The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) (collectively, the U.S. Antitrust Agencies) have recently reinvigorated antitrust enforcement against company “interlocks”—i.e., when a director or officer of a company serves in the same role in a competing company.
Indeed, the Agencies have been actively looking for these interlocks, and the DOJ touts that it has unwound or prevented interlocks across two dozen companies over the last three years.1 In addition to agency enforcement, an unlawful “interlock” risks potential private action as well, as evidenced in a suit recently brought by Elon Musk against Microsoft and OpenAI.2
Put simply, an unlawful “interlock” occurs when any person “serves as a director or officer in any two corporations … that are … competitors… . “ 15 U.S.C. 19 (Section 8 of the Clayton Act).3 An “interlock” is unlawful per se, meaning that the violation occurs once there is an “interlock” (e.g., no need for the government or private plaintiff to prove it actually resulted in anti-competitive harm).4
On January 10, 2025, the Antitrust Agencies filed a “Statement of Interest” (SOI) in the private action against Microsoft and OpenAI that sheds light on how they define “interlocks” and when the Agencies might pursue enforcement action. In doing so, the Statement provides some guidance for companies seeking to mitigate antitrust risks in appointing its directors and officers.5
- Direct Appointments: The Agencies take the position that a violation occurs when a company’s director or officer directly serves as a director or officer of a competing company. This is the straightforward application of Section 8’s prohibition against “interlocks.” As stressed in the Statement, this prohibition “remov[es] the opportunity or temptation for [antitrust] violations.”6
- Indirect Appointments: The Agencies also take the position that a violation occurs when a company’s director or officer indirectly serves as a director or officer of a competing company, e.g., “through an agent, deputy, or representative.”7 In other words, the same person need not serve as a director or officer in the competing companies for the violation; the Agencies are still concerned when a company has someone affiliated with it serve at a competitor.
- Observer Appointments: The Agencies take the position that a violation occurs when a director or officer serves as a Board “observer” at a competitor as well. While the “observer” might not influence or control the competitor, the Agencies are concerned that an observer will still have access of competitively sensitive information that can then be used to distort competition.
- Substance over Form: The Agencies take the position that a violation occurs when a company “ask[s] another person to serve as a board observer to obtain entry to a meeting that is otherwise off limits due to [the antitrust] ban on interlocks.”8 Again, the Agencies are concerned with companies taking any step to manage a competitor or get access to competitor information, stressing that substance matters over form.
- Removal Does Not Remove Risk: The Agencies take the position that removing the “interlock” does not eliminate the risk of an antitrust claim. The Agencies could still pursue a claim out of concern that during the “interlock” the companies exchanged competitively sensitive information or concern of a recurrence in the offense.9
- Risks Outside of Antitrust (i.e., Risks Under the FTC Act and California Law)
- The Agencies takes the position that “interlocks” can also violate the FTC Act’s prohibitions against “unfair methods of competition.” This prohibition (in Section 5 of the FTC Act) “reaches beyond the [antitrust statutes] to encompass various types of unfair conduct that tend to negatively affect competitive conditions.”10 In other words, the FTC is preserving the ability to go after “interlocks” that might not meet the strict requirements of Section 8 of the Clayton Act.
- The California Unfair Competition Law (UCL) follows the FTC Act in many ways. Thus, legal actions (public and private) can be brought against “interlocks” under the UCL, as well. As stated in the Statement, this is particularly true when the “interlock” “facili[tates] the exchange of confidential, competitively significantly (sic) information between rivals.”11
The recent Statement of Interest highlights how the Agencies are prioritizing enforcement against “interlocks,” but more importantly, provides insight into what the Agencies consider to be an unlawful “interlock,” which can help companies mitigate the antitrust risk of appointing its directors and officers.
[1] Statement of Interest of the United States and Federal Trade Commission (“Statement”) at *1, Elon Musk, et al. v. Samuel Altman, et al., 4:24-cv-04722-YGR (N.D. Cal.), available at https://www.justice.gov/atr/media/1383966/dl?inline.
[2] Elon Musk, et al., v. Samuel Altman, et al., 4:24-cv-04722-YGR (N.D. Cal.).
[3] Notwithstanding, there are three exceptions to the prohibition: 1) the competitive sales of either corporation are $51,380,000 or less; 2) the competitive sales of either corporation are less than 2 percent of that corporation’s total sales; or 3) the competitive sales of each corporation are less than 4 percent of the corporation’s total sales, respectively.
[4] See TRW, Inc. v. FTC, 647 F.2d 942 (9th Cir. 1981) (The purpose of section 8 was “to nip in the bud incipient antitrust violations by removing the opportunity or temptation for such violations through interlocking directorates.”) (citation omitted).
[5] The Statement represents the Agencies’ position on how Section 8 of the Clayton Act should be interpreted; it does not necessarily represent how courts may interpret it in all instances.
[6] Statement of Interest at *3, citing TRW 647 F.2d at 946-47.
[7] Id. at *6 (emphasis added).
[8] Id.
[9] Id.
[10] Id. at *8.
[11] Id. at *9.
