The U.S. Justice Department is investigating venture capital firm Andreessen Horowitz over whether its board representation at competing technology companies may violate federal antitrust law. The inquiry focuses on rules governing interlocking directorates, which restrict representatives of the same organization from serving on the boards of competing corporations.
Focus on Databricks and Fivetran
The investigation is examining Andreessen Horowitz's board representation at data technology companies Databricks and Fivetran. Andreessen Horowitz co-founder Ben Horowitz serves on Databricks' board, while partner Martin Casado serves on Fivetran's board.
The two companies have increasingly moved into overlapping areas of the data infrastructure market. Databricks has expanded its products across data ingestion and related services, bringing parts of its business closer to areas in which Fivetran operates.
Section 8 of the Clayton Act
The investigation centers on Section 8 of the Clayton Act, which prohibits certain interlocking directorates between competing corporations. The provision is intended to prevent potential conflicts that may arise when the same individual, or representatives of the same organization, hold board positions at competing companies.
The Justice Department has increased enforcement of Section 8 in recent years. Previous enforcement actions have resulted in directors resigning from corporate boards after regulators raised concerns about overlapping representation among competitors.
Broader Implications for Venture Capital
The Andreessen Horowitz investigation could have broader implications for venture capital firms that hold board seats across large portfolios of technology companies. Startups that initially operate in separate markets can become competitors as their products and strategies evolve, potentially creating new antitrust considerations for investors with board representation.
No wrongdoing by Andreessen Horowitz has been established, and the investigation remains ongoing. Its outcome could provide further clarity on how federal antitrust rules governing interlocking directorates apply to venture capital firms and their portfolio companies.
Source: Bloomberg