September 20, 2016

Director Interlocks: DOJ Enforcement Activity

In this memo, Goodwin Procter reviews recent FTC & DOJ enforcement activity dealing with the Clayton Act’s prohibition on director interlocks – and offers some practical compliance advice:

– Be sure to include a component on the antitrust laws in your corporate compliance policies. This will ensure that all Board members, officers, and employees are well aware of the law.

– Perform a compliance check at least yearly by asking your Board members, officers, and employees if they serve on other Boards.

– Know who you are from top to bottom; be aware if any subsidiaries or affiliates compete with any other entities in which the company is also invested – whether directly or indirectly

– Be conscious of your firm’s identity. As a firm’s mission shifts or it acquires or expands into new product lines, it may become newly competitive with other firms. Director interlocks violations certainly can emerge as these shifts take place.

– In any transaction where Board seats may shift, be sure to add a interlocks check to the closing checklist.

– Be mindful that even if there isn’t a technical violation, there could be conflict of interests implicated by dual-Board service.

This memo from Philip Giordano of Kaye Scholer weighs in on the implications of the DOJ’s enforcement activity on taking board seats & minority ownership stakes in a competitor.

John Jenkins