Under Section 8 of the Clayton Act, no person may simultaneously serve as a director of two competing corporations (other than banks, banking associations, and trust companies) if each corporation has capital, surpluses, and undivided profits totaling more than $10 million as adjusted based on the change in gross national product. The Federal Trade Commission (FTC) announcement indicates that the adjusted value of $10 million for 2024 is $48.559 million (up from $45.257 million in 2023).
This restriction does not No They apply, however, if the corporations' competitive sales are below a certain level, where โcompetitive salesโ are defined as the โgross receipts from all products and services sold by one corporation in competition with another,โ determined based on annual gross income. income for the corporation's last completed fiscal year. Specifically, it is not a violation for this board to overlap if:
- competitive sales any The corporation costs less than $1 million adjusted, with the adjusted value now set at $4.8559 million (up from $4.5257 million in 2023); either
- competitive sales any corporation are less than two percent of its total sales; either
- competitive sales each corporation are less than four percent of that corporation's total sales.
The updated dollar thresholds will take effect when they are published in the Federal Register this month. The FTC must review these thresholds annually.
The Department of Justice (DOJ) has traditionally enforced Section 8's prohibition on interconnecting addresses and current DOJ leadership has emphasized that Section 8 enforcement is a priority. The result is a series of cases in which directors have resigned to resolve concerns from the Justice Department. Additionally, the FTC has also recently begun prioritizing enforcement of Section 8. In 2023, the Commission (1) brought an enforcement action applying the ban to noncorporate entities (although the statute refers only to corporations), (2 ) evaluated potential violations of Section 8 in merger reviews (including questions about address interlocking in information requests sent to the transaction parties), and (3) alleged that an interlock may separately be a violation of Section 5 of the FTC Act's prohibition on โmethods of unfair competition.โ[1]
In summary, the relevant jurisdictional thresholds for the onboard overlay restriction to apply are below:
| Limit | Original quantity | Adjusted thresholds for 2024 |
| Aggregate capital, surplus and undivided profits of each corporation | More than 10 million dollars | More than $48,559 million |
| De minimis Exemptions (The restriction on overlapping participation in the board of directors does not apply if any of the following conditions are met.) | ||
| Amount of any competitive corporate sales | Less than 1 million dollars | Less than 4,855.9 million dollars |
| Percentage of competitive sales any corporation | less than 2% | N/A |
| Percentage of competitive sales each corporation | less than 4% | N/A |
FTC Also Updates Civil Penalty Amounts
The FTC has also updated the amounts of civil penalties under its jurisdictionpursuant to an annual requirement under the Federal Civil Penalty Inflation Adjustment Act Improvements Act (FCPIAA) of 2015.
Among other changes, the maximum civil penalties for the following increased from $50,120 to $51,744, effective January 10, 2024:
- Pre-merger filing notification violations under the Hart-Scott-Rodino Improvement Act;
- Violation of a final order of the Commission regarding unfair or deceptive acts or practices;
- Civil actions to recover penalties for knowing violations of regulations regarding unfair or deceptive acts or practices; and
- Civil actions to collect penalties for knowing violations of cease and desist orders regarding unfair or deceptive acts or practices.
