DOJ Levels-Up Section 8 Enforcement: Gaming Company Director Resigns from Competitor’s Board in Response to DOJ Scrutiny

On December 18, 2024, the Department of Justice (the “DOJ”) announced that Tencent Holdings Ltd. (“Tencent”) had removed two directors from the board of Epic Games, Inc. (“Epic”) and relinquished its right to unilaterally appoint directors to Epic’s board going forward. The DOJ’s press release states that this action was taken in response to concerns raised by the agency about the potential for Tencent’s board representation to violate Section 8 of the Clayton Act’s prohibition on interlocking directorates. This development highlights the DOJ’s continued focus on enforcing Section 8 and serves as an important reminder that companies, particularly those involved in dynamic and competitive industries like tech, energy, and infrastructure, must be vigilant about the composition of their boards and the potential for appointments to create legal exposure under Section 8.

The DOJ’s concerns with Tencent having two board members serving on Epic’s board may appear counterintuitive. Tencent is a Chinese conglomerate offering a range of mobile apps, video games, and entertainment services. Epic is a U.S.-based video game developer most famous for its game “Fortnite.” Tencent has a minority ownership position in Epic, giving Tencent the ability to appoint two directors on Epic’s board. The DOJ alleged that Tencent, through its U.S.-based subsidiary, Riot Games Inc. (“Riot”), competes with Epic in video game development, and thus Tencent’s right to appoint two directors to Epic’s board constituted an illegal interlock. However, importantly, the directors that the DOJ took issue with were not officers or directors of Riot, and, other than through its ownership of Riot, the DOJ did not allege that Tencent itself competes with Epic. The DOJ apparently did not view as a mitigating factor the fact that Tencent had an equity stake in Epic and therefore was seeking to ensure that its interests as a significant shareholder were protected through board representation.

Tencent’s decision to dismantle its alleged board interlock is the latest example of the DOJ seeking to unwind interlocking directorates (V&E previously discussed this trend here). Since 2022, the DOJ has announced that 16 directors have resigned from the board of 15 companies in response to DOJ interlock concerns (see announcements here, here, here, and here). Like these other cases, Tencent resolved the DOJ’s concerns without a consent decree.

Although it is unclear to what degree increased Section 8 enforcement will continue into the next administration, Section 8 was a focus of the DOJ during President Donald Trump’s first term. For example, Makan Delrahim, Assistant Attorney General for the DOJ’s Antitrust Division during President Trump’s first administration, identified Section 8 as a priority for the division in 2019.

Given the potential for continued aggressive enforcement of Section 8, it would be prudent for companies to proactively assess their board composition and identify any potential interlocks that could draw regulatory attention. This includes not only reviewing current board members, but also evaluating any contractual rights or other arrangements that could be interpreted as granting one company influence over another’s board, even if no individuals are currently serving on both boards. As the Tencent/Epic case reflects, these efforts should consider the potential for interlocks based on subsidiaries and minority holdings. Companies should also consider implementing robust compliance programs to avoid Section 8 concerns and to establish mechanisms for identifying and addressing potential interlocks.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.