FTC Takes Action to Prevent Anticompetitive Arrangement in Beretta, Ruger Deal

The Federal Trade Commission took action to resolve antitrust concerns arising from a stock purchase agreement between two of the largest firearm manufacturers, Beretta Holding S.A. (Beretta) and Sturm, Ruger & Co. Inc. (Ruger), by accepting a proposed consent order that prevents anticompetitive entanglements between the two companies.

Under the terms of the FTC’s proposed consent order, Beretta, a subsidiary of Upifra S.A., will be prohibited from appointing or nominating anyone to serve on Ruger’s board of directors unless that person is independent of Beretta. 

The order 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 order marks the FTC’s latest enforcement action to crack down on companies sharing directors. Interlocking directorates can create opportunities for anticompetitive coordination between competitors, including through the sharing of competitively sensitive information. 

“Competition thrives best when the temptation to collude and share sensitive information isn’t on the table,” said Taylor C. Hoogendoorn, Deputy Director of the FTC’s Bureau of Competition. “Competition between gunmakers helps ensure that Americans can exercise their Second Amendment rights. The FTC’s order aims to preserve the independence of a significant American gunmaker and removes the risk of anticompetitive coordination between two of the largest firearm manufacturers by taking decisive action to prevent anticompetitive interlocking directorates from forming. This latest enforcement action serves as a warning that the FTC will take action to prevent anticompetitive board of director overlaps between competitors.”

Under their proposed deal, Beretta is seeking to acquire Ruger stock to increase Beretta’s investment in Ruger to up to 25% of Ruger’s outstanding shares. The proposed deal would allow Beretta to appoint two members of Ruger’s board of directors, which the FTC alleges would create an illegal interlocking directorate arrangement. 

The FTC’s proposed consent order, which resolves the Commission’s competition concerns, prohibits Beretta from appointing, nominating or otherwise causing any person to be appointed or nominated to serve on Ruger’s board of directors unless such person is independent of Beretta. 

The proposed consent order also requires, among other provisions, that Beretta: 

• Provide advance written notice to the Commission at least 15 days before appointing, designating, nominating, electing or otherwise causing any person to become a member of the board of directors of Ruger; and
• Not hire or enter into any financial or other relationship with any independent director nominated by Beretta and appointed to the board of directors of Ruger that would: (1) involve violating the independent director’s fiduciary duty or (2) involve the exchange of nonpublic information received about Ruger to Beretta, until such independent director has ceased serving on the board of directors of Ruger for a period of one year.

The Commission vote to issue the complaint and accept the consent agreement for public comment was 2-0. 

The public will have 30 days to submit comments on the proposed consent agreement package. Instructions for filing comments appear on the docket. Once processed, they will be posted on Regulations.gov.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions.