Interlocking Directorates Under Section 8 Of The Clayton Act: Can An Old Statute Learn New Tricks?

• Published date: 13 September 2022
• Subject Matter: ntitrust/Competition Law, Antitrust, EU Competition
• Law Firm: WilmerHale
• Author: Mr Thomas Mueller, Hartmut Schneider, Nana Wilberforce, Gannam Rifkah and 'lvaro Mateo Alonso

On June 3, 2022, Department of Justice Antitrust Division Deputy Assistant General Richard A. Powers reiterated the Division's intent to bring more cases to trial and touted the Division's record number of open investigations.¹ This surge in potential litigation is bolstered by increased funding for the Division, which Division leader Assistant Attorney General Jonathan Kanter "intend[s] to put ... to good use."²

These increased resources will surely be used to explore provisions of antitrust law that have generally stayed out of the enforcement spotlight. In a speech in April 2022, AAG Kanter stated: "[W]e are committed to litigating cases using the whole legislative toolbox that Congress has given us to promote competition. One tool that I think we can use more is Section 8 of the Clayton Act. ... 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

What does Section 8 provide, how might its boundaries be tested, and what should companies and individuals serving on corporate boards keep in mind?

The Statute

Section 8 of the Clayton Act has been part of the U.S. antitrust enforcement repertoire for over a century. It prohibits a "person" from serving as a director or board-appointed officer of two or more "corporations" if (i) the corporations are "by virtue of their business and location of operation, competitors ...;" and (ii) certain monetary thresholds are met.⁴ Section 8 is a preventative tool intended to avert collusion before it occurs.⁵

The principal remedy for a violation of Section 8 is the elimination of the interlock, and relief may include prohibitions of future interlocks.⁶ Section 8 allows for a one-year grace period during which a person can resign from one of the problematic positions, and thus remove the interlock, where the interlock arose over time (such as when a person serves on two boards and one of the companies expands into a market where it competes with the other).⁷

Section 8 has de minimis exceptions, whereby it does not apply if:(1) the competitive sales of either corporation are less than $4,103,400;⁸ (2) the competitive sales of either corporation are less than 2% of that corporation's total sales; or (3) the competitive sales of each corporation are less than 4% of that corporation's total sales. "Competitive sales" are defined as the "gross revenues for all products and services sold by one corporation in...