Clayton Act Section 8 Interlocking Directorates
Antitrust Practice Group Lunch Meeting October 23, 2008 Chris Compton
Clayton Act Section 8 (15 U.S.C Sec 19)
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Person cannot serve as director or officer of 2 or more competing corporations where – Each has combined capital, surplus and undivided profits exceeding $25,319,000 (as of Jan. 29, 2008) – Engaged in US or foreign competition Unless: – Competitive sales of either in last FY total $2,531,900 or less; or – Competitive sales of either < 2% of total sales; or – Competitive sales of neither is 4% or more of total sales Danger: Collusion “occasion of sin.”
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DOC#
1
Clayton 8, cont.
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“Competitors”: products sold are interchangeable and sold within the same geographic area – Such that elimination of competition between them would violate any of the antitrust laws “Person” is both individuals and corporations But two companies must be separate, not agents – Affiliate’s numbers not counted if separate companies No safe harbor for de minimus competition – Per se liability once thresholds crossed Few court decisions to offer guidance
DOC# 2
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Clayton 8 Remedies
• Can be enforced by agencies or private parties • Theoretically trebled damages available
– No private plaintiff has yet won damages
• Government seeks injunctive relief • Grace Period:
– If person initially eligible, but thresholds later crossed, one year from then to extricate self.
DOC#
3
Clayton 8 Issues
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“Subsidiaries and Affiliates: Implications for – whether “two or more corporations” involved; and – whether “competition” by one should be imputed to others Deputization” Risk for VCs: Reading, Int’l v. Oaktree Cap. Mgmt, LLC (SDNY 2003) – Private equity firm could not appoint different representatives to two portfolio company boards – Firm is liable if its appointees are its “puppets” FTC Use of Section 5 to reach violations of spirit, if not letter, of Section 8 – E.g., Indirect interlocks; unconsummated plan; thresholds “not quite” reached (?)
DOC# 4
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Questions?