Scrutiny of interlocking directorates has made its way into the antitrust crosshairs as the Federal Trade Commission (FTC) has launched a multipronged challenge against EQT Corporation’s proposed acquisition from the Quantum Energy Partners private equity investment group. Astonishingly, this marks the FTC’s first case in 40 years that duly enforces Section 8 of the Clayton Act, aimed at preempting a proposed board of directors interlock. The details have been extensively covered by JD Supra.
What’s even more interesting is the concurrent action by the Department of Justice’s (DOJ) Antitrust Division, which demanded and secured the resignation of two Pinterest directors from the board of Nextdoor. This move represents the ongoing enforcement efforts by the DOJ and indicates a likely future trajectory of increased scrutiny of interlocking directorates in the corporate sphere.
Interlocking directorates occur when board members of one company simultaneously sit on the board of another company. While it may seem an innocuous practice, such interlocks can pose potential risks of collusion, limiting market competition and ultimately violating antitrust laws. Most notably, Section 8 of the Clayton Act specifically prohibits interlocks between competing companies.
The current actions by the FTC and DOJ stand as a precedent-setting move that signals a shift in the landscape of corporate directorships. Legal professionals, particularly in antitrust law, should be cognizant of these developments as they are likely to have profound implications for future corporate transactions and dealings.