FTC Moves to Restrict Beretta’s Board Influence in Ruger Investment

The agency accepted a proposed consent order designed to address concerns that Beretta’s planned investment could create an unlawful overlap between the companies’ boards, according to a Sept. 16 statement from the FTC.

Under the proposed transaction, Beretta would be permitted to increase its holdings to as much as a quarter of Ruger’s outstanding shares and appoint two people to Ruger’s board. The FTC alleges that the board arrangement contemplated by the agreement would violate Section 8 of the Clayton Act, which generally restricts directors or officers from simultaneously serving competing companies.

The settlement would not prevent Beretta from nominating directors altogether. Instead, anyone it places on Ruger’s board would have to be independent of Beretta, according to the FTC. Beretta is a subsidiary of Upifra S.A.

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The restrictions reflect regulators’ concern that overlapping corporate boards can give competitors opportunities to exchange confidential business information or coordinate their conduct. The FTC characterized the action as part of its broader enforcement effort targeting interlocking directorates.

“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 in the agency’s statement. He said the order was intended to maintain Ruger’s independence and reduce the possibility of coordination between two major firearms manufacturers.

The agreement would impose additional oversight on Beretta. The company would have to notify the FTC in writing at least 15 days before taking steps to put a person on Ruger’s board.

Beretta would also face restrictions on its relationships with independent directors it nominates. Under the proposed order, it could not enter into arrangements that compromise such a director’s fiduciary obligations or involve passing Ruger’s nonpublic information to Beretta. Those restrictions would continue until one year after the director leaves Ruger’s board, according to the FTC.

The commission voted 2-0 to issue its administrative complaint and accept the proposed agreement for public comment. The case remains pending, according to the FTC’s case docket.

The public has 30 days to comment on the proposed settlement. A final consent order, once approved by the commission, would carry the force of law governing the companies’ future conduct, the agency said.

Source: FTC