For many health care organizations, including hospital systems, physician groups, and private equity–backed health care platforms, board and governance structures have grown increasingly complex as the industry consolidates and integrates across service lines. It is common for executives, physicians, and investor representatives to hold board seats or observer roles across affiliated or partnered entities. While such arrangements may promote strategic collaboration or oversight, recent enforcement activity by the Federal Trade Commission (the “FTC”) underscores the need for careful attention to potential interlocking directorates under Section 8 of the Clayton Act, particularly when governance overlaps occur among entities that provide competing services or operate in overlapping geographic or patient markets.

Understanding Section 8 of the Clayton Act

Section 8 of the Clayton Act (15 U.S.C. § 19) prohibits any person from serving simultaneously as a director or officer of two competing corporations, unless a statutory exemption applies. The goal of Section 8 is to prevent the sharing of competitively sensitive information and to reduce the risk of coordination between companies that should be acting as independent market competitors.

Currently, Section 8 applies to corporations with capital, surplus, and undivided profits exceeding $51,380,000. The statute does not apply if the competitive sales of either corporation are less than $5,138,000, or if those sales are less than 2% of one corporation’s total sales or 4% of each corporation’s total sales. “Competitive sales” include all products and services sold in competition with the other entity. The law also includes a one-year grace period—if two companies become competitors after a board appointment is made, the interlocking director may continue to serve for up to a year while the issue is resolved.

Traditionally, Section 8 was viewed as applying to direct interlocks, where the same individual sits on the boards of two competitors. However, enforcement agencies have recently emphasized that “indirect” interlocks—for example, where different individuals serve on the boards of competitors but act on behalf of the same investment fund or parent company—may also raise Section 8 concerns. Recent statements by senior DOJ and FTC officials have emphasized that Section 8 enforcement is a key priority area, with the agencies conducting proactive sweeps to identify potential interlocks, including those involving private equity and common ownership structures. In addition, the FTC and the Department of Justice (the “DOJ”) have broadened their scrutiny to include board observer rights and other arrangements that could facilitate the exchange of competitively sensitive information. While such roles may not always create a technical interlock under Section 8, they can still raise concerns under the Sherman or FTC Acts if they permit access to competitors’ sensitive information.

The agencies’ recent focus follows a series of resignations in 2023 and 2024 across multiple industries, including technology, health care, and private equity, reflecting a shift toward resolving potential violations before formal complaints are issued. Both agencies have also made clear that Section 8 applies not only to corporations, but also to non-corporate entities such as partnerships and limited liability companies. This expansion aligns with the agencies’ position that the statutory reference to “corporations” encompasses a wide range of organizational forms engaged in commercial competition, even if not formally incorporated.

The FTC’s Recent Action in Sevita Health

The FTC’s recent action involving Sevita Health highlights its renewed focus on this area. In October 2024, the FTC announced that three individuals resigned from the boards of both Sevita Health and Beacon Specialized Living Services, Inc., two companies providing residential and supportive services to individuals with intellectual and developmental disabilities. The FTC found that the two companies were competitors and that the overlapping board memberships created an unlawful interlock under Section 8. Notably, the FTC did not issue a complaint or require a consent order—the matter was resolved voluntarily through the directors’ resignations. In its announcement, the FTC praised both companies for their cooperation and reminded all organizations to review their board structures regularly to avoid similar interlocks. This enforcement action is consistent with the FTC and DOJ’s recent emphasis on proactive compliance. The agencies have signaled that they will continue to investigate both formal and informal interlocks, including observer arrangements, and that voluntary resignations will remain the preferred method of resolution—but only if companies identify and remediate the issue promptly.

Implications for Health Care Entities

For health care providers, management services organizations, and investors with interests across multiple facilities or platforms, the FTC’s recent action in Sevita Health serves as a timely reminder that Section 8 compliance should be a routine element of governance and affiliation reviews. Health systems that maintain joint ventures or minority interests in competing facilities, or that share executives, directors, or board observers across affiliated entities, may inadvertently create interlocks that fall within Section 8’s scope. Even where the same individual is not serving on multiple boards, regulators may view “deputized” representation, such as separate designees representing a shared parent organization, investment fund, or physician practice management company, as creating an impermissible interlock.

Next Steps and Compliance Considerations

In light of the FTC’s renewed enforcement activity, health care organizations should conduct periodic reviews of their board and leadership structures to identify any potential overlaps between entities that may compete in the same service lines or geographic markets. This review should also be integrated into due diligence processes for new affiliations, joint ventures, or management agreements that provide governance or observer rights. Even absent a technical “interlock,” health care leaders should remain vigilant to avoid sharing competitively sensitive information between potentially competing entities, since conduct falling outside Section 8 may still raise concerns under the Sherman or FTC Acts, particularly where clinical or pricing information could be exchanged indirectly through shared board participation.

Conclusion Health care organizations operate in an environment of increasing consolidation and regulatory oversight, where governance structures are under heightened antitrust scrutiny. As the FTC and DOJ continue to focus on interlocking directorates, regular compliance reviews, board audits, and clear conflict-of-interest policies can help health care entities identify and resolve potential issues early, minimize enforcement risk, and maintain the integrity of their governance and collaborative arrangements.