WASHINGTON, D.C. — The Federal Trade Commission moved to restrict Beretta Holding S.A.’s board influence at Sturm, Ruger & Co. Inc. as Beretta seeks to raise its stake in the firearm manufacturer to as much as 25%, resolving antitrust concerns that the proposed arrangement could create an illegal interlocking directorate.
Under a proposed consent order, Beretta would be barred from appointing or nominating anyone to Ruger’s board unless that person is independent of Beretta. The FTC alleges that Beretta’s stock purchase agreement, which would permit it to appoint two Ruger directors, otherwise would violate Section 8 of the Clayton Act.
Section 8 generally prohibits directors or officers from simultaneously serving at competing companies under circumstances covered by the statute. The FTC said such overlaps can facilitate coordination or the exchange of competitively sensitive information.
Beretta is a subsidiary of Upifra S.A. Ruger is one of the companies the FTC identified as a major firearm manufacturer competing with Beretta.
The proposed order would also require Beretta to give the FTC at least 15 days’ advance written notice before causing anyone to become a Ruger director.
Beretta also would be prohibited from hiring or entering into certain financial or other relationships with an independent director it nominated to Ruger’s board if the arrangement would compromise the director’s fiduciary duties or involve passing nonpublic Ruger information to Beretta. That restriction would remain in place until one year after the director leaves Ruger’s board.
“Competition thrives best when the temptation to collude and share sensitive information isn’t on the table,” Taylor C. Hoogendoorn, deputy director of the FTC’s Bureau of Competition, said. The agency said the order is intended to preserve independence between the two manufacturers while allowing the stock investment to proceed under the proposed restrictions.
The commission voted 2-0 to issue the administrative complaint and accept the consent agreement for public comment. The matter remains pending, and the public comment period runs through Oct. 19.
The FTC notes that issuing an administrative complaint reflects a determination that it has reason to believe a law has been or is being violated; it is not a final adjudication. If adopted on a final basis, the consent order would carry the force of law for Beretta’s future conduct covered by the order.
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