- Since President Biden in 2021 announced a sweeping strategy to boost competition by reinvigorating antitrust enforcement, the administration has looked for collusion in as many places as possible. It has now rediscovered it on boards of directors.
- Earlier this week, the Department of Justice announced the resignation of seven directors from the boards of five companies after the department’s antitrust division announced it’s stepping up enforcement of Section 8 of the Clayton Act, which prohibits directors from sitting on boards of competing companies.
- “Competitors sharing officers or directors further concentrates power and creates the opportunity to exchange competitively sensitive information and facilitate coordination – all to the detriment of the economy and the American public,” Assistant Attorney General Jonathan Kanter, DOJ’s chief antitrust enforcer, said in announcing the resignations.
In laying out his competition push last year, Biden said government inaction has been contributing to consolidation, so he promised a whole-of-government approach in which a range of agencies would be empowered to join the antitrust fight. This includes the Department of Labor looking at the anti-competitive effects of wage collusion, for example, and the Federal Trade Commission looking at mergers from a data-concentration standpoint, not just a consumer-price standpoint.
By relying on Section 8 of the Clayton Act, DOJ is indicating that it can take action against what it calls interlocking directorates on the basis of the competitive harm that could come from these arrangements – a preemptive approach.
“By eliminating the opportunity to coordinate – explicitly or implicitly – through interlocking directorates, Section 8 is … intended to prevent other violations of the antitrust laws before they occur,” DOJ said in this week’s announcement.
The five companies with director resignations are Udemy, SolarWinds, Definitive Healthcare, Redwire and CTS.
- Udemy is an online corporate education provider whose recently resigned director is also on the board of Skillsoft, a competitor in the field.
- SolarWinds provides application performance monitoring software and three of its directors resigned because of their connection to investment firm Thoma Bravo, which has an interest in Dynatrace, a competitor.
- Definitive Healthcare is a third-party business intelligence provider whose former director sits on the board of ZoomInfo Technologies, which competes in the same space.
- Redwire competes in the space infrastructure and communications products and services industry with Maxar Technologies, which shared a director with the company before the resignation.
- CTS manufactures sensors and switches for passenger and commercial vehicles. Its recently resigned director sits on the board of Littelfuse, which operates in the same space.
More board resignation announcements could be coming.
“Companies, officers, and board members should expect that enforcement of Section 8 will continue to be a priority for the Antitrust Division,” DOJ said.