Clayton Act Scrutiny’s Rise Calls for Board Interlock Review

Shortly before the new Trump administration took office in January, the Department of Justice and Federal Trade Commission filed a statement of interest in private litigation brought by Elon Musk against Sam Altman and OpenAI Inc.—a case in which Musk alleges that two individuals illegally served on both OpenAI and Microsoft Corp.’s boards.

The agencies’ statement signals a potentially troubling trend for public and private companies of all shapes and sizes: heightened scrutiny of Section 8 of the Clayton Act, which prohibits individuals serving as directors or officers of competing organizations at the same time.

Here’s what business leaders, board members, and their counsel need to know to mitigate potential risks.

Clayton Act Scrutiny

The DOJ and FTC’s statement of interest indicated their intent to robustly and widely enforce Section 8.

It advocated for the expansion of interlocking directorate liability by taking the view that the exchange of competitive information might prevent a case from becoming moot even after a director in question resigns. It also argued that even an “observer” on a board may be considered a “director” for purposes of the statute and underscored the FTC’s interpretation that Section 5 of the FTC Act fills in any gaps Section 8 may leave open.

There are several other signs that Section 8 scrutiny may be intensifying.

FTC enforcement. In its first Clayton Act case in 40 years, the FTC approved a 2023 consent order that prohibits a natural gas company from occupying a board seat on its competitor, requires the company to divest its stock of the competitor, prevents anticompetitive information exchange, and unwinds a separate anticompetitive joint venture between the two entities.

The DOJ’s focus on private equity. The DOJ believes that even indirect interlocks are problematic, such as where different individuals represent the same private equity firm on boards of competitors. This focus has led to numerous resignations in the last few years: seven directors from five boards in 2022 and five more from four boards in 2023.

A recent academic study. In June, a group of Stanford and Yale professors published “Anticompetitive Directors,” an academic study finding “evidence that individual board members sit simultaneously on the boards of competitors throughout the economy.”

The Trump administration has continued this trend. In September, three members of Sevita Health’s board of directors resigned after the FTC brought an action to enforce Section 8. This was because they were also on the board of Beacon Specialized Living Services Inc., which, like Sevita Health, provides services to people with developmental or mental disabilities.

The administration also has continued to enforce the antitrust laws robustly in merger reviews, scrutinizing actions of the tech industry, and pursuing price-fixing cases.

How to Prepare

To mitigate Section 8 risk, public and private companies should evaluate and address existing interlocks. Consider the following best practices:

• Public companies should review director-and-officer questionnaires to ensure they elicit relevant information to analyze potential interlocks.
• Director-and-officer questionnaires should be resubmitted annually to capture any change in circumstances that might trigger a Section 8 issue.
• Companies with financial sponsors—whether public or private—should diligence whether other portfolio companies of the sponsor operate competing lines of business.
• Governance guidelines should be reviewed to ensure directors notify the company before accepting another directorship to allow an appropriate review of potential interlocks.
• Companies should educate directors and officers about the prohibition.

Finally, business leaders should be aware of the three exceptions that apply when competitive overlap between companies is minimal. Under the FTC’s 2025 threshold updates for interlocking directorates, those exceptions are:

• One of the corporations has competitive sales of less than $5,138,000. For reference, competitive sales means “gross revenues for all products and services sold by one corporation in competition with the other, determined on the basis of annual gross revenues for such products and services in that corporation’s last completed fiscal year.”
• Competitive sales of either corporation are less than 2% of the corporation’s total sales. “Total sales” is defined as the “gross revenues for all products and services sold by one corporation over that corporation’s last completed fiscal year.”
• The competitive sales of each corporation are less than 4% of the corporation’s total sales.

A one-year grace period is available for individuals serving as directors or officers who were eligible at the time of election but have since undergone certain changes in circumstances.

New Enforcement Landscape

Scrutiny of interlocking directorates has increased in recent years, with the risk now extending beyond traditional board seats to observers, indirect ties through financial sponsors, and information sharing.

The good news is that remediation is largely within a company’s control. A disciplined process to identify, assess, and address interlocks now may reduce enforcement risk later.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Rebecca A.D. Nelson is partner at Bryan Cave Leighton Paisner and devotes her practice to antitrust law, providing training, counseling, transactional analysis, and defense of merger and conduct investigations.

R. Randall Wang is senior counsel at Bryan Cave Leighton Paisner and concentrates his practice in the areas of corporate finance and mergers and acquisitions.

Darren E. Ray is an associate in Bryan Cave Leighton Paisner’s business and commercial disputes practice group.

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