The FTC reminded market participants to ensure that persons do not serve as officers or directors of competing companies during restructurings or acquisitions.
In a blog post, the FTC highlighted two common transaction scenarios to help market participants avoid violating Clayton Act Section 8. First, the FTC noted that when a company is acquiring or merging into a new business line, it may create an "interlock" if the acquiring or surviving board members are also members of a competing company. Second, the FTC also noted interlocking in "spin-offs," where an officer or director retains positions with the parent and the new firm, which have become direct competitors.
In both instances, the FTC stated, individuals have a one-year grace period to resign from any problematic positions. However, the FTC warned, during the grace period, the interlocked director or officer cannot use his/her role to further anti-competitive schemes.
To ensure compliance, the FTC recommended that counsel (i) remain mindful of potential interlocks during restructurings and acquisitions, (ii) educate officers, directors and in-house counsel on interlocking directorates and (iii) annually review operations, policies and procedures to ensure compliance.
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