In the early 2000s, the US antitrust agency investigated major tech companies for potential violations of a somewhat little-known and obscure provision of antitrust/ competition law – Section 8 of the Clayton Act – which makes it illegal in certain circumstances for the same person to serve as a director of competing companies, often described as “interlocking directorates” or interlocks. This led to the resignation of Google CEO Eric Schmidt from Apple’s board, Apple’s Arthur Levinson stepped down from Google’s board, and Google’s John Doerr quit Amazon’s board.
Interlocks can be direct when the same person sits on the boards of competing companies, or indirect, when a private equity (PE) firm appoints representatives to the boards of competing companies. Such individuals often have access to competitively sensitive information (CSI), participate in decision-making processes, and can influence competitive strategies and exchange the CSI, resulting in cartelisation, the most pernicious form of anti-competitive activity. As a result, interlocks are prohibited in various countries including the US, Japan, and South-Korea etc.
Please click here to read the full article by Sidharrth Shankar and Vaibhav Choukse, published in Moneycontrol.
Sidharrth is the Co-Chair of the Corporate Practice at JSA. He specializes in General Corporate Commercial, Mergers & Acquisitions and Private Equity.