The Federal Trade Commission has published its annual revision of the interlocking directorate thresholds under Section 8 of the Clayton Act. The new, slightly higher thresholds are effective as of today, March 4, 2019.

Section 8 prohibits a “person” from serving as an officer or director of corporations that compete with one another in the marketplace, except where that competition is very limited. Section 8 also applies where two different individuals represent the same company but serve on competitors’ boards.

The existence of an interlock prohibited by Section 8 is a per se violation – which means that no defenses may be offered where an illegal interlock is established. It is therefore important to be cognizant of any potential Section 8 issue as well as the current applicable thresholds.

Under the updated thresholds for 2019, a “person” cannot serve as officer or director of any two corporations if:                           

  1. the “capital, surplus, and undivided profits” of each corporation exceeds $36,564,000; and
  2. the corporations are competitors “by virtue of their business and location of operation.”

Section 8 does, however, provide exceptions to this general rule. Even where the above elements are satisfied, an interlock is allowed if:

  1. the competitive sales of either corporation are less than $3,656,400; or
  2. the competitive sales of either corporation are less than 2% of the corporation’s total sales; or
  3. the competitive sales of each corporation are less than 4% of that corporation’s total sales.

A Section 8 enforcement action may be brought by the federal antitrust agencies, but there is also a private right of action for Section 8 claims. Companies and individuals should, therefore, keep Section 8 considerations in mind when considering the appointment or undertaking of an officer or director position, and in evaluating current positions.

For more information about the revised thresholds or interlocking directorates law in general, please contact Becky Nelson or Danielle Mangogna.