Dive Brief:

• In the latest action to come out of the federal government’s stepped-up focus on interlocking directorates, Steven Newhouse and Steven Miron resigned from the board of Warner Bros. Discovery April 1 after learning they were being investigated for possible antitrust violations. 
• “The U.S. Department of Justice informed them that it was investigating whether their service on the board of directors violated Section 8 of the Clayton Antitrust Act,” the company said in a statement.
• In addition to sitting on the board of WBD, Newhouse and Miron sit on the board of Advance, one of the biggest shareholders of Charter Communications, a competitor of WBD In the video streaming business.

Dive Insight:

DOJ in late 2022 said it was breaking from the past and taking a proactive enforcement approach to what it calls interlocking directorates – directors sitting on the boards of competing companies. 

Holding a leadership role in competing companies is considered a per se violation of Section 8 of the Clayton Act because it could enable companies to share information or coordinate strategies. 

“Eliminating the opportunity to coordinate — explicitly or implicitly — through interlocking directorates [can] prevent other violations of the antitrust laws before they occur,” DOJ has said.  

Prior to this change in emphasis, DOJ took a hands-off approach; if companies discovered a possible conflict, they would make changes to resolve the conflict. The agency didn’t go looking for violations. 

“Historically, interlocking directorates were issues that [tended to be] incidentally uncovered during merger or other transaction reviews,” Jan Rybnicek, an attorney with Freshfields, told Legal Dive last year. “‘Oh, we noticed this interlocking directorate. Go off and fix it.’ And that was the remedy: just remove the cross-directorship and that would be it.”

That changed in 2022, when the Biden administration said it would start looking for potential conflicts and it directed companies to review the composition of their boards to see if their directors have conflicting roles that have gone unnoticed. 

“You might have acquired a company that was in space x, but during your time holding it, they expanded to y and z,” Rybnicek said. “All of a sudden you’re in these other markets you didn’t know about.”

A number of companies, including software company SolarWinds, have since made changes to comply with DOJ’s more aggressive approach. “The division’s enforcement efforts to date have unwound or prevented interlocks involving at least two dozen companies,” the agency says. 

Newhouse and Miron were appointed to WBD’s board after the company was created out of a merger between Warner Bros. and Discovery. They both came in from the Discovery side. Miron is CEO of Advance, a privately held investor in media and technology companies. Newhouse is co-president of Advance.  

“Without admitting any violation, and in light of the changing dynamics of competition in the entertainment industry, [the two executives] elected to resign rather than to contest the matter,” WBD said in its statement. 

“We are disappointed to leave the board, but wish to do the right thing for WBD.” Newhouse said. 

The resignations are “a win for consumers,” Deputy Assistant Attorney General Michael Kades said. “In enacting Section 8 of the Clayton Act, Congress was concerned that competitors who shared directors would compete less vigorously to provide better services and lower prices. We will continue to vigorously enforce the antitrust laws when necessary to address overreach by corporations and their designated agents.”

DOJ has been looking at WBD as part of a sports-streaming deal that the company is hoping to enter into with Disney and Fox. If allowed to go through, the deal could lock up an estimated 55% of U.S. sports rights by cost, or about $14.4 billion of the $26.7 billion spent last year.  

It’s not clear if the agency uncovered the board conflict as part of its scrutiny of the sports streaming deal.