In Brunswick the antitrust claim had been used to give one producer an advantage by shuttering a rival, at the expense of customers; the Supreme Court replied that this abuse of antitrust law must not be tolerated. It created the antitrust-injury doctrine, under which private antitrust litigation is limited to suits by those persons for whose benefit the laws were enacted. See also Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990); Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 107 S.Ct. 484, 93 L.Ed.2d 427 (1986). Plaintiffs rely on Protectoseal Co. v. Barancik, 484 F.2d 585 (7th Cir.1973), for the proposition that private plaintiffs can enforce § 8. We don't doubt this—but Protectoseal was not a shareholders' derivative suit, and the antitrust-injury doctrine, which the Supreme Court adopted four years after Protectoseal, limits which private parties can pursue § 8 claims.
This court affirmed the entry of the injunction, noting that "the statute reflects a public interest in preventing directors from serving in positions which involve either a potential conflict of interest or a potential frustration of competition." Protectoseal Co. v. Barancik, 484 F.2d 585, 589 (7th Cir. 1973). Some seventeen years later, Congress in 1990 amended § 8 of the Clayton Act by increasing the minimum threshold amount of capital, surplus, and undivided profits necessary to prohibit interlocking directorates from $1,000,000 to $10,000,000, computed "at the end of that corporation's last completed fiscal year."
Because the parties failed to cite the law relevant to determining the question, we draw attention to, inter alia, T.R.W., Inc. v. F.T.C., 647 F.2d 942 (9th Cir. 1981) (proof that interlock has actual anticompetitive effect is not required); Las Vegas Sun, Inc. v. Summa Corp., 610 F.2d 614 (9th Cir.), cert. denied, 447 U.S. 906, 100 S.Ct. 2988, 64 L.Ed.2d 855 (1980) (where district court found that six entities owned and operated by one individual neither competed with each other nor represented themselves as competitors, no violation of Clayton Act § 8); Kennecott Copper Corp. v. Curtiss-Wright Corp., 584 F.2d 1195, 1205 (2d Cir. 1978) ( § 8 does not prohibit interlocking directorships between parent companies whose subsidiaries are competitors); Protectoseal Co. v. Barancik, 484 F.2d 585, 588-89 (7th Cir. 1973) (Stevens, J.) (by § 8, Congress intended, inter alia, to prohibit interlocks between corporations that could not lawfully merge; § 8 has broader coverage than § 7); In re Penn Central Securities Litigation, 367 F. Supp. 1158, 1168 (E.D.Pa. 1973); Paramount Pictures Corp. v. Baldwin-Montrose Chemical Co., 1966 Trade Cas. (CCH) ¶ 71,678 at 82,065 (S.D.N Y 1966); and more generally to Bankamerica Corp. v. United States, 462 U.S. 122, 128, 103 S.Ct. 2266, 2270, 76 L.Ed.2d 456 (1983); Copperweld Corp. v. Independence Tube Corp., ___ U.S. ___, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984); Borg Warner Corp., 3 Trade Reg.Rep. (CCH) ¶ 22,663 (FTC 1983); ABA Section on Antitrust Law, Antitrust Law Developments (Second) 210-14 (1984); Kramer, Interlocking Directorships and the Clayton Act After 35 Years, 59 Yale L.J. 1266 (1950). The court below should, upon renewed motions for summary judgment or at trial, as the case may be, study the issues in the afterlight of these authorities.
The few courts and authorities that have considered the issue have held that conduct violative of section 8 is illegal per se. See, e.g., Protectoseal Co. v. Barancik, 484 F.2d 585, 589 (7th Cir. 1973); P. Areeda, Antitrust Analysis ¶ 666 (3d ed. 1981); 4 Von Kalinowski, Antitrust Laws and Trade Regulation § 21.02[2]. It seems to me that if an interlocking directorate falls within section 8, which is very specific, the interlock is unlawful and no rule of reason analysis is necessary.
Only two alleged "competitors" are involved and proof that the interlock has an actual anticompetitive effect is not required. Accord, Protectoseal Co. v. Barancik, 484 F.2d 585, 589 (7th Cir. 1973). Second, the petitioner's recommended standard is too restrictive.
See also Travers, Interlocks in Corporate Management and the Antitrust Laws, 46 Tex.L.Rev. 819, 821-22 (1968) ("Moreover, the absence of litigation may indicate that the Department's campaign to secure voluntary compliance is notably successful."); but see Wilson, supra n.5, at 317-19 (enforcement of section 8 described as "long periods of benign neglect" "punctuated by a few bursts of mild activity"). In Protectoseal Co. v. Barancik, 484 F.2d 585 (7th Cir. 1973), then Circuit Judge Stevens stated in dictum that "[t]he corporation itself is a potential defendant in litigation which the government may initiate to enforce § 8." SCM contends that the language and legislative history of section 8 support its interpretation.
Plaintiffs argue that because violations of Section 8 are considered per se illegal, they need not allege injury in order to seek injunctive relief, although they would need to do so in order to seek damages. (P. Opp. Br. 67 (citing Jicarilla Apache Tribe v. Supron Energy Corp., 728 F.2d 1555, 1572 (10th Cir. 1984) (Seymore, J., concurring in part); Protectoseal Co. v. Barancik, 484 F.2d 585, 589 (7th Cir. 1973).) However, the Court need not reach this distaff, as plaintiffs have adequately alleged antitrust injury resulting from the interlock.
A Section 8 violation exists when two or more corporations, one with a net worth in excess of one million dollars, who are competitors such that any agreement between the companies might constitute a violation of the antitrust laws, share a common director. Protectoseal Co. v. Barancik, 484 F.2d 585, 589 (7th Cir. 1973); 15 U.S.C. § 19. See also, United States v. Sears, Roebuck Co., 111 F. Supp. 614 (S.D.N.Y. 1953).
That authority, however, ignores the reality of intercorporate relationships and the goal of Section 8 in preventing "a potential conflict of interest or a potential frustration of competition." Protectoseal Co. v. Barancik, 484 F.2d 585, 589 (7th Cir. 1973). Accord, United States v. Sears, Roebuck Co., 111 F. Supp. 614 (S.D.N.Y. 1953).
For these reasons, under the Clayton Act, interlocking directors are not permitted in two or more corporations if they are competitors. See 15 U.S.C. § 19 (2006); Protectoseal Co. v. Barancik, 484 F.2d 585, 589 (7th Cir. 1973). This prohibition is a recognition interlocking directors implies a relationship is not at "arm's length."