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DOJ Brings Criminal Monopolization Case for Invitation to Collude: Can an Anticompetitive Proposal, Even If Rejected, Result in Criminal Liability?

Antitrust and Competition Law Alert® | November 2, 2022

Authors: Bernard (Barry) A. Nigro Jr., Nathaniel L. Asker, and Renee E. Turner

Earlier this year, the Department of Justice’s Antitrust Division stated that it would seek to criminally prosecute monopolization cases,[1]a significant change from the DOJ’s recent practice of pursuing such cases solely as civil matters. This week, the DOJ made good on that promise, announcing its first criminal monopolization case in over 40 years.[2] The case is significant in that it shows that the DOJ will prosecute companies and individuals that merely take anticompetitive steps to attempt to obtain monopoly power, such as inviting competitors to collude, even if those actions are ultimately unsuccessful. Firms with significant market positions or few competitors in particular product or geographic segments should take note and confer with counsel before implementing policies that could potentially be viewed by the government as exclusionary, predatory or otherwise anticompetitive.

The DOJ announced this week that the owner and president of a Montana-based paving and asphalt company pleaded guilty to a one-count criminal information charging him with attempted monopolization of the highway crack-sealing market in Montana and Wyoming in violation of Section 2 of the Sherman Act.[3] In particular, the defendant proposed to his main (and most times only) competitor, the owner of another paving and asphalt company, that the two firms enter into a written market-allocation agreement that would eliminate competition between the companies for publicly-funded highway crack-sealing projects in Montana, Wyoming, South Dakota, and Nebraska.[4] The scheme was uncovered after the competitor refused the proposal and reported the anticompetitive conduct to an agency of the US Department of Transportation.[5]

This case, filed in September 2022, follows only months after the DOJ announced its plan to resume criminal prosecutions under Section 2. For the past forty years, the Division has criminally prosecuted only per se violations of Section 1 of the Sherman Act, such as bid rigging, price fixing, and market allocation conspiracies. However, as Attorney General Jonathan Kanter noted this past April, “[s]ince the 1970s, Section 2 has been a felony just like Section 1.”[6] In fact, the DOJ had historically pursued dozens of Section 2 criminal prosecutions,[7] including the seminal case of American Tobacco Co. v. United States, 328 U.S. 781 (1946), in which the Supreme Court upheld the convictions of several tobacco companies and their executives for monopolizing, attempting to monopolize and conspiring to monopolize the tobacco industry. In the opinion affirming the convictions, the Supreme Court held that “the crime of monopolizing” under Section 2 occurs when a party “acquire[s] or maintain[s] the power to exclude competitors from any part of the trade or commerce among the several states” and has the ability and “intent and purpose to exercise that power.”[8] The Supreme Court explained that no formal agreement is required to constitute a criminal violation of Section 2, and “[n]either proof of exertion of the power to exclude nor proof of actual exclusion of existing or potential competitors is essential to sustain a charge of criminal monopolization under the Sherman Act.”[9]

The DOJ’s most recent criminal monopolization case builds on the principles set forth in the American Tobacco case that had more recently laid dormant. In addition, the DOJ’s handling of the Montana highway case also represents an aggressive approach to prosecuting cases involving invitations to collude. Historically, invitations to collude have been prosecuted under Section 5 of the Federal Trade Commission Act—a purely civil statute. The DOJ’s prosecution of the Montana case indicates, however, that invitations to collude may now also be prosecuted criminally under Section 2, risking severe penalties. Invitations to collude may also be charged as fraud under the federal wire and mail fraud statutes, depending on the circumstances of the case. The DOJ’s aggressive approach in this case puts a premium on companies having a robust antitrust compliance program, which the DOJ has clearly stated it will consider when making charging decisions in criminal antitrust cases.

For corporations, a criminal conviction under Section 2 carries a maximum penalty of a $100 million fine or double the gain or loss attributable to the conspiracy.[10] For an individual, a criminal conviction under Section 2 carries a maximum penalty of 10 years of imprisonment, a $1 million fine, and a three-year term of supervised release.[11] In addition, government contractors may also be subject to suspension or debarment by state or federal agencies based upon a Section 2 conviction—a consequence Deputy Attorney General Lisa O. Monaco discussed when announcing updates to the DOJ’s corporate crime enforcement policy.[12]

Finally, recent public statements and policy updates show how Section 2 charges fit into the Division’s changing enforcement regime. For criminal enforcement, updates made earlier this year to the Justice Manual,[13] a primer for law enforcement officials (e.g., FBI agents),[14] and the Leniency Policy Frequently Asked Questions,[15] all include discussions of Section 2 criminal enforcement. More broadly, AAG Kanter has made reinvigorating Section 2 enforcement a key component of his agenda, and prosecuting criminal monopolization offenses is fundamental to that initiative.[16] Going forward, companies that may have significant market positions or relatively few competitors in particular product or geographic categories should assess whether their existing compliance programs adequately account for renewed Section 2 enforcement.[17]

 


[1] Remarks of then-Deputy Assistant Attorney General Richard Powers at American Bar Association White Collar Conference (Mar. 2, 2022). For a detailed discussion, see our client alert, DOJ Signals Readiness to Criminally Prosecute Monopolization Violations.

[2]   See Press Release, DOJ, Construction Company President Admits to Violating Section 2 of the Sherman Act, (Oct. 31, 2022).

[3]   See id.: see also 15 U.S.C. § 2 (providing under Section 2 of the Sherman Act that that it is a felony to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations”).

[4]   See Information at ¶¶ 6, 9, 11, United States v. Nathan Nephi Zito, CR 22-113-BLG-SPW (D. Mont. Sept. 19, 2022).

[5]   See id. at ¶¶ 8, 12.

[6]   Speech, DOJ, Assistant Attorney General Jonathan Kanter Delivers Opening Remarks at 2022 Spring Enforcers Summit, (Apr. 4, 2022).

[7]   See Joseph James Matelis II and Daniel Richardson, Criminal Enforcement of Section 2 of the Sherman Act, (Sept. 9, 2022).

[8]   American Tobacco Co. v. United States, 328 U.S. 781, 809 (1946).

[9]   Id. at 809-10.  

[10] See 15 U.S.C. § 2.

[11] See id.

[12] See Speech, DOJ, Deputy Attorney General Lisa O. Monaco Delivers Remarks on Corporate Criminal Enforcement, (Sept. 15, 2022).

[13] See Justice Manual, Title 7: Antitrust, 7-2.200 - The Sherman Act, (Apr. 2022).

[14] See U.S. Dep’t of Justice, Antitrust Div., An Antitrust Primer for Federal Law Enforcement Officials 7, (Apr. 2022).

[15] See U.S. Dep’t of Justice, Antitrust Div., Frequently Asked Questions about the Antitrust Division’s Leniency Program 5, (Apr. 4, 2022).

[16] Speech, DOJ, Assistant Attorney General Jonathan Kanter Delivers Keynote at the University of Chicago Stigler Center, (Apr. 21, 2022).

[17] Recent DOJ policy updates emphasize the importance of corporate compliance programs. For a detailed discussion on the DOJ’s guidance on corporate compliance programs, see our client alert, Having an Effective Antitrust Compliance Program Is More Important Than Ever (Dec. 30, 2020).


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