In brief
The Federal Trade Commission (FTC) has issued a consent order resolving interlocking directorate concerns spurred by a stock purchase agreement between firearm companies Beretta Holding S.A. (“Beretta Holding”) and Sturm, Ruger & Co., Inc. (“Ruger”). The stock purchase agreement permits Beretta Holding to increase its ownership stake from 10% to 25% and nominate two “independent” directors to Ruger’s board. The FTC alleged that the stock purchase agreement did not sufficiently ensure the nominees’ independence and could allow an agent of Beretta Holding to serve on the board of Ruger, as a direct competitor of Beretta Holding, in violation of Section 8 of the Clayton Act and Section 5 of the FTC Act. The order prohibits Beretta Holding from appointing or nominating anyone to Ruger’s board unless the person is independent of Beretta Holding. The matter underscores the need to assess Section 8 risk when structuring minority investments and related board nomination or governance rights.
Key takeaways
- Section 8 risk is not limited to mergers or acquisitions. Minority investments in competitors can attract scrutiny if the investor is granted board nomination, observer, or governance rights.
- The FTC continues to interpret competition broadly for Section 8 purposes. The US antitrust authorities continue to take a broad approach to defining competition, such that even limited product overlaps can trigger Section 8 scrutiny.
- Board nomination rights granted to competitors require careful structuring. Board rights should clearly establish a director’s “independence” by requiring that nominees not have any material familial, personal, financial, contractual, professional, employment, or other relationship with the competitor that could reasonably impair their objective judgment. Independence requirements should not be waivable in a manner that permits the competitor to nominate its own personnel or others who do not satisfy those standards.
In more detail
The Beretta-Ruger proxy fight and cooperation agreement
In late 2025, Ruger disclosed in an Securities and Exchange Commission (SEC) filing that Beretta Holding “stealthily” obtained a 10% accumulation of shares in Ruger. Beretta Holding subsequently became Ruger’s largest shareholder and began urging for changes in governance and strategic direction. This led to a public dispute between the parties on governance while Beretta Holding continued to increase its equity position in Ruger.
In February 2026, the parties met and Beretta Holding indicated that it would continue to increase its ownership position unless Ruger agreed to certain terms. Beretta Holding’s demands, among other things, included: ownership of up to 25% of Ruger, board representation, including the appointment of a Beretta executive to Ruger’s board, and voting rights. Ruger argued that it could not meet Beretta Holding’s demands due to increasing antitrust risks under Section 8 of the Clayton Act.
That same month, Beretta Holding launched a proxy contest by nominating four directors for election to Ruger’s board. Ruger responded with an SEC filing titled “Ruger Sets the Record Straight on Competitor Beretta’s Attempt to Seize Control of Ruger,” accusing Beretta Holding of seeking effective control through increased investment in Ruger.
In May 2026, the parties reached a settlement to avoid a shareholder vote in the proxy contest. Under the settlement agreement, for Beretta Holding to withdraw its proxy fight and director nominations, the parties agreed:
- Beretta Holding could increase its ownership stake to 25%.
- Beretta Holding would implement a three-year standstill.
- Beretta Holding would generally vote with management recommendations.
- Beretta Holding could nominate up to two independent directors.
- Both parties would consider collaborations in manufacturing, sourcing, and distribution.
The FTC’s challenge to the board nomination rights
In September 2026, the FTC announced a consent order that “settles allegations that Beretta and Ruger’s proposed stock purchase deal would create an illegal interlocking directorate arrangement in violation of Section 8 of the Clayton Act, which generally prohibits directors and officers from serving simultaneously on the boards of competitors.” The FTC’s complaint highlights the following deficiencies within the stock purchase agreement between Beretta Holding and Ruger:
- The agreement “lack[ed] fulsome requirements that Ruger Directors nominated by [Beretta Holding] are independent of [Beretta]” in compliance with the FTC’s Section 8 requirements. Namely, a director cannot have a “material relationship” with Beretta Holding (defining a “material relationship” as any familial, personal, financial, contractual, professional, employment, or any other relationship that would reasonably be expected to impair the objectivity of the Independent Director’s judgment when participating as a director of Ruger); and
- The agreement “permit[ed] the waiver of certain independence requirements so that if waived [Beretta Holding] could nominate a member of Beretta or other individuals who would not meet independence requirements.”
The FTC’s continued focus on Section 8 enforcement
The FTC’s challenge reflects the continued interest in policing potential interlocking directorates and governance arrangements involving competitors. The matter demonstrates that Section 8 scrutiny can be triggered by publicly available information, including SEC filings and corporate disclosures. The FTC’s willingness to challenge board nomination rights associated with a minority investment also highlights the agencies’ broader focus on arrangements that may provide competitors with opportunities to influence business decisions or access competitively sensitive information. Companies should therefore carefully consider Section 8 implications when structuring investments, governance rights, and board-related arrangements involving competitors.
Recommendations
- Conduct a Section 8 assessment before granting board, observer, or governance rights to an investor. Section 8 enforcement generally involves a broad view of competitive overlaps, which warrants a thorough analysis of the nature and extent of any competitive overlap between the parties’ respective product offerings.
- Clearly outline that board nominees are independent and do not have any material relationship with a competitor, taking into account that simply describing the board roles as “independent” is not sufficient if the investor retains meaningful influence over their service, so agreements should ensure that board nominees do not have any material relationship with the competitor that could reasonably impair their objective judgment and those independence requirements should not be waivable.
- Implement defined safeguards regarding access to competitively sensitive information for board arrangements. Section 8 risk can extend to other risks under antitrust laws so it is essential that companies continuously monitor and ensure processes are in place to mitigate potential risk, including regular reviews of competitive overlaps, legal monitoring of board agendas and meeting materials, and enforcement of director recusals and meeting material redactions where appropriate.
- Continuously monitor and review existing arrangements. Competition is dynamic, and new competitive offerings can arise through acquisitions or organic expansion. As such, companies should conduct regular reviews and assessments of shifting competitive dynamics to determine whether any Section 8 issues may be present.