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In a significant departure from past enforcement practices, the
Section 2 of the Sherman Act outlaws monopolization. It
Every person who shall monopolize, or attempt to monopolize, or
The consequences for a company or individual facing an
But despite the statute’s explicit criminal language and
DOJ’s Justice Manual, which provides guidance to the
While a violation of [the Sherman Act] may be prosecuted as a
But following announcements from top antitrust enforcers this
While a violation of [the Sherman Act] may be prosecuted as a
Assistant Attorney General Kanter first signaled the shift in
This significant departure from past enforcement practice has
At a June 7 webinar sponsored by the ABA Antitrust Section,
The Sherman Act was passed in 1890. During the first
Since that 1977 Braniff Airways prosecution, DOJ has focused its
In speeches and comments throughout the past spring, senior
Panelists at the June 7 webinar raised several questions about
In addition, DOJ’s record on Section 2 civil enforcement is
Powers answered these questions by stating that he believed the
In addition to the antitrust enforcement guidance documents DOJ
Just as important as the changes to the policy is the
I want to emphasize that we are focused on making our policies
In light of this dramatic shift in criminal Section 2
And as several of the panelists at the June 7 ABA webinar
DOJ is clearly signaling that it is moving forward on bringing
DOJ is likely to hear pleas from some in the antitrust community
Footnotes<\/strong><\/p>\n 1. Justice Manual, Section 7-2.200 (emphasis
2. Examples of other areas of antitrust enforcement where
If you have any questions about this Alert<\/em>, please
Disclaimer:<\/em><\/strong> This Alert has been
\nU.S. Department of Justice Antitrust Division (DOJ) recently
\nannounced a new focus<\/a> on prosecuting criminal
\nmonopolization cases under Section 2 of the Sherman Act. DOJ has
\nnot prosecuted a criminal monopolization case in nearly 50 years.
\nNonetheless, Division Deputy Assistant Attorney General for
\nCriminal Enforcement Richard Powers has indicated that DOJ has no
\nintention of providing guidance to the business community related
\nto this new focus on criminal prosecutions for monopolization.
\nBusinesses will therefore need to redouble efforts to comply with
\nSection 2, despite a “dearth of Section 2 case law
\naddressing modern markets<\/a>,” as Assistant Attorney General
\nJonathan Kanter, the DOJ’s top antitrust enforcer, put it in a
\nJanuary speech to the New York State Bar Association.<\/p>\nMonopolization Under Section 2 of the Sherman Act<\/h3>\n
\nstates:<\/p>\n
\ncombine or conspire with any other person or persons, to monopolize
\nany part of the trade or commerce among the several States, or with
\nforeign nations, shall be deemed guilty of a felony.<\/p>\n<\/div>\n
\nindictment under Section 2 are severe. Criminal violations of the
\nSherman Act are punishable by up to $100 million in fines for
\ncompanies and $1 million in fines for individuals, or twice the
\ngross gain or loss from the offense, whichever is greater.
\nIndividuals may be sentenced to up to 10 years of imprisonment.<\/p>\n
\nsignificant penalties, in the modern era, the government has
\nbrought only civil cases under Section 2, reserving criminal
\nenforcement for agreements in restraint of trade (e.g.<\/em>,
\nprice fixing and bid rigging) under Section 1.<\/p>\n
\ndepartment’s prosecutors, previously made this distinction
\nexplicit, stating that:<\/p>\n
\nfelony, in general the Department reserves criminal prosecution for
\n“per se” unlawful restraints of trade among competitors,
\ne.g.<\/em>, price fixing, bid rigging, and market allocation
\nagreements.<\/p>\n<\/div>\n
\npast spring, the Justice Manual was changed to read:<\/p>\n
\nfelony, in general, the Department reserves criminal prosecution
\nunder Section 1<\/em> for “per se” unlawful restraints
\nof trade among competitors, e.g., price fixing, bid rigging, and
\nmarket allocation agreements. It may also bring, and has
\nbrought, criminal charges under Section 2<\/em>.<\/p>\n<\/div>\n
\nhis January speech when he remarked that DOJ would use “every
\ntool available to promote competition.” Powers thereafter
\nannounced the new policy at the American Bar Association (ABA)
\nWhite Collar Crime Institute in March. In response to a question at
\nthat conference, Powers stated that DOJ is prepared to bring
\ncriminal charges under Section 2 “if the facts and the law
\nlead us to the conclusion that a criminal charge based on a Section
\n2 violation is warranted.” Kanter echoed Powers’ statement<\/a> at
\nthe April Enforcers’ Summit, declaring “if the facts [and]
\nthe law, the careful analysis of the department’s policies
\nguiding our use of prosecutorial discretion, warrant a criminal
\nSection 2 charge, the Division will not hesitate to enforce the
\nlaw.”<\/p>\nNo Plans by DOJ to Issue Industry Guidance<\/h3>\n
\nled to questions about whether DOJ will issue industry guidance on
\nwhat conduct DOJ will consider criminal.<\/p>\n
\nPowers made clear that DOJ has no plan to issue such guidance, as
\nit has in others areas of antitrust enforcement.2<\/sup>
\nRather, Powers stated that the business community should look to
\nthe text of Section 2 and the case law on criminal Section 2 cases,
\ndespite the fact that the most recent such case law is nearly 50
\nyears old. This echoes prior comments<\/a> on June 3, 2022,
\nwhere Powers stated the “long history of Section 2
\nprosecutions and accompanying case law show us the way
\nforward.” These recent statements seem to conflict, however,
\nwith Kanter’s remarks in January that “there is a dearth
\nof Section 2 case law addressing modern markets.”<\/p>\n
\napproximately 80 years of its existence, DOJ pursued criminal
\nSection 2 cases. In his June 7 comments, Powers pointed out that
\nthere were more than 100 prosecutions during that time period. But
\nthe last such prosecution was in 1977, when DOJ prosecuted two
\nairlines under Sections 1 and 2, under a theory that the airlines
\nconspired to create a monopoly and keep out competitors.<\/p>\n
\ncriminal enforcement entirely on per se<\/em> antitrust
\nviolations under Sherman Act Section 1 such as price fixing, bid
\nrigging and market allocation agreements, as reflected in the
\nnow-revised section of the Justice Manual quoted above. At the same
\ntime, it has prosecuted Section 2 cases solely as civil violations,
\nwhich yield treble damages but not fines or jail time.<\/p>\n
\nantitrust enforcers have expressed a belief that competition
\nenforcement has gone “astray<\/a>.” In
\nparticular, Kanter has argued<\/a> that historic
\nunder-enforcement has led to less resiliency in the markets and an
\nerosion of consumer choice that threatens democracy itself. Echoing
\nthese sentiments, Powers stated at the June 7 webinar that the lack
\nof Section 2 prosecutions since the 1970s means that
\nanticompetitive conduct by monopolists has “gone
\nunpunished” and that DOJ is determined to reverse this trend
\nand return to the days of vigorous criminal enforcement of Section
\n2.<\/p>\n
\ncriminal Section 2 cases. Among them were concerns about whether
\nthe courts will rely on the criminal Section 2 case law from over
\n50 years ago, or instead the more recent body of civil Section 2
\ncase law. Civil cases alleging monopolization require the
\npresentation of economic and other experts to prove the relevant
\nproduct and geographic markets. Conference attendees asked Powers
\nwhether DOJ’s criminal Section 2 prosecutions will require the
\nsame type of proof. If so, the attendees pointed out, those
\nprosecutions will be a lot more difficult than DOJ’s
\nprice-fixing, bid-rigging and market-division cases, where
\nDOJ’s burden is to simply prove the existence of an illegal
\nagreement, because such violations are per se<\/em>
\nunlawful.<\/p>\n
\nmixed. So why is DOJ now planning to revive criminal Section 2
\ncases-with the higher “beyond a reasonable doubt” burden
\nof proof-when it has had difficulty even proving civil Section 2
\nviolations?<\/p>\n
\ncourts would apply the older criminal cases and not the more recent
\ncivil cases, and thus DOJ will not be required to present economic
\ntestimony or prove relevant markets. As to why DOJ is pushing into
\ncriminal Section 2 cases despite its mixed record in civil cases,
\nPowers simply stated that DOJ has an obligation to enforce the laws
\nthat Congress passed.<\/p>\nLack of Industry Guidance Runs Counter to DOJ’s Policy of
\nTransparency<\/h3>\n
\nhas issued in other areas (see footnote 2<\/a>), DOJ has issued guidance regarding
\nits antitrust leniency program-whereby companies that self-report
\ncartel activity can avoid prosecution-in the form of a frequently
\nasked questions (FAQ) page on its website. In explaining recent
\nrevisions to the FAQs at the April Spring Enforcers Summit, Kanter stated the
\nfollowing<\/a>:<\/p>\n
\ndivision’s commitment to making that policy transparent,
\npredictable, and accessible to the public. .<\/p>\n
\nintelligible to all: outside counsel, in-house counsel, and
\nbusinesspeople in all sectors of the economy and at all levels of
\nsophistication. There are no unwritten rules to enforcement at the
\nAntitrust Division. We make our enforcement decisions based on
\ntransparent and predictable criteria.<\/p>\n<\/div>\n
\nenforcement policy, and with no recent enforcement history to draw
\nfrom, it is difficult to determine the “transparent and
\npredictable criteria” DOJ will use in determining what conduct
\nwill be subject to criminal prosecution for monopolization. It is
\none thing for companies and executives to be unclear on what
\nconduct will subject them to a civil enforcement action and
\npotential damages, but quite another to not know what conduct could
\nlead to a corporate indictment, criminal fines and jail terms for
\nexecutives. In short, the stakes are higher now than they have been
\nin decades.<\/p>\n
\npointed out, guidance would be helpful not only to the business
\ncommunity, but also to the courts. An example is the DOJ\/FTC
\nHorizontal Merger Guidelines-while they do not have the force of
\nlaw, courts often rely upon them in deciding whether a proposed
\nmerger is likely to lead to a substantial lessening of competition
\nin violation of Section 7 of the Clayton Act. A guidance document
\nregarding criminal Section 2 enforcement could have a similar
\nbenefit to courts that will be grappling with such prosecutions
\nwith no recent case law to guide their analysis.<\/p>\nConclusion<\/h3>\n
\ncriminal Section 2 cases. Such investigations are time-consuming,
\nso we should not be surprised if it takes many months or even years
\nbefore the first prosecution. Powers’ advice to companies at
\nthe June 7 webinar-not to wait for DOJ to bring cases, but instead
\nto invest in robust and effective compliance programs now-is worth
\nheeding.<\/p>\n
\nfor industry guidance on the new policy. Whether DOJ heeds these
\ncalls remains to be seen. Without a guidance document from DOJ,
\nbusinesses and their executives that could potentially be subject
\nto a criminal Section 2 prosecution will need to take extra
\nprecautions and avoid conduct that could be considered predatory or
\nexclusionary toward a competitor. And whether or not guidance is
\nissued, companies and individuals should consult with experienced
\nantitrust counsel to help them navigate this rapidly shifting
\nterrain.<\/p>\n
\nadded).<\/small><\/p>\n
\nDOJ has issued guidance include the FTC\/DOJ Statements of Antitrust
\nEnforcement Policy in Health Care (1996); the FTC\/DOJ Horizontal
\nMerger Guidelines (last revised in 1997); the FTC\/DOJ Antitrust
\nGuidelines on Competitor Collaborations (2000); the FTC\/DOJ
\nAntitrust Guidance for Human Resources Professionals (2016); the
\nFTC\/DOJ Antitrust Guidelines for the Licensing of Intellectual
\nProperty (2017); and the FTC\/DOJ Vertical Merger Guidelines (2020,
\nwithdrawn by the FTC in 2021).<\/small><\/p>\nFor More Information<\/h3>\n
\ncontact Christopher H. Casey<\/a>, Melissa S. Geller<\/a>, Sean P. McConnell<\/a>, Brian H. Pandya<\/a>, any of the attorneys<\/a> in our Antitrust and Competition Group<\/a> or the
\nattorney in the firm with whom you are regularly in contact.<\/p>\n
\nprepared and published for informational purposes only and is not
\noffered, nor should be construed, as legal advice. For more
\ninformation, please see the firm’s<\/em>
\nfull disclaimer<\/a>.<\/em><\/p>\n<\/div>\n