Antitrust permissibility of interlocking directorates unclear in light of recent case law

Recent case law of the Swiss Federal Administrative Court raises doubts as to whether interlocking directorates between competitors remain permissible under antitrust law at all. Although the court does not impose a general prohibition, its reasoning shows that interlocking directorates between competitors entail significant antitrust risks and that these risks may be difficult to eliminate completely.

Particularly noteworthy is the Court’s finding that recusal rules as well as technical or organisational safeguards could result in board members no longer being able to fully perform their statutory duties. Against this background, the Court considered a prohibition on appointing representatives of competitors to the board of directors to be the least restrictive effective measure.

The decision therefore reveals a fundamental conflict: Safeguards that are sufficiently effective to prevent the exchange of competitively sensitive information may, at the same time, restrict the board mandate so significantly that the person concerned can no longer fulfil their statutory duties as a board member. This does not necessarily mean that interlocking directorates between competitors are per se unlawful. However, the decision implies that a prohibition may be the only practicable measure where less restrictive measures either do not provide sufficient protection or are incompatible with the statutory duties of the board member.

Going forward, it will therefore be necessary to carefully assess, on a case-by-case basis, whether safeguards such as recusal rules or information barriers are in fact sufficient to prevent the use or disclosure of competitively sensitive information. It will also be necessary to assess whether an interlocking directorate is objectively necessary and can be justified by legitimate grounds of economic efficiency. This may become particularly difficult in concentrated markets with only a few market participants.

The decision of the Swiss Federal Administrative Court is not yet final and may be appealed to the Swiss Federal Supreme Court.

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