As reported by the US Department Of Justice, on December 18th, the Justice Department revealed a significant shift in the governance of Epic Games Inc. (Epic) as two directors, appointed by Tencent Holdings Ltd. (Tencent), stepped down from the Epic board. This decision came in response to concerns raised by the Antitrust Division regarding potential violations of Section 8 of the Clayton Act, which prohibits overlapping board memberships between competing companies. Tencent, a minority stakeholder in Epic, has become embroiled in this situation due to its status as the parent company of Riot Games Inc., a direct competitor to Epic.
In a strategic move, Tencent has also opted to amend its shareholder agreement with Epic, relinquishing its unilateral right to appoint directors or observers to the Epic board in the future. This development represents the latest in a series of enforcement actions by the Antitrust Division aimed at dismantling or preventing interlocking directorates, with the division having previously addressed similar issues involving at least two dozen companies.
“Scrutiny around interlocking directorates continues to be an enforcement priority for the Antitrust Division,” stated Deputy Director of Civil Enforcement Miriam R. Vishio from the Justice Department’s Antitrust Division. “Due to the hard work of our tremendous staff, our increased enforcement around Section 8 over the last few years has achieved substantial results and become part of our fabric.”
Section 8 of the Clayton Act is a strict legal provision that designates certain interlocking directorates as a per se violation of antitrust laws, forbidding directors and corporate officers from holding simultaneous positions on the boards of competing firms, though limited exceptions do exist. Notably, no individual or company under investigation has acknowledged any wrongdoing, and the division remains vigilant, monitoring not just the gaming industry but others for possible breaches of antitrust regulations, including Section 8.
Tencent stands as one of the largest multimedia and video game conglomerates globally. Incorporated in the Cayman Islands, with its headquarters located in Shenzhen, China, Tencent not only owns Riot Games but also holds a minority share in Epic and has made equity investments in various other gaming and media companies.
Epic Games, headquartered in Cary, North Carolina, is recognized as a leading independently owned video game and software developer and publisher. Riot Games, an American entity headquartered in Los Angeles, is well-known for its role as a game developer, publisher, and organizer of esports tournaments.
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