- Section 8 of the Clayton Act
- September 13, 2004
- Law Firm: Weil, Gotshal & Manges LLP - Office
Section 8 of the Clayton Act prohibits a person from serving as a director or officer of two corporations that are "by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of antitrust laws." 15 U.S.C. § 19(a)(1)(B).
De Minimis Exemptions: Section 8 will not apply where:
- either corporation has "capital, surplus and undivided profits aggregating" $20,090,0001 or less; or
- either corporation has "competitive sales" of less than $2,009,000;2 or
- either corporation's competitive sales are less than 2% of that corporation's "total sales"; or
- each corporation's competitive sales are less than 4% of that corporation's total sales.
Definition of Competitive Sales: Section 8 defines "competitive sales" as "the gross revenues for all products and services sold by one corporation in competition with the other." Courts have interpreted "competitive sales" broadly, looking at product features, market perceptions, and customer overlap.
Subsidiaries and Section 8: Section 8 may apply (1) where the two corporations are not themselves competitors, but have subsidiaries that compete, or (2) where one corporation competes with a subsidiary of the other. Section 8 itself is silent on this issue and there is a paucity of relevant case law. However, such interlocks do not automatically violate Section 8.3
Foreign Corporations and Section 8: There is no exemption from Section 8 for directors and officers of foreign corporations, although the "competitive sales" exemptions may exclude those foreign corporations that have a minimal U.S. presence. However, where foreign corporations have a substantial U.S. presence, they will be within the reach of Section 8, at least where the interlock is with a U.S. corporation.
Enforcement of Section 8: Section 8 suits may be brought by the Department of Justice for the Federal Trade Commission or by private parties and both the corporations and the directors or officers may be found to violate Section 8. Judicial relief usually consists of elimination of the interlock and, occasionally, the prohibition of future interlocks, where there is a danger of recurrent violation. FTC and DOJ consent decrees may contain prior notification or approval provisions regarding the appointment of future directors or officers. While damages are theoretically available to private plaintiffs, they appear never to have been awarded.
1. Originally $10,000,000 when Section 8 was amended in 1990; this threshold is recalculated annually by the Federal Trade Commission based on the increase in the Gross National Product. The figure above reflects the FTC's recalculation as of January 2004.
2. Originally $1,000,000; also recalculated annually based on the increase in the GNP.
3. See Kennecott Copper Corp. v. Curtiss-Wright Corp., 584 F.2d 1195, 1205 (2d Cir. 1978) (finding no § 8 violation where parent corporations had never dictated policy to competing subsidiaries).