The Department of Justice Antitrust Division ("DOJ") announced on Wednesday that it has required several directors to resign from simultaneously serving on the corporate boards of competitor companies. The announcement comes after the Division's recent pledge to reinvigorate enforcement of Section 8 of the Clayton Act,1 which prohibits such "interlocking directorates" as a per se violation of the antitrust laws if the two corporations are competitors and meet certain capital and sales thresholds.
Section 8 of the Clayton Act provides that no person shall serve as the director or officer of two corporations when those corporations have capital more than $41,034,000 or the companies have competitive sales of $4,103,400.2 There are exceptions for when either corporation's competitive sales are less than two percent of that corporation's total sales or when the competitive sales of each corporation are less than four percent of that corporation's total sales.3
Among the withdrawals were executives in industries ranging from marketing intelligence platforms to manufacturers of sensor technology used in commercial vehicles. In total, the Division secured the resignations of unnamed corporate board members from five sets of alleged competitors: Definitive Healthcare Corp. and ZoomInfo Technologies Inc., Maxar Technologies Inc. and Redwire Corp., Littelfuse Inc. and CTS Corp., Skillsoft Corp. and Udemy Inc., and Solarwinds Corp. and Dynatrace, Inc.
The Antitrust Division has required corporate directors to resign in the past over concerns that interlocking directorates may facilitate coordination between competitors and lessen competition. However, this recent announcement is notable because it shows an increased willingness by current Antitrust Division officials to pursue Section 8 violations and require interlocking directors to resign. This is another step in the antitrust agencies' recent change in enforcement policy regarding private equity firms and their frequent common ownership of competing companies.
The Antitrust Division highlighted that companies and corporate directors should expect continued enforcement of Section 8 by the Antitrust Division. Assistant Attorney General for Antitrust Jonathan Kanter noted that "The Antitrust Division is undertaking an extensive review of interlocking directorates across the entire economy and will enforce the law."
Footnotes
1. Assistant Attorney General Jonathan Kanter Delivers Opening Remarks at 2022 Spring Enforcers Summit, Department of Justice Antitrust Division Speech (Apr. 2022), available at: https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-opening-remarks-2022-spring-enforcers.
2. FTC Announces Annual Update of Size of Transaction Thresholds for Premerger Notification Filings and Interlocking Directorates, Federal Trade Commission (Jan. 2022), available at: https://www.ftc.gov/news-events/news/press-releases/2022/01/ftc-announces-annual-update-size-transaction-thresholds-premerger-notification-filings-interlocking.
3. 15 U.S.C. § 19.
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