Enabling Interlock Benefits While Preventing Anticompetitive Harm: Toward an Optimal Definition of Competitors Under Section 8 of the Clayton Act

Abstract

Section 8 of the Clayton Act prohibits directorship and management interlocks between competing corporations. When determining whether corporations are competitors within the meaning of Section 8, the courts have historically applied qualitative criteria rather than quantitative market definition analysis. In the Section 7 merger context, however, the courts have increasingly relied on quantitative analysis and have become more and more skeptical of the accuracy of qualitative analysis. In the context of interlocks, an inaccurate definition of competitors can create problems from both corporate governance and competition policy perspectives. By examining the benefits, costs, and difficulties of implementing quantitative analysis to determine whether interlocking corporations compete, this paper explores the most realistic ways in which quantitative market definition analysis could be introduced and applied in the Section 8 context. The greater precision that generally accompanies quantitative analysis illustrates that it is theoretically a preferable method for defining competitors under Section 8, but because interlocks involve lower stakes than mergers and because quantitative market definition analysis is costly, quantitative analysis is not a viable option if conducted comprehensively. "Quick-look" quantitative analysis is a practical alternative.