships in various circumstances. 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. We can expect the Federal Trade Commission to follow suit in the current enforcement environment. In light of these recent developments, we explore below some ambiguities that exist in the application of Section 8 and discuss prophylactic steps that may help avoid possible allegations of collusion that may arise from board or officer links between competitors.
By William H. Rooney, Wesley R. Powell, Jeffrey B. Korn, Agathe M. Richard, E. Claire Brunner & Colin J. Lee[1]
I. INTRODUCTION
The U.S. antitrust enforcement agencies (the “Agencies”) continue to pursue aggressive and novel tactics across many areas of antitrust enforcement, including merger review, criminal enforcement, and administrative proceedings and rulemaking. Among these efforts, the Antitrust Division of the United States Department of Justice (“DOJ”) has stated that it will reinvigorate enforcement of Section 8 of the Clayton Act (“Section 8”), which prohibits a practice commonly known as “interlocking directorates” – i.e. the simultaneous service by a “person” as a board member or officer of two or more competing “corporations.”[2] In an April 2022 speech addressed to antitrust regulators, Assistant Attorney General Jonathan Kanter declared that the DOJ would be expanding its use of Section 8 as an enforcement tool: “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.”[3]
By October 2022, Mr. Kanter fulfilled his promise. On October 19, 2022, the DOJ announced that seven board directors across five U.S. companies had resigned from their board seats.[4] Each of the resignations was the result of the DOJ’s investigation of whether the directors’ service on the corporate boards violated the prohibition on interlocking directorates under Section 8. And at the end of the same month, it was reported that three major private equity firms had received civil investigative demands from the DOJ directed at possible board overlaps.[5]
The text of Section 8 is relatively straightforward. A “person” may not hold a board or officer position at two or more corporations (subject to certain exemptions pertaining to the size of the corporations’ competitive sales) if: (1) each corporation is engaged in U.S. commerce; (2) the corporations are, “by virtue of their business and location of operation, competitors”; and (3) the combined capital, surplus, and undivided profits of each of the corporations exceeds $45,257,000.[6] The purpose of Section 8 is to prevent an overlap in directors or officers at two competitors from becoming a conduit through which the competitors may restrict competition.[7] Whether an interlock presents a Section 8 concern, however, may be ambiguous as “competition” has become increasingly uncertain in a fluid and complex economy and other Section 8 terms have not been fully clarified.[8]
We will outline several ambiguities in the application of Section 8 as well as the possibility that the Agencies also may assess whether the Section 8 interlock raises issues under Section 1 of the Sherman Act (“Section 1”), which prohibits agreements in restraint of trade,[9] or Section 5 of the FTC Act (“Section 5”), which prohibits unfair methods of competition.[10] The remedies and penalties associated with Section 1 and Section 5 can be more serious than those under Section 8 alone, so that even if interlocked companies have good faith arguments that they have complied with Section 8, they may wish to implement measures to protect against potential allegations of an agreement in restraint of trade arising from the interlock.
The Agencies have “called out” private equity firms as targets of more intensive antitrust scrutiny in mergers and acquisitions, and they are likely to focus on private equity firms in connection with Section 8 enforcement as well.[11] We will explore such preventative measures as firewalls and recusal procedures that companies may employ to reduce the likelihood that Section 8 ambiguities may invite Section 1 or Section 5 collusion concerns.
II. ALTHOUGH THE TEXT OF SECTION 8 IS STRAIGHTFORWARD, TODAY’S COMPLEX NOTIONS OF COMPETITION AND OTHER AMBIGUITIES COMPLICATE ITS APPLICATION
While the statutory language of Section 8 may appear easy to parse, ambiguities surrounding interpretation of key terms and evolving Agency approaches to enforcement complicate its application.
A. Considering Interlocks Between Unincorporated Entities
To whom Section 8 applies is a more complicated question than its text would suggest. The Section 8 prohibition, by its terms, applies only to “corporations.” We are not aware of any court decisions addressing whether the same person could serve on the board of competing limited liability companies (“LLCs”). At least one commentary implies that the Agencies or a court may conclude that an LLC interlock could be within the scope of the Section 8 prohibition: “Section 8 pre-dates the use of LLCs … To date, courts have not directly addressed this question, although we believe the harm can be the same regardless of the forms of the entities.”[12]
In any event, even if Section 8 is read literally to apply solely to “corporations” of the type that existed when Section 8 was enacted, interlocks involving other entities (whether a limited liability partnership, an LLC, or other business entity) may be covered by Section 5 of the FTC Act and subject to FTC investigation and enforcement. Such an interlock may also raise Section 1 issues.
B. What Constitutes a “Person” Under Section 8?
Several cases have interpreted “person,” under a so-called “deputization” theory, to include a business entity that designates the natural, “deputized” representatives sitting on competing boards.[13] That theory has been extended to include not only employees, but also agents, of the single, appointing business entity. Under Square D Co. v. Schneider S.A., 760 F. Supp. 362 (S.D.N.Y. 1991), natural person representatives need have only an agency relationship to the parent business entity and need not be directors, officers, or even employees of that person to fall within the scope of Section 8. Id. at 366-67. “[A] cause of action under § 8 is stated where a company attempts to place on the Board of a competitor individuals who are agents of, and have an employment or business relationship with, such company.” Id. at 367.
The DOJ’s October 2022 Section 8 enforcement announcement, though relatively summary, also provided sufficient information to infer that one interlock likely arose from a single private equity firm’s having representatives on the boards of allegedly competing firms through different private equity employees. In the interlocking directorate involving the competing companies, Solarwinds and Dynatrace, two director representatives of the same private equity firm served on the board of Solarwinds and resigned from that board. Another director and representative of the same private equity firm served on the boards of both Solarwinds and Dynatrace. That representative apparently produced the prohibited interlock under the deputization theory that caused the resignation of the first two private equity representatives from the board of Solarwinds.
Finally, under the “attribution” theory, also applied by the court in Square D, an interlock for the purposes of Section 8 may be found when a director sits on the board of both a subsidiary of one company and the parent of a competing subsidiary. Square D Co., 760 F. Supp. at 367. For the attribution theory to apply, however, the parent must sufficiently control the subsidiary for the competitive activities of the subsidiary to be “attributed” to the parent. “[C]ompetition with a subsidiary may be properly deemed to a parent corporation where the parent closely controls or dictates the policies of its subsidiary.” Id.
C. Agencies Have Expanded Their Interpretation of “Competition”
Similarly complicating the application of Section 8 is the broad interpretation of “competitor” in the statute and the recently expanded interpretation of “competition” by the Agencies. In TRW, Inc. v. Federal Trade Commission, 647 F.2d 942, 947 (9th Cir. 1981), for example, the court rejected the standard for determining competition under the Sherman Act and Section 7 of the Clayton Act as “too restrictive” under Section 8. Rather, the court found that:
To further the purpose of Section 8 there should be reliance not only on the degree of actual interchangeability of use between the products of alleged competitors, but also on evidence concerning (1) the extent to which the industry and its customers recognize the products as separate or competing; (2) the extent to which production techniques for the products are similar; and (3) the extent to which the products can be said to have distinctive customers. Id.
The Agencies have also indicated that “competition” should be construed broadly to serve the prophylactic purposes of Section 8. “Under Section 8 . . . the critical inquiry is to identify a competitive nexus between corporations sufficient to warrant concern over potential antitrust violations involving coordination of competition between the firms—in other words, to determine whether the products are sufficiently substitutable to raise a concern of price-fixing or other collusion.”[14]
The task of determining whether competition exists between interlocked companies becomes more complex when one considers the Agencies’ recent suggestion that relevant competition may be broader than traditional horizontal relationships.[15] In seeking comments in connection with the Agencies’ revision of the Merger Guidelines, the Request for Information asked “whether distinctions between horizontal and vertical transactions reflected in the guidelines should be revisited in light of trends in the modern economy.”[16] In that regard, Jonathan Kanter recently remarked, “We obsess in all cases about market definition, when in many situations direct evidence can help us assess the potential for harm. Competition varies, and our framework must adapt accordingly.”[17] In addition, virtually every Agency merger challenge involves a dispute as to market definition. One cannot avoid the fact that which firms are, and are not, “competitors” of one another is frequently a contested question.
Interpreting “competitor” is further complicated when one considers competition for such inputs as labor. The Agencies have emphasized their enforcement intentions and actions with respect to agreements that reduce employee wages and benefits.[18] Determining which companies are “competitors” for labor – and other inputs – may not be resolved by traditional means of comparing output products and services.
D. Section 8 Exemptions May Be Available But Can Involve Risk as to Interpretation and a Fluid Business Landscape
Section 8 provides for exemptions from its scope. Most notable is the de minimis exemption for corporations for which the competitive sales (a) of either corporation are less than $4,525,700 (indexed annually), (b) of either corporation are less than 2 percent of that corporation’s total sales, or (c) of each corporation are less than 4% of that corporation’s total sales.[19]
Ambiguities persist regarding the application of the de minimis exemption. We are aware of no judicial guidance on whether foreign sales must be included in any aspect of the de minimis calculation. Competitive businesses may grow rapidly and competitive landscapes may change, so that competitive sales calculations must be monitored. In addition, as discussed below, the Agencies may investigate an exempt interlock under Section 1 or Section 5, neither of which has a de minimis exemption.
E. Interlocks May Provide an Occasion for Potential Section 1 or Section 5 Concerns
Conscious parallelism alone is not illegal.[20] But parallel conduct plus some additional factor, often some form of communication between the competitors that are engaged in the parallel conduct,[21] can support an inference of collusion.[22] An enforcer could assert that the interlock, including an exempt interlock, provided a conduit for communications between the competitors. The question is then one of evidence and the reasonable inferences that may be drawn from that evidence.
Companies may consider whether the implementation of such preventative measures as firewalls and recusal protocols (discussed below) would be prudent even in the context of exempt interlocks or interlocks that are not covered by the terms of Section 8.
F. Resignation, Consent Orders, or Injunctions Typically Resolve Section 8 Issues
Section 8 cases that are brought by the DOJ or FTC are sometimes resolved through injunctive relief, and other cases are settled with consent judgments or informally. Most recently, as noted above, several board directors resigned from their board seats, without admitting liability, in response to DOJ’s concerns that the directors’ service on those corporate boards violated the Section 8 prohibition.[23]
At least one private plaintiff has sought damages for a Section 8 claim, but the case was a derivative action and does not appear to have continued to judgment.[24] To our knowledge, no case has been litigated to judgment in which the court has awarded damages for a violation of Section 8. As such, it is unclear whether a damages claim under Section 8 would require an antitrust injury,[25] even though courts have construed the statute to impose per se liability without regard to competitive effects.[26] A company may conclude, however, that the cost of litigating a Section 8 case exceeds the value of any principle to be vindicated or directorship to be preserved.
III. MANAGING SECTION 8 AMBIGUITIES
As Agencies focus their attention on Section 8 enforcement, companies may wish to be proactive in addressing the potential concerns that may arise. Such an affirmative approach would involve (1) identifying where potential interlocks exist (which would require officers and directors to disclose other board seats and officerships that they hold), (2) assessing the directness of any competition between the interlocked companies and the application of potential exemptions, and (3) considering the implementation of firewalls and recusal procedures to “break the conduit” that may serve as the basis of allegations of concerted unlawful coordination under Section 1 or Section 5.
Companies can monitor Section 8 issues by including in their compliance program periodic board-membership reviews to monitor known interlocks and identify newly developed ones. Compliance protocols can emphasize the importance of confidentiality and a director’s not serving as a conduit for, or common locus of, competitively sensitive information. Private equity firms might be especially careful to track their holdings, especially if they are investing in multiple companies in the same sector, to assess for interlocks.
Companies may consider whether firewalls and recusal protocols may be prudent measures that would help to forestall allegations of collusion. Those allegations might assert that the common director or officer served as a conduit for the transmission of competitively sensitive information between the interlocked companies. The common director or officer might also serve as a common locus of such information, which a plaintiff might assert enabled the common director or officer to coordinate the behavior of the interlocked companies. If that behavior is later deemed to have been parallel, the plaintiff might further seek to allege a tacit agreement by way of the common director or officer.
Firewalls are designed to prevent the transfer of confidential information between “deputized” representatives of a common owner serving on competing boards Recusals require a representative to not participate in confidential board discussions on at least one of the competing boards and to decline receipt of any information regarding the relevant competing business.[27] Firewalls and recusals together should prevent a common director or officer, whether the same natural person or “deputized” individuals, from becoming a conduit for, or repository of, the competitively sensitive information of the interlocked companies.
Firewalls and recusal procedures alone will not absolve a company of a Section 8 violation, as courts have held that an anticompetitive effect is not an element of a Section 8 liability claim.[28] They may, however, reduce the likelihood that viable allegations can be made of collusion between the interlocked companies.[29] Firewalls and recusal procedures also reflect a corporate commitment to competitive independence[30] and may serve as an acceptable mitigant or remedy to an uncertain or temporary interlock.[31]
A temporary interlock may arise in circumstances where Section 8 allows a one-year grace period to a director or officer to eliminate certain after-occurring interlocks. When a director or officer lawfully assumes his or her position with a given corporation and, by reason of a change in the affairs of that corporation, the officer or director becomes no longer able to maintain that position under Section 8, he or she may serve in the relevant position for one year following the occurrence of the prohibited interlock.[32] Firewall and recusal protections can avoid inadvertent communications or confidential information access during the period before which the interlock is eliminated.[33]
IV. CONCLUSION
In light of Agencies’ more aggressive enforcement intentions regarding Section 8 interlocks, companies may wish to monitor with heightened sensitivity director and officer interlocks. They may also wish to implement such preventative measures as firewalls and recusal procedures to maintain competitive independence where the application of Section 8 is uncertain, or the interlock is not covered by the terms of Section 8.
[1] Messrs. Rooney, Powell, and Korn are partners, Ms. Richard is a counsel, and Ms. Brunner and Mr. Lee are associates, of Willkie Farr & Gallagher LLP. This article represents the tentative thoughts of the authors and should not be construed as the position of any other person or entity. This article is provided for news and informational purposes only and does not take into account the qualifications, exceptions, and other considerations that may be relevant to particular situations. Nothing contained herein constitutes, or is to be considered, the rendering of legal advice, generally or as to a specific matter, or a warranty of any kind. Readers are responsible for obtaining legal advice from their own legal counsel. The authors disclaim liability for any errors in, or any reliance upon, this information.
[2] 15 U.S.C. § 19 (2018).
[3] Jonathan Kanter, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Assistant Attorney General Jonathan Kanter Delivers Opening Remarks at 2022 Spring Enforcers Summit (Apr. 4, 2022).
[4] Press Release, U.S. Dep’t of Justice, Directors Resign From the Boards of Five Companies in Response to Justice Department Concerns About Potentially Illegal Interlocking Directorates (Oct. 19, 2022), https://www.justice.gov/opa/pr/directors-resign-boards-five-companies-response-justice-department-concerns-about-potentially.
[5] Liz Kiesche, [Private Equity Firms] face Justice Department probe on influence over boards, Seeking Alpha (Oct. 28, 2022, 2:48 PM), https://seekingalpha.com/news/3897438-kkr-apollo-blackstone-face-justice-department-probe-on-influence-over-boards-report; see also James Arkin, Durbin Wants Life Science Cos.’ Interlocking Boards Reviewed, Law360 (Feb. 13, 2023), https://www.law360.com/articles/1575832?e_id=f4ec58b6-ef0d-4e13-ae08-0de044c79e13&utm_source=engagement-alerts&utm_medium=email&utm_campaign=similar_articles (“Sen. Dick Durbin, D-Ill… called on top antitrust officials in the Biden administration to investigate the life sciences industry for anti-competitive ‘interlocking directorates’ after recent research showed a substantial increase in the number of overlapping board members at competing companies.”).
[6] This number generally adjusts on an annual basis. 15 U.S.C. § 19(a)(1)(A)-(B) (2018); 15 U.S.C. § 19(a)(5) (2018); Revised Jurisdictional Thresholds for Section 8 of the Clayton Act, 88 Fed. Reg. 3742 (Jan. 20, 2023).
[7] U.S. v. Sears, Roebuck & Co., 111 F. Supp. 614, 616 (S.D.N.Y. 1953) (“Interlocking directorships on rival corporations had been the instrumentality of defeating the purpose of the antitrust laws. They had tended to suppress competition or to foster joint action against third party competitors. The continued potential threat to the competitive system resulting from these conflicting directorships was the evil aimed at. Viewed against this background, a fair reading of the legislative debates leaves little room for doubt that, in its efforts to strengthen the antitrust laws, what Congress intended by § 8 was to nip in the bud incipient violations of the antitrust laws by removing the opportunity or temptation to such violations through interlocking directorates.”).
[8] Jonathan Kanter, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Assistant Attorney General Jonathan Kanter of the Antitrust Division Delivers Keynote at Fordham Competition Law Institute’s 49th Annual Conference on International Antitrust Law and Policy (Sept. 16, 2022) (“I believe our horizontal and vertical framework has been limiting in this respect. Focusing on that distinction has sometimes screened out important information about mergers that entrench market power or tend to create a monopoly. Mergers that relate to adjacent markets can have those effects, without being strictly horizontal or vertical. Our tools, however, have not equipped us to analyze them flexibly and comprehensively.”).
[9] 15 U.S.C. § 1 (2018).
[10] 15 U.S.C. § 45 (2018).
[11] Deputy Assistant Attorney General Andrew Forman stated in an ABA keynote address that “[private equity firms] can extract value or try to thwart rivals—adding cost, delay, and burden, while reducing quality and impeding innovation which competition brings.” Andrew Forman, Deputy Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Deputy Assistant Attorney General Andrew Forman Delivers Keynote at the ABA’s Antitrust in Healthcare Conference (June 3, 2022). Similarly, FTC Chair Lina Khan asserted in a June 2022 statement that “[a]ntitrust enforcers must be attentive to how private equity firms’ business models may in some instances distort incentives in ways that strip productive capacity, degrade the quality of goods and services, and hinder competition.” Lina Khan, Chairwoman, Fed. Trade Comm., Statement of Chair Lina M. Khan, Joined by Commissioner Rebecca Kelly Slaughter and Commissioner Alvaro M. Bedoya In the Matter of JAB Consumer Fund/SAGE Veterinary Partners Commission File No. 2110140 (June 13, 2022).
[12] Julian O. Von Kalinowski et al., Antitrust Laws and Trade Regulation § 35.03[2][a] (2d. 2022) (quoting Makan Delrahim, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Don’t “Take the Money and Run”: Antitrust in the Financial Sector at 4 (May 1, 2019), https://www.justice.gov/opa/speech/file/1159346/download).
[13] Pocahontas Supreme Coal Co. v. Bethlehem Steel Corp., 828 F.2d 211, 217 (4th Cir.1987) (“when a parent company designates different persons to sit on the boards of competing subsidiaries, these persons are treated as ‘deputies’ of the same principal so that they are the same person for § 8 interlock purposes.”).
[14] Borg-Warner Corp., 101 F.T.C. 863, 928-29 (1983); see also Debbie Feinstein, Have a plan to comply with the bar on horizontal interlocks, Fed. trade Comm’n (Jan. 23, 2017), available at www.ftc.gov/news-events/blogs/competition-matters/2017/01/have-plan-comply-ban-horizontalinterlocks (“Section 8 applies to ‘competitors’ in the sense that ‘the elimination of competition by agreement between them’ would violate the antitrust laws. But courts have rejected the argument that this is the same as the market definition analysis found in other antitrust cases. In TRW, Inc. v. Federal Trade Commission, the Ninth Circuit found that especially in emerging industries, competition in the Section 8 sense can encompass more than an assessment of the cross-elasticity of demand for existing products.”).
[15] Jonathan Kanter, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, U.S. Dep’t of Justice, Assistant Attorney General Jonathan Kanter Delivers Keynote Speech at Georgetown Antitrust Law Symposium (Sept. 13, 2022) (“[M]erger enforcement has become disconnected from the competitive realities of our economy. It has become a sometimes-artificial exercise. We focus too much on a small handful of models for predicting price effects, and lose sight of the competition actually at stake. We obsess in all cases about market definition, when in many situations direct evidence can help us assess the potential for harm. Competition varies, and our framework must adapt accordingly.”).
[16] Press Release, Federal Trade Commission and Justice Department Seek to Strengthen Enforcement Against Illegal Mergers (Jan. 18, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/01/federal-trade-commission-justice-department-seek-strengthen-enforcement-against-illegal-mergers.
[17] Supra note 15.
[18] See e.g. Plea Agreement, United States v. VDA OC, LLC, No. 2:21-CR-00098, (D. Nev. Oct. 27, 2022) (guilty plea by health care company conspiring to suppress wages of school nurses); Indictment, United States v. Neeraj Jindal, No. 4:20-cr-00358, (E.D. Tex. Dec. 9, 2020) (indictment under Section 1 alleging defendant conspired with other therapist staffing businesses to fix lower wages paid to physical therapists and their assistants) (defendant Jindal was acquitted of the price-fixing charge in the indictment, Verdict, United States v. Neeraj Jindal, No. 4:20-cr-00358, (E.D. Tex. Apr. 14, 2022)).
[19] 15 U.S.C. § 19(a)(1), (2).
[20] Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 553-54 (2007) (“Even ‘conscious parallelism,’ a common reaction of ‘firms in a concentrated market [that] recogniz[e] their shared economic interests and their interdependence with respect to price and output decisions[,]’ is ‘not in itself unlawful.’” (citation omitted)); Theatre Enterprises v. Paramount Distributing, 346 U.S. 537, 541 (1953) (“Circumstantial evidence of consciously parallel behavior may have made heavy inroads into the traditional judicial attitude toward conspiracy; but ‘conscious parallelism’ has not yet read conspiracy out of the Sherman Act entirely.”).
[21] See e.g. In re Plywood Antitrust Litig., 655 F.2d 627, 634 (5th Cir. 1981) (“The parallel pricing conduct clearly demonstrated in the record plus the numerous items of direct evidence of communication between high-level personnel on pricing policy adequately support the jury’s verdict.”) (emphasis added); see also Blomkest Fertilizer, Inc. v. Potash Corp. of Saskatchewan, Inc., 203 F.3d 1028, 1033 (8th Cir. 2000) (“Courts have held that a high level of communications among competitors can constitute a plus factor which, when combined with parallel behavior, supports an inference of conspiracy.”); Apex Oil Co. v. DiMauro, 822 F.2d 246, 254 (2d Cir. 1987) (plus factors might include “a high level of interfirm communications”).
[22] Capitol Body Shop, Inc. v. State Farm Mut. Auto. Ins. Co., 163 F. Supp. 3d 1229, 1234 (M.D. Fla. 2016), aff’d sub nom. Auto. Alignment & Body Serv., Inc. v. State Farm Mut. Auto. Ins. Co., 953 F.3d 707 (11th Cir. 2020), and aff’d sub nom. Auto. Alignment & Body Serv., Inc. v. State Farm Mut. Auto. Ins. Co., 953 F.3d 707 (11th Cir. 2020) (“Evidence of conscious parallelism alone does not permit an inference of conspiracy unless the Plaintiff either (1) establishes that, assuming there is no conspiracy, each defendant engaging in the parallel action acted contrary to its economic self-interest or (2) offers other ‘plus factors’ tending to establish that the defendants were not engaging merely in oligopolistic price maintenance or price leadership but rather in a collusive agreement to fix prices or otherwise restrain trade”) (emphasis added); In re Musical Instruments and Equipment Antitrust Litigations, 798 F.3d 1186, 1194 n.7 (9th Cir. 2015) (“Plus factors coupled with parallel conduct can take a complaint from merely possible to plausible.”)
[23] Press Release, U.S. Dep’t of Justice, Directors Resign From the Boards of Five Companies in Response to Justice Department Concerns About Potentially Illegal Interlocking Directorates (Oct. 19, 2022), https://www.justice.gov/opa/pr/directors-resign-boards-five-companies-response-justice-department-concerns-about-potentially.
[24]See Treves v. Servel, Inc., 244 F.Supp. 773, 775, 777 (1965).
[25] Atlantic Richfield v. USA Petroleum, 495 U.S. 328, 335 (1990) suggests that an antitrust injury might be required to support a damages claim under Section 8. The Supreme Court in Atlantic Richfield rejected the contention that “any loss flowing from a per se violation of Section 1 automatically [satisfied] the antitrust injury requirement.”
[26] U.S. v. Crocker Nat. Corp., 656 F.2d 428, 438 (9th Cir. 1981) (“Interlocking arrangements between competing corporations threaten the basic purpose of the Sherman Act and are therefore treated as illegal per se.”); U.S. v. Sears, Roebuck & Co., 111 F. Supp. at 617 (“To accept [the government’s] workable per se test, instead of the defendants’ alternative, permits the prohibitory features of §8 to be administered with the full scope which the legislators must have contemplated.”); see also Herbert Hovenkamp & Phillip E. Areeda, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶1302 (5th ed. 2020) (“The [Sears] court adopted a per se rule requiring only a showing that two firms are or have been competitors and that the dollar amount is sufficient to invoke the Act.”).
[27] The FTC’s 1996 settlement with Lockheed Martin Corporation in relation to its merger with Loral provides an example of firewall and recusal protections for board members. The agreement provided, for example, that Lockheed Martin “shall require any Common LM/Loral Space Director to refrain from discussing, providing, disclosing or otherwise making available, directly or indirectly, any NonPublic Space Information of Loral Space to any member of the Board of Directors of Lockheed Martin, any officer of Lockheed Martin or any employee of Lockheed Martin.” Lockheed Martin also agreed to “conduct all matters relating to Space & Strategic Missiles without the vote, concurrence or other participation of any kind whatsoever of any Common LM/Loral Space Director.” See Decision and Order at Section XIII (B) and (C), Lockheed Martin Corporation, FTC Docket No. C-3685 (Sept. 19, 1996).
[28] See supra note 29.
[29] While many examples of firewall and recusal procedures from consent orders occur in the Section 7 context, a 1981 FTC advisory opinion sought by the United Automobile Workers of America discussed as a key fact that it was clear that one of the directors at issue would “function independently and [would] refrain from sharing confidential commercial information with other union officials, including the UAW director on the other board” in finding that a representative relationship for the purposes of Section 8 was not present. See Advisory Opinion, United Auto Workers, 97 F.T.C. 933, 935-36 (May 8, 1981).
[30] U.S. Dep’t of Justice, Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations (2019), https://www.justice.gov/atr/page/file/1182001/download (“Moreover, effective antitrust compliance programs not only prevent, detect, and address antitrust violations, they also further remedial efforts and help foster corporate and individual accountability by facilitating a corporation’s prompt self-reporting and timely and thorough cooperation in the Antitrust Division’s investigations.”).
[31] The Agencies have found under Section 7 of the Clayton Act that firewall policies adequately addressed similar concerns regarding the sharing of competitively sensitive information. See e.g. Final Judgment at VII.A, United States v. Evangelical Cmty. Hosp., No. 4:20-cv-01383-MWB (Sept. 16, 2021)(“Defendants must implement and maintain reasonable procedures to prevent competitively sensitive information from being disclosed, by or through implementation and execution of the obligations in this Final Judgment or the Amended and Restated Collaboration Agreement or through Geisinger’s provision of information technology systems and support to Evangelical . . . between or among employees of Geisinger and Evangelical.”); Decision and Order at II.A, The Coca-Cola Company, FTC Docket No. C-4305 (Nov. 3, 2010) (“TCCC shall use DPSG Commercially Sensitive Information only under the following conditions”), id. at II.C (“TCCC shall disclose DPSG Commercially Sensitive Information to Additional Firewalled TCCC Personnel only under the following conditions…”); Decision & Order at II.C.2, PepsiCo, Inc., FTC Docket No. C-4301 (Sept. 27, 2010) (“PepsiCo shall comply with the following procedure in connection with Additional Firewalled PepsiCo Personnel), id. at Appendix A pp. 16-17 (“There will be a firewall between [Executive Vice President and Chief Commercial Officer] and the CEO of PBA.”); see also Pretrial Brief of Defendants at 39-40, United States, et al. v. UnitedHealth Group Incorporated, et al., No. 1:22-cv-0481-CJN (D.D.C. filed Jul. 22 2022).
[32] 15 U.S.C. § 19(b).
[33] Banks, banking associations, and trust companies are explicitly excluded from Section 8 liability. 15 U.S.C. § 19(a). However, Section 1 and Section 5 (and other statutes and regulations) apply to a bank’s behavior, and such firewall and recusal procedures may provide protection to these entities. An assessment of interlocks between or among banks, banking associations, and trust companies is outside of the scope of this article.
