DOJ Requires Directors To Resign From Boards To Mitigate Antitrust Concerns

The Department of Justice announced on October 19 that seven directors resigned their positions from five corporate boards to mitigate antitrust concerns.¹ DOJ raised concerns that the directors' simultaneous service on two separate corporate boards potentially violated the Clayton Act's prohibition on interlocking directorates. Section 8 of the Clayton Act prohibits, subject to certain exceptions, a person from serving "as a director or officer in any two corporations . . . that are . . . competitors. . . ."²

This announcement follows a speech delivered earlier this year by Antitrust Division Assistant Attorney General Jonathan Kanter, who stated that DOJ is "ramping up efforts to identify violations . . . and [] will not hesitate to bring Section 8 cases to break up interlocking directorates."³

This development highlights increasing antitrust scrutiny of interlocking directorates and underscores the need to maintain an effective antitrust compliance program to mitigate Section 8 risks in choosing directors or when existing corporate directors join other boards, as well as other issues that might arise from interlocking board service.

Clayton Act Section 8

Simultaneous service as an officer or director of two different competing companies may create antitrust risks through the improper disclosure of competitively sensitive information or coordination between the competitors.⁴ Section 8 of the Clayton Act is a prophylactic statute designed to prevent this type of conduct by prohibiting such dual service, subject to certain exceptions, regardless of whether any anti-competitive conduct actually occurs due to the interlock.

For Section 8 to apply to an interlock, the following jurisdictional thresholds must be met:

• The combined "capital, surplus and undivided profits" (i.e., net worth) of each of the corporations exceeds $41,034,000 (indexed annually);⁵ and
• Each corporation is engaged in whole or in part in interstate commerce; and
• The corporations are competitors "by virtue of their business and location of operation . . . so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws."⁶

However, because certain interlocks are viewed to pose little risk of significant antitrust harm, interlocks are exempt from Section 8, where:

• the competitive sales⁷ of either corporation are less than $4,103,400 (indexed annually);⁸ or
• the competitive sales of either corporation are less than two percent of...