DOJ Antitrust Division Leadership States No Guidance Forthcoming On Criminal Monopolization Cases – Antitrust, EU Competition

In a significant departure from past enforcement practices, the
U.S. Department of Justice Antitrust Division (DOJ) recently
announced a new focus on prosecuting criminal
monopolization cases under Section 2 of the Sherman Act. DOJ has
not prosecuted a criminal monopolization case in nearly 50 years.
Nonetheless, Division Deputy Assistant Attorney General for
Criminal Enforcement Richard Powers has indicated that DOJ has no
intention of providing guidance to the business community related
to this new focus on criminal prosecutions for monopolization.
Businesses will therefore need to redouble efforts to comply with
Section 2, despite a “dearth of Section 2 case law
addressing modern markets,” as Assistant Attorney General
Jonathan Kanter, the DOJ’s top antitrust enforcer, put it in a
January speech to the New York State Bar Association.

Monopolization Under Section 2 of the Sherman Act

Section 2 of the Sherman Act outlaws monopolization. It
states:

The consequences for a company or individual facing an
indictment under Section 2 are severe. Criminal violations of the
Sherman Act are punishable by up to $100 million in fines for
companies and $1 million in fines for individuals, or twice the
gross gain or loss from the offense, whichever is greater.
Individuals may be sentenced to up to 10 years of imprisonment.

But despite the statute’s explicit criminal language and
significant penalties, in the modern era, the government has
brought only civil cases under Section 2, reserving criminal
enforcement for agreements in restraint of trade (e.g.,
price fixing and bid rigging) under Section 1.

DOJ’s Justice Manual, which provides guidance to the
department’s prosecutors, previously made this distinction
explicit, stating that:

But following announcements from top antitrust enforcers this
past spring, the Justice Manual was changed to read:

Assistant Attorney General Kanter first signaled the shift in
his January speech when he remarked that DOJ would use “every
tool available to promote competition.” Powers thereafter
announced the new policy at the American Bar Association (ABA)
White Collar Crime Institute in March. In response to a question at
that conference, Powers stated that DOJ is prepared to bring
criminal charges under Section 2 “if the facts and the law
lead us to the conclusion that a criminal charge based on a Section
2 violation is warranted.” Kanter echoed Powers’ statement at
the April Enforcers’ Summit, declaring “if the facts [and]
the law, the careful analysis of the department’s policies
guiding our use of prosecutorial discretion, warrant a criminal
Section 2 charge, the Division will not hesitate to enforce the
law.”

No Plans by DOJ to Issue Industry Guidance

This significant departure from past enforcement practice has
led to questions about whether DOJ will issue industry guidance on
what conduct DOJ will consider criminal.

At a June 7 webinar sponsored by the ABA Antitrust Section,
Powers made clear that DOJ has no plan to issue such guidance, as
it has in others areas of antitrust enforcement.²
Rather, Powers stated that the business community should look to
the text of Section 2 and the case law on criminal Section 2 cases,
despite the fact that the most recent such case law is nearly 50
years old. This echoes prior comments on June 3, 2022,
where Powers stated the “long history of Section 2
prosecutions and accompanying case law show us the way
forward.” These recent statements seem to conflict, however,
with Kanter’s remarks in January that “there is a dearth
of Section 2 case law addressing modern markets.”

The Sherman Act was passed in 1890. During the first
approximately 80 years of its existence, DOJ pursued criminal
Section 2 cases. In his June 7 comments, Powers pointed out that
there were more than 100 prosecutions during that time period. But
the last such prosecution was in 1977, when DOJ prosecuted two
airlines under Sections 1 and 2, under a theory that the airlines
conspired to create a monopoly and keep out competitors.

Since that 1977 Braniff Airways prosecution, DOJ has focused its
criminal enforcement entirely on per se antitrust
violations under Sherman Act Section 1 such as price fixing, bid
rigging and market allocation agreements, as reflected in the
now-revised section of the Justice Manual quoted above. At the same
time, it has prosecuted Section 2 cases solely as civil violations,
which yield treble damages but not fines or jail time.

In speeches and comments throughout the past spring, senior
antitrust enforcers have expressed a belief that competition
enforcement has gone “astray.” In
particular, Kanter has argued that historic
under-enforcement has led to less resiliency in the markets and an
erosion of consumer choice that threatens democracy itself. Echoing
these sentiments, Powers stated at the June 7 webinar that the lack
of Section 2 prosecutions since the 1970s means that
anticompetitive conduct by monopolists has “gone
unpunished” and that DOJ is determined to reverse this trend
and return to the days of vigorous criminal enforcement of Section
2.

Panelists at the June 7 webinar raised several questions about
criminal Section 2 cases. Among them were concerns about whether
the courts will rely on the criminal Section 2 case law from over
50 years ago, or instead the more recent body of civil Section 2
case law. Civil cases alleging monopolization require the
presentation of economic and other experts to prove the relevant
product and geographic markets. Conference attendees asked Powers
whether DOJ’s criminal Section 2 prosecutions will require the
same type of proof. If so, the attendees pointed out, those
prosecutions will be a lot more difficult than DOJ’s
price-fixing, bid-rigging and market-division cases, where
DOJ’s burden is to simply prove the existence of an illegal
agreement, because such violations are per se
unlawful.

In addition, DOJ’s record on Section 2 civil enforcement is
mixed. So why is DOJ now planning to revive criminal Section 2
cases-with the higher “beyond a reasonable doubt” burden
of proof-when it has had difficulty even proving civil Section 2
violations?

Powers answered these questions by stating that he believed the
courts would apply the older criminal cases and not the more recent
civil cases, and thus DOJ will not be required to present economic
testimony or prove relevant markets. As to why DOJ is pushing into
criminal Section 2 cases despite its mixed record in civil cases,
Powers simply stated that DOJ has an obligation to enforce the laws
that Congress passed.

Lack of Industry Guidance Runs Counter to DOJ’s Policy of
Transparency

In addition to the antitrust enforcement guidance documents DOJ
has issued in other areas (see footnote 2), DOJ has issued guidance regarding
its antitrust leniency program-whereby companies that self-report
cartel activity can avoid prosecution-in the form of a frequently
asked questions (FAQ) page on its website. In explaining recent
revisions to the FAQs at the April Spring Enforcers Summit, Kanter stated the
following:

In light of this dramatic shift in criminal Section 2
enforcement policy, and with no recent enforcement history to draw
from, it is difficult to determine the “transparent and
predictable criteria” DOJ will use in determining what conduct
will be subject to criminal prosecution for monopolization. It is
one thing for companies and executives to be unclear on what
conduct will subject them to a civil enforcement action and
potential damages, but quite another to not know what conduct could
lead to a corporate indictment, criminal fines and jail terms for
executives. In short, the stakes are higher now than they have been
in decades.

And as several of the panelists at the June 7 ABA webinar
pointed out, guidance would be helpful not only to the business
community, but also to the courts. An example is the DOJ/FTC
Horizontal Merger Guidelines-while they do not have the force of
law, courts often rely upon them in deciding whether a proposed
merger is likely to lead to a substantial lessening of competition
in violation of Section 7 of the Clayton Act. A guidance document
regarding criminal Section 2 enforcement could have a similar
benefit to courts that will be grappling with such prosecutions
with no recent case law to guide their analysis.

Conclusion

DOJ is clearly signaling that it is moving forward on bringing
criminal Section 2 cases. Such investigations are time-consuming,
so we should not be surprised if it takes many months or even years
before the first prosecution. Powers’ advice to companies at
the June 7 webinar-not to wait for DOJ to bring cases, but instead
to invest in robust and effective compliance programs now-is worth
heeding.

DOJ is likely to hear pleas from some in the antitrust community
for industry guidance on the new policy. Whether DOJ heeds these
calls remains to be seen. Without a guidance document from DOJ,
businesses and their executives that could potentially be subject
to a criminal Section 2 prosecution will need to take extra
precautions and avoid conduct that could be considered predatory or
exclusionary toward a competitor. And whether or not guidance is
issued, companies and individuals should consult with experienced
antitrust counsel to help them navigate this rapidly shifting
terrain.

Footnotes

1. Justice Manual, Section 7-2.200 (emphasis
added).

2. Examples of other areas of antitrust enforcement where
DOJ has issued guidance include the FTC/DOJ Statements of Antitrust
Enforcement Policy in Health Care (1996); the FTC/DOJ Horizontal
Merger Guidelines (last revised in 1997); the FTC/DOJ Antitrust
Guidelines on Competitor Collaborations (2000); the FTC/DOJ
Antitrust Guidance for Human Resources Professionals (2016); the
FTC/DOJ Antitrust Guidelines for the Licensing of Intellectual
Property (2017); and the FTC/DOJ Vertical Merger Guidelines (2020,
withdrawn by the FTC in 2021).

For More Information

If you have any questions about this Alert, please
contact Christopher H. Casey, Melissa S. Geller, Sean P. McConnell, Brian H. Pandya, any of the attorneys in our Antitrust and Competition Group or the
attorney in the firm with whom you are regularly in contact.

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