DOJ Antitrust Division Signals Impending Criminal Monopolization Cases

WHAT HAPPENED

On March 2, 2022, the US Department of Justice (DOJ) Antitrust Division Deputy Assistant Attorney General Richard Powers revealed that the DOJ intends to investigate and pursue alleged criminal violations against individuals or companies who violate Section 2 of the Sherman Act. For more than 40 years, criminal enforcement of antitrust laws have focused nearly exclusively on hardcore, per se anticompetitive agreements (i.e., price fixing, output restriction or market allocation) among two or more horizontal competitors. Section 2 of the Sherman Act, on the other hand, primarily focuses on conduct by one firm or company with significant market power and, typically, is a means to bring a civil case for monopolization or anticompetitive use of the existing monopoly power.

LEGAL BACKGROUND

This marks a radical departure from longstanding DOJ antitrust enforcement of monopolization claims. In general, the DOJ has refrained from Section 2 criminal prosecutions.

Section 2 makes it illegal to acquire or maintain monopoly power through anticompetitive means and focuses primarily on unilateral or one-sided anticompetitive behavior. Courts (including the Supreme Court of the United States) generally have analyzed Section 2 cases under the “rule of reason,” which weighs both procompetitive and anticompetitive effects of conduct.

Because the rule of reason imposes a balancing test that is akin to the preponderance of evidence standard, the higher criminal burden of proof could clash with existing jurisprudence and agency guidelines on Section 2 enforcement standards. In contrast, Section 1 of the Sherman Act prohibits anticompetitive agreements—where courts have automatically deemed certain types of agreements, such as agreements to fix prices, allocate markets or rig bids—as illegal “per se,” because they (through ample judicial and economic experience) have been deemed to produce little or no procompetitive effects.

DOJ’s HISTORY WITH SECTION 2

In the last 50 years, the vast majority of criminal cases that the Antitrust Division has brought involved per se illegal agreements under Section 1. The Antitrust Division appears to have initiated very few criminal Section 2 cases during that same period with mixed success. For instance, in United States v. Cuisinarts, the DOJ prosecuted the defendant under Section 2 for per se resale price maintenance agreements.[1] The defendant agreed to pay a $250,000 fine for a plea of nolo contendere. However, today, the per se criminal treatment of resale price maintenance is in serious doubt as the long line of Supreme Court decisions from GTE Sylvania to Leegin have firmly placed most vertical resale price restraints for Section 2 under the rule of reason standard.

WHAT’S NEXT

In 2016, the Federal Trade Commission and the DOJ released a joint publication called the “Antitrust Guidance for Human Resource Professionals” when announcing expanded criminal enforcement in labor markets for wage fixing and no-poaching agreements.[2] We expect the DOJ to release similar guidance with respect to criminal prosecution of Section 2 claims.

The policy shift raises a host of additional questions, such as what types of conduct under Section 2 the Division intends to focus on (i.e., conspiracy to monopolize), how the Division intends to prove elements like relevant market and criminal intent, and whether companies will be able to rely on any reasonably well-defined “safe harbors.” Without clarity around these issues, DOJ’s new approach may impair future competition and innovation- the very things that Section 2 was intended to encourage. In short, the lack of clear instructions for avoiding criminal exposure and ambiguous enforcement guidance could dampen significantly competitive conduct among firms and potentially increase the likelihood of companies facing criminal investigations that later choose to accept plea deals or civil settlements that may not be warranted by underlying facts.

This is only the latest wave of scrutiny in the DOJ’s more aggressive approach to antitrust issues. Powers’ remarks affirm an earlier promise made by DOJ Antitrust Division Assistant Attorney General Jonathan Kanter in January 2022 that criminal prosecutions of Section 2 cases remain a top priority for the Antitrust Division.[3] The announcement is consistent with calls from members of US Congress and other policymakers for more stringent (and potentially criminal) enforcement of monopolization claims, particularly for large tech corporations. Senator Elizabeth Warren (D-MA) repeatedly has urged the DOJ to deconcentrate companies and target corporate executives, publishing her most recent letter to the DOJ on February 8, 2022.[4]

McDermott Will & Emery lawyers continue to closely monitor DOJ enforcement of Section 2 claims to provide guidance amidst a radically changing antitrust environment.


[1] United States v. Cuisinarts, Inc., No. H80-559, 1981 WL 2062, at *1 (D. Conn. Mar. 27, 1981).

[2] Department of Justice press release, Justice Department and Federal Trade Commission Release Guidance for Human Resource Professionals on How Antitrust Law Applies to Employee Hiring and Compensation (20 October 2016) available at https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-release-guidance-human-resource-professionals.

[3] Department of Justice press release, Assistant Attorney General Jonathan Kanter of the Antitrust Division Delivers Remarks to the New York State Bar Association Antitrust Section (24 January 2022) available at https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-antitrust-division-delivers-remarks-new-york.

[4] Senator Elizabeth Warren press release, Warren Calls On DOJ to Take Aggressive Action to Enforce Antitrust Laws As Giant Corporations Raise Consumer Prices to Highest Levels in Decades (8 February 2022) available at https://www.warren.senate.gov/newsroom/press-releases/warren-calls-on-doj-to-take-aggressive-action-to-enforce-antitrust-laws-as-giant-corporations-raise-consumer-prices-to-highest-levels-in-decades.

Andrew Lee
Andrew J. Lee is a recognized leader in the international antitrust sphere who focuses his practice on antitrust and competition matters, counseling multinational global corporations and executives that have faced high-risk antitrust investigations and disputes globally. His practice in the past decade has particularly focused on advising leading corporations in Asia Pacific in connection with high-profile antitrust investigations that often require close strategic coordination between the United States and other global investigative agencies. Andrew started his career at the US Federal Trade Commission (FTC) during the Clinton Administration, where he helped initiate several major antitrust enforcement actions and assisted the Commission’s leadership in setting broad competition law enforcement policies and agenda. Drawing on this experience, Andrew closely advises clients on preventing, detecting, mitigating and responding to potential antitrust and related business risks within a company.Read Andrew Lee's full bio. 


Katharine M. O'Connor
Katharine O’Connor focuses her practice on complex antitrust litigation, government investigations, defending mergers and acquisitions before antitrust enforcement agencies, and counseling clients on antitrust compliance issues. She has experience representing clients in a wide array of industries, including health care, manufacturing, food and finance. Read Katharine O’Connor's full bio.


Justin P. Murphy
Justin P. Murphy is a partner in the firm’s Regulatory Practice Group. A former federal prosecutor, Justin counsels and represents corporate and individual clients involved in government enforcement of complex antitrust, fraud and all phases of white-collar criminal and related civil matters, including internal corporate investigations, False Claims Act (FCA), Foreign Corrupt Practices Act (FCPA), e-discovery, data privacy, cybersecurity, securities enforcement, federal grand jury, inspector general investigations and trials and appeals. His focus in criminal antitrust investigations includes bid-rigging, price-fixing, procurement fraud, hiring practices and market allocation in a variety of industries.


Paul M. Thompson
Paul M. Thompson focuses his practice on white-collar criminal defense, congressional investigations and appellate matters. He is a current member of the Firm-wide Management Committee and a former member of the Firm’s Executive Committee. From 2011 to 2015, Paul served as partner-in-charge of the Washington, DC office. Read Paul M. Thompson's full bio.


Claire Danberg
Claire E. Danberg focuses her practice on antitrust matters and competition law, including antitrust litigation and compliance matters, as well as consumer protection. Claire focuses her work across a variety of industries, including healthcare, consumer products and technology and manufacturing. In addition to her antitrust and litigation work, Claire maintains an active pro bono practice. Read Claire Danberg's full bio. 

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