The second part of this Article details the history of Section 2 criminal enforcement. As best we are able to determine from public sources (which are difficult to access given their age), grand juries have returned 38 indictments with Section 2 charges since 1938. Only four of those indictments involved Section 2 alone. For the other 34, the DOJ brought a Section 2 count alongside another count or counts (typically under Section 1 of the Sherman Act) based on the same underlying conduct, an enforcement practice that was informed by the modest maximum fines available under Section 1 during that time period. The last returned indictment under Section 2 appears to have come in 1977, and the last public acknowledgement of the convening of a grand jury to investigate a Section 2 violation appears to have occurred in 1984.
The third and final part of this Article outlines several potential defenses if the DOJ were to act upon its new policy and initiate criminal Section 2 proceedings. The DOJ’s long-standing policy limiting criminal enforcement to Section 1, and 45 years of enforcement history consistent with that policy, may give rise to concern that criminal prosecutions under Section 2 are inconsistent with the Due Process Clause. Similarly, the DOJ’s long history of disclaiming the appropriateness of criminally enforcing Section 2 strengthens potential mens rea defenses, particularly for cases involving actual or attempted monopolization lacking similarity to traditional Section 1 claims. And Section 2 jurisprudence in general has evolved considerably in the decades since the DOJ’s last criminal actions under Section 2, making it unclear which, if any, precedents are reliable guides to how courts would approach criminal Section 2 matters today. Those constitutional and statutory defenses could make it difficult for the DOJ to obtain convictions in Section 2 prosecutions brought under the new policy.
The History of Section 2’s Criminal Provisions and the DOJ’s Statements of Enforcement Policy
Since 1890, the Sherman Act has prohibited both agreements in restraint of trade under Section 1 and monopolization, attempted monopolization, and conspiracies to monopolize under Section 2. The statute has always provided for criminal enforcement of both sections. For much of the Act’s history, violations of the Sherman Act were misdemeanors (that is, punishable by less than one year in jail), and the Antitrust Division was rarely able to obtain jail sentences for violations.
Congress first amended Section 2 of the Sherman Act in 1955, when it increased the maximum fine from $5,000 to $50,000. A few months before that amendment, the Attorney General’s National Commission to Study the Antitrust Laws issued a report calling on Congress to increase the Sherman Act’s fines. As the report explained, a majority of the Commission’s members favored doubling the maximum fine from $5,000 to $10,000 to keep up with inflation, with a few members supporting the more substantial increase that Congress ultimately pursued. Even at that time, however, support for stiffer penalties was not unanimous. Some members opposed increasing the fines on the ground that criminal sanctions of any kind were inappropriate under the Sherman Act, noting the “gross injustice resulting from the application of these criminal laws to cases where uncertainty is so great that neither the Department of Justice nor the attorneys for the parties involved can know in advance whether their actions are unlawful.” The international ramifications of Sherman Act criminal enforcement during the 1940s and 1950s was top of mind for these dissenting members, who noted that “of all the great industries that contributed most to the winning of the war there is hardly one that has not been branded by either indictment or injunction suit as violators of this criminal statute. Our enemies do not fail to take advantage of that strange anomaly, in their never-ending charges that we are a nation of criminal monopolists.”
The Sherman Act first became a felony through the Antitrust Penalties and Procedures Act of 1974, which increased the maximum prison sentence from one to three years. The 1974 Act also increased the maximum fine, allowing the DOJ to seek up to $1 million from a corporation and $100,000 from an individual defendant. Congress increased the fines again in the Antitrust Amendments Act of 1990, which set a new maximum of $10 million for corporations and $350,000 for individuals. The fourth and final amendment came in 2004, when Congress enacted the Antitrust Criminal Penalty Enhancement and Reform Act (“ACPERA”). That law authorized jail sentences of up to 10 years, and fines of up to $10 million for a corporation or $1 million for an individual defendant. It also included a provision that spurred criminal enforcement against cartels by offering incentives to cartel participants that first report a violation of the antitrust laws.
Apart from the four amendments to Section 2, the fines available under the Sherman Act were also functionally increased through the Criminal Fine Improvements Act of 1987. That statute allows the government to seek a fine of “not more than twice the gross gain or twice the gross loss” in criminal cases where a defendant’s conduct resulted in ill-gotten gains or caused pecuniary loss to victims.
Each of the four amendments to the Sherman Act increased criminal fines or jail terms under Section 1 and Section 2 in tandem. Throughout Congress’s deliberations over these amendments, however, the focus was squarely on criminal prosecutions against cartels. For instance, President Ford’s speech kicking off the 1974 reforms warned of the harms caused by “price-fixing and bid rigging,” a concern that was echoed by legislators supporting the bill in Congress. During the hearings on the 1990 legislation, then-Acting Assistant Attorney General Michael Boudin explained that the Division’s “number-one antitrust enforcement priority is to root out clearly anticompetitive antitrust violations through criminal prosecution. Examples of conduct that the Department prosecutes criminally are government procurement fraud, bid rigging, price fixing, and market allocation among competitors.” In 2004, Senator Herbert Kohl, the sponsor of ACPERA, noted the importance of deterring hard-core cartel violations, and then-Assistant Attorney General R. Hewitt Pate greeted the law’s passage by explaining that it would “greatly enhance one of the Division’s core missions, its anti-cartel enforcement program.”
The congressional focus on the use of Section 1 to stop price-fixing and bid rigging is not surprising. For decades, the Division has maintained a policy of focusing its criminal enforcement efforts on per se violations of Section 1 of the Sherman Act. Over time, that focus solidified into a criminal enforcement policy of pursuing only hard-core cartel behavior, particularly after the Sherman Act became a felony in 1974. The cartel-only criminal policy was reflected in the Antitrust Division Manual in its first edition in 1979, published during the Carter administration. It has since been reflected in every subsequent edition of the Manual until March 2022, when the Antitrust Division removed the Manual from the DOJ website because it was “undergoing revision.” The Division also cited that policy in federal courts, and Division leadership from both political parties routinely espoused it. Former Assistant Attorney General Thomas O. Barnett’s comments are illustrative, and highlight the importance of the Division’s narrow criminal focus to its overall antitrust enforcement program:
By focusing narrowly on price fixing, bid-rigging, and market allocations, as opposed to the “rule of reason” or monopolization analyses used in civil antitrust law, we have established clear, predictable boundaries for businesses. This narrow focus also helps conserve prosecution and judicial resources by reducing the number of potential cases and also by reducing the complexity of proof: proving the existence of an agreement establishes the violation without the need for the detailed economic testimony common in civil antitrust actions.
This view was so entrenched that the bipartisan Antitrust Modernization Commission (“AMC”), writing 15 years ago and without dissent from any of its 12 members, recommended that “the Antitrust Division . . . should continue to limit its criminal enforcement activity to ‘naked’ price-fixing, bid-rigging, and market or customer allocation agreements among competitors,” a recommendation consistent with the ABA Antitrust Section’s submission to the AMC.
The Division’s cartel-focused criminal enforcement policy also underlies the modern sentencing system. The U.S. Sentencing Commission first promulgated a Guideline for criminal antitrust violations in 1987. It focused exclusively on “bid-rigging, price-fixing, and market-allocation agreements.” The Commission justified that approach by explaining that “[t]here is no consensus . . . about the harmfulness of other types of antitrust offenses, which furthermore are rarely prosecuted and may involve unsettled issues of law.” Following ACPERA’s enactment in 2004, which increased the maximum jail sentence from three years to 10 years, the Commission revised the Guideline to increase the penalties, while maintaining a singular focus on per se Section 1 violations. As a result, as the ABA Antitrust Section pointed out to the AMC, “the commentary and very structure of the Sentencing Guidelines clearly contemplates the criminal prosecution of hard-core cartel conduct only.”
The Division’s cartel-focused policy is reflected in its guidance to DOJ enforcers tasked with discovering and investigating Sherman Act violations. Its 2005 Antitrust Primer for Federal Law Enforcement Personnel stated that “[p] rice-fixing, bid rigging, and market allocation by companies and individuals are violations of Section 1 and generally are prosecuted criminally.” The guidance also states that “[v]iolations of Section 2 are generally not prosecuted criminally.” The only exception to that rule was for cases involving violence and organized crime. The same language was included in the earlier version of the Primer released in 2003. As noted above, the DOJ updated that document in April 2022 to address criminal conspiracies under Section 2 and allude to potential criminal prosecution of either “actual or attempted monopolization.”
Finally, the United States has frequently advanced its cartel-focused criminal policy on the world stage. The United States has always been an outlier for the breadth of its criminal antitrust laws. Most countries have no criminal antitrust enforcement regime. Among those that do, criminal enforcement is directed squarely at cartels. The United States has often encouraged this exclusive focus on the criminal prosecution of cartels. For instance, the Division’s 1995 Enforcement Guidelines for International Operations explained that U.S. criminal enforcement was targeted at per se violations precisely because that conduct “would also be [a] violation[] of the law in other countries,” thereby making extradition feasible. And as recently as 2020, the Division explained in a statement to the Organization for Economic Cooperation and Development (OECD) that the success of its criminal enforcement was the result of its “unwavering commitment to ensuring predictability and transparency in its criminal antitrust enforcement efforts,” which stemmed from its “decision to pursue hardcore cartel behavior.”
This consistent policy has helped harmonize U.S. practice with competition law around the world, leading to enhanced cooperation among enforcers. In 1998, the OECD’s Recommendation on Hard Core Cartels “marked the first time” the organization had “defined and condemned a particular kind of anti-competitive conduct,” a move that facilitated international coordination. Those recommendations were updated in 2019 to call for further coordination among international authorities in their efforts to target hard-core cartels.
The History of Section 2 Criminal Enforcement
The DOJ did not always limit its criminal enforcement policy to cartel-type conduct. Between 1938 and 1977, the DOJ used its Section 2 criminal authority in at least 38 cases. Throughout that time, the DOJ rarely relied solely on Section 2 to challenge the defendant’s conduct. It typically brought Section 2 charges alongside other counts, most often under Section 1, to target the same acts, with the result of increasing the total fines imposed on the defendant.
Section 2 covers three different types of conduct: monopolization, attempted monopolization, and conspiracy to monopolize. While Section 2 is most often associated with unilateral conduct by a monopolist, the conspiracy provisions can cover coordinated conduct by multiple actors. Accordingly, there are a number of situations where the DOJ can pursue Section 1 alongside Section 2. There are also situations in which the Section 2 count implicated other crimes, like extortion.
The table below summarizes returned indictments since 1938 that we were able to locate and include a Section 2 charge. The information is based on a review of the Westlaw and CCH Vital Law databases for decisions involving criminal indictments and monopolization. For each case, the table provides a brief summary of the allegations and identifies whether the DOJ brought the Section 2 charge on its own or alongside other charges.
Criminal Section 2 indictments since 1940
