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The Sherman Act is unique in that it provides for both criminal and civil enforcement. In the United States, price fixing, bid-rigging, and market allocation agreements have long been prosecuted as felonies under federal law. Corporate offenders risk substantial fines while individual offenders are subject to both fines and prison terms. For much of the Sherman Act's 110 year history, the United States was the only country in the world to prosecute certain classes of antitrust offenses criminally. Very few other countries have adopted competition laws that criminalize antitrust - although that may change. Nonetheless given the global scale of today's economies, international companies and their employees potentially violate United States criminal antitrust laws if they are selling products in the United States.
There a number of important differences in the enforcement of the antitrust laws depending on whether they are prosecuted as criminal violations or civil violations. For one, the Antitrust Division is responsible for the criminal enforcement of the federal antitrust laws. See "Protocol for Increased State Prosecution of Criminal Antitrust Offenses," available at www.usdoj.gov. Civil antitrust violations may be litigated by the Antitrust Division, Federal Trade Commission, state attorney generals and private parties. Yet that is merely one in a number of differences between the enforcement regimes.
First, as general rule, criminal investigations focus on the conduct of individuals whereas civil investigations focus on marketplace dynamics. Criminal prosecution of antitrust offenses in the United States is narrowly focused on certain classes of conduct where the legality of the challenged conduct is unquestioned and where the offender has willfully violated the law. In criminal cases, there is no investigation of market definition, entry barriers, efficiencies, or other issues familiar to most civil antitrust practitioners. Instead, the focus in criminal prosecutions is on whether there was an agreement or an understanding to fix prices, rig bids, or allocate markets. Economic analysis - at least in determining liability - is largely, if not completely, irrelevant in a criminal case. In a civil case, the focus is often on the dynamics of a particular market and economic analysis often plays a far larger role.
Second, the rules and procedures governing a criminal investigation and prosecution differ from those governing a civil investigation. Some of those rules favor the government. For example, in a criminal grand jury investigation the government has greater power to demand documents and testimony than it does in the course of a civil investigation. At the same time, a putative defendant in a criminal case has rights that a civil defendant does not. The government is subject to extensive discovery and notice obligations after it indicts a firm or individual for a criminal violation of the antitrust laws. These differences are not limited to the pre-trial phase. At trial the criminal defendant has a host of different rights than the civil defendant, and perhaps even more significantly in complex antitrust cases the government must prove its case beyond a reasonable doubt.
A third difference is the available remedies. In a criminal case the potential punishment for corporations and individuals can be significant. The statutory maximums for criminal antitrust violations were recently raised in 2004. Today a corporation convicted of a criminal offense could face up to $100 million in fines and an individual defendant could be sentenced to a maximum of ten years in prison. Yet, the Antitrust Division argues that it can seek fines beyond the Sherman Act maximums by invoking a Section 3571(d) violation (fine based on gain or loss resulting from the offense). In recent years, it has invoked this statute multiple times in justifying a number of fines in excess of $100 million. A practitioner must be aware of these statutory provisions and the government's interpretation of the United States Sentencing Guidelines when counseling clients on potential criminal sanctions. See Scott Hammond, "Antitrust Sentencing in the Post- Booker Era: Risks Remain High for Non-Cooperating Defendants," available at www.usdoj.gov. In civil cases, the government can seek injunctive relief and, in some cases, monetary fines (disgorgement) and damages.
When a plaintiff seeks monetary damages, the threat of treble damages looms and an adverse judgment can result in significant damage awards. Section 4 of the Clayton Act states that any person whether an individual, business entity, or government who has been injured by another party because of an antitrust violation can recover three times the amount that is awarded. The rationale behind this provision is to deter violators and encourage litigants to bring a lawsuit.
These are merely some of the procedural differences between civil and criminal antitrust matters. The differences demonstrate the importance of being able to distinguish conduct that is potentially subject to criminal sanctions and that to which is merely subject to civil sanctions.
About the Author
Kyle Andeer is an Attorney Advisor to Commissioner J. Thomas Rosch of the Federal Trade Commission. The views of this article are the opinion of the article and not the Federal Trade Commission or any one Commissioner.