DealLawyers.com Blog

The ongoing litigation between Elon Musk and Sam Altman is not the first place I’d think to turn to get updates on the FTC and DOJ’s latest positions on the application of Section 8 of the Clayton Act. But, since several of Musk’s claims turn on antitrust arguments relating to OpenAI and Microsoft, the DOJ and FTC filed a statement of interest in the case earlier this month. Here’s an excerpt from this Cadwalader memo:

In the joint DOJ and FTC “statement of interest” filed in Elon Musk v. Samuel Altman, the agencies argue that “section 8 bars relationships that create an interlock regardless of form.” The agencies argue:

“[A]n individual cannot evade liability by serving as an ‘observer’ on a competitor’s board. … [A] company or individual cannot use an indirect means to a prohibited end, such as by asking another person to serve as a board observer to obtain entry to a meeting that is otherwise off limits due to Section 8’s ban on interlocks.  Such misdirection would undermine Section 8’s intent to impose a clear ban on direct involvement in the management of a competitor.”

Although the DOJ has touted that the interlocks initiative has led to 15 interlocking director resignations from 11 boards, this Bryan Cave memo notes that the agencies are also saying in the statement of interest that resignation may not be sufficient:

Historically, the agencies allowed Section 8 cases to be resolved by resignation or withdrawal of the nomination of the alleged interlocking director. In this statement of interest, however, the agencies now argue that “ending an interlocking directorate, e.g., by having a person resign from a corporate board, is not sufficient, on its own, to moot a claim under Section 8 of the Clayton Act.”

The agencies continue that “if a plaintiff properly pleads a likelihood of recurrence or an ongoing harm through the wrongful retention of competitively sensitive information obtained through the alleged interlocks, Section 8 claims are not moot.” However, the agencies do not cite a single case supporting this conclusion.

It sounds like these positions — and the FTC’s focus on interlocks generally — are not likely to change, even as agency leadership shifts. Here’s more from the Cadwalader memo:

Firms and individuals should recognize this position was adopted by a unanimous commission, including President-elect Trump’s designee for FTC Chairman (and current Commissioner), Andrew Ferguson, and Republican-appointed Commissioner Melissa Holyoak.

The antitrust agencies’ efforts to identify and break interlocks, broadly defined, are not going to be shelved in the second Trump administration.  Notably, the revised reporting rules for transactions subject to the Hart-Scott-Rodino Act include a requirement that filing parties identify certain officers and directors. One purpose of this reporting requirement is to identify interlocks that may impact competition, including interlocks that are not prohibited by Section 8.

We’re posting these and other resources in the “Director Interlocks” section of our “Antitrust” Practice Area.

– Meredith Ervine