During opening remarks at the Spring Enforcers Summit on April 4, 2022, about a month after Powers’ initial remarks, AAG Kanter emphasized that the DOJ “will aggressively pursue enforcement of the criminal antitrust laws to protect consumers, workers and businesses harmed by unlawful collusion and monopolization.” Kanter reiterated the DOJ’s justification for its position based on the language of the Sherman Act:
[W]hen Congress passed the Sherman Act in 1890, it made Section 2 a crime as it did with Section 1. Since the 1970s, Section 2 has been a felony, just like Section 1. In 2004, Congress increased Section 2’s criminal penalties in lockstep with the increased penalties for Section 1 crimes. So if the facts and the law, and a careful analysis of Department policies guiding our use of prosecutorial discretion, warrant a criminal Section 2 charge, the Division will not hesitate to enforce the law.
During the 2022 ABA Antitrust Law Spring Meeting, multiple DOJ officials commented on the potential for criminal prosecution under Section 2—again pointing to the language of the statute—but none of the officials provided further clarity on the DOJ’s policy in this area. During the Enforcers Roundtable on April 8, when prompted on whether there would be further guidance in this area, Kanter responded that “my guidance is to read the cases,” noting that “there is over a century of case law relating to criminal antitrust enforcement of Section 1 and Section 2.” Kanter concluded his remarks on this point by repeating that the DOJ “will pursue criminal violations when the facts and law suggest that it is appropriate and consistent with the Principles of Federal Prosecution.” Similarly, during another Spring Meeting panel, Powers noted there is a “long arc” of criminal Section 2 cases and advised practitioners to “take a look at what’s on the books.” Neither Kanter nor Powers cited any particular cases or provided any further guidance to the business community.
The DOJ’s Prior Policy Statements on Criminal Antitrust Enforcement
The recent comments from DOJ officials stand in stark contrast with the DOJ’s approach to Section 2 enforcement over the past few decades. The DOJ has long had the theoretical ability to criminally prosecute violations of Section 2 because, like Section 1 of the Sherman Act, the text of the statute provides that those who violate the statute “shall be deemed guilty of a felony.” In recent history, however, the DOJ has only brought criminal charges for “hardcore” violations of Section 1 of the Sherman Act, which prohibits concerted action in restraint of trade, such as price-fixing, bid rigging, market or customer allocation, and, in the last few years, no-poach or wage-fixing conduct. Courts have held that classic “hardcore” agreements among competitors, such as those to fix prices, rig bids, or allocate markets, are “unlawful per se” under Section 1 and may be condemned without elaborate analysis because they “have such predictable and pernicious anticompetitive effect, and such limited potential for procompetitive benefit.”
Across presidential administrations spanning several decades, the DOJ has made numerous statements outlining its approach of prioritizing criminal prosecution of such per se conduct under Section 1. For example, in 1955, in the Report of the Attorney General’s National Committee to Study the Antitrust Laws, the Antitrust Division advised that it would limit criminal prosecution to price-fixing and other violations where there is “proof of a specific intent to restrain trade or to monopolize.” The Report also noted, however, that “the use of criminal process . . . was improper” under the antitrust laws where the cases were “wholly without precedent.” In 1967, the DOJ reiterated that it would limit criminal prosecution to only “willful” violations of the antitrust laws. Later, in 1995, shortly after the expansion of the Antitrust Division’s Criminal Leniency Program, then-AAG Anne Bingaman and Criminal DAAG Gary Spratling specifically highlighted that price-fixing, bid-rigging, and market-allocation schemes were the most important areas of focus for DOJ criminal enforcement. And, in 2003, then-AAG Hewitt Pate said that the DOJ brings criminal charges only against “hard core cartel activity that each and every executive knows is wrongful. The cases we criminally prosecute at the Division are not ambiguous. They involve clandestine activity, concealment, and clear knowledge on the part of the perpetrators of the wrongful nature of their behavior.” During the hearings for the Antitrust Modernization Commission, Criminal DAAG Scott Hammond added that the DOJ will not prosecute cases in which “there is some innocent explanation here or some inadvertence, that they crossed the line without meaning to.”
In fact, even up until the day before the March remarks from DOJ officials, the publicly available Antitrust Division Manual, which guides the criminal and civil prosecutorial and enforcement decisions of Division attorneys, essentially stated that the Division’s policy was to use civil process for violations that are subject to the rule of reason, e.g., Section 2 claims, and that even certain conduct that may appear to be a per se violation would not be appropriate to prosecute criminally. As of the date of publication of this article, the webpage for the Manual indicates that it is “undergoing revision.”
Past Criminal Prosecutions Under Section 2: How to “Read the Cases”
The DOJ has not pursued criminal prosecutions for Section 2 violations for the past few decades, and for good reason. Section 2 cases are governed by the rule of reason which requires a careful weighing of anticompetitive effects and procompetitive justifications, while criminal Section 1 cases are nearly universally governed by the per se standard, which condemns certain categories of conduct as illegal without a need for detailed assessment of competitive effects. This rarity of criminal prosecution under Section 2 was addressed in an April 2007 report by the blue-ribbon Antitrust Modernization Commission, noting that the last criminal prosecutions for such conduct occurred almost fifty years ago and that, despite the statutory authority to do so, the DOJ has forgone criminal prosecutions of unilateral conduct under Section 2 (as well as certain joint conduct where the competitive effects are often ambiguous).
In the most recent criminal Section 2 cases, which are from the 1970s and predate many modern antitrust precedents, the DOJ had a mixed record of success. Notably, the cases where the DOJ alleged criminal violations of Section 2 also included either a traditional conspiracy claim under Section 1 of the Sherman Act, or egregious criminal conduct of a completely different sort from the type of conduct alleged in more modern Section 2 cases. Moreover, only in one of these 1970s cases, U.S. v. Dunham Concrete Products, were individual defendants actually indicted and sentenced to jail time.
The indictments in General Motors and Braniff Airways each alleged both Section 1 and Section 2 claims, indicating that the Section 2 claims may not have been necessary to bring criminal charges. In General Motors, the DOJ alleged that the defendants had engaged in a traditional conspiracy to fix prices, in violation of Section 1 of the Sherman Act, as well as a conspiracy to monopolize the market for automobile fleets in violation of Section 2 of the Sherman Act. The court, however, concluded that the DOJ’s allegations were incongruous, observing that typically co-conspirators do not raise prices in order to monopolize a market. The court ultimately entered a judgment of acquittal on the second count of the indictment (conspiracy to monopolize), finding that the DOJ did not allege sufficient facts to demonstrate that the defendants had specific intent to monopolize, a necessary element of a conspiracy to monopolize claim. In Braniff, the DOJ also brought a traditional conspiracy claim under Section 1 alongside the Section 2 claim, this time alleging a conspiracy to allocate the market and also to prevent rival Southwest Airlines from growing in the Texas market. The DOJ alleged that Braniff and its co-conspirator exchanged flight schedules, ticket fees, and other competitive information as part of a market allocation scheme, and also to prevent customers from re-booking flights on Southwest in an effort to thwart competition. Unlike in General Motors, the court rejected defendants’ arguments for dismissal, and the two defendants ultimately pled guilty and no contest, respectively.
In other cases that the DOJ prosecuted criminally under Section 2, there was egregious criminal conduct outside the antitrust context. For example, in Dunham Concrete Products, defendants were accused not only of attempting to monopolize certain concrete markets, but also of engaging in other forms of conduct in violation of the Hobbs Act. The indictment charged defendants with engaging in other extreme forms of criminal conduct, such as purposefully obstructing competitors’ construction projects and using labor strikes and threats of physical violence as forms of extortion. Notably, the defendants involved in this conduct were affiliated with infamous criminal Jimmy Hoffa, and the conduct occurred before the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO) was passed. Similarly, in Empire Gas, defendants were accused of intentionally damaging competitors’ property as part of an attempt to monopolize the market.
Viewed in this historical context, it is difficult to imagine the DOJ bringing—let alone sustaining—criminal monopolization charges against a company or individuals in the current age without either (a) egregious alleged conduct that is otherwise criminal, or (b) facts sufficient to support a traditional conspiracy claim under Section 1 of the Sherman Act. Given the extreme facts of this dated precedent, and without any further guidance from the DOJ, it remains unclear where the DOJ views the line for conduct to cross into criminal Section 2 territory—particularly in light of the modern rule-of-reason framework for Section 2 monopolization claims.
Potential Obstacles to Criminal Prosecution under Section 2
The recent vague statements by DOJ officials regarding criminal prosecution under Section 2 contrast with the approach that the DOJ took when announcing a change in policy with respect to so-called “no poach” or “wage-fixing” agreements. There, the DOJ and FTC made a formal policy announcement through the 2016 Guidance for Human Resource Professionals that made clear that going forward the DOJ would be criminally prosecuting no-poach and wage-fixing agreements under Section 1 of the Sherman Act. The DOJ indicated that the Guidance would not apply retroactively and it would not criminally prosecute conduct that had completely terminated before the issuance of the Guidance. Even then, in several of the DOJ’s active no-poach cases, defendants have argued (unsuccessfully so far) that the Guidance alone did not provide fair notice to potential defendants, and therefore the DOJ’s criminal prosecution of this conduct is unconstitutional.
Likewise here, potential defendants in any future Section 2 criminal prosecutions are likely to raise significant due process objections due to, among other things, lack of fair notice on what conduct constitutes a criminal violation of Section 2. “To satisfy due process, a penal statute must define the criminal offense . . . with sufficient definiteness that ordinary people can understand what conduct is prohibited.” Potential defendants in a Section 2 criminal case are likely to argue that the sudden criminal enforcement of Section 2—after a fifty-year gap of criminal prosecution and after numerous policy statements indicating the DOJ would act to the contrary—violates the Due Process Clause of the Constitution. Potential defendants are also likely to argue that the theoretical ability under the statute for the DOJ to bring criminal charges, absent actual prosecution, is not sufficient fair notice of the criminality of such conduct.
In response, the DOJ will likely argue that, unlike the arguments that defendants have raised in the no-poach cases, there is historical precedent for criminally prosecuting Section 2 violations, as discussed above, and the Sherman Act explicitly makes violations of Section 2 a felony. Therefore, the DOJ will likely argue that the government cannot be accused of creating a new category of criminal antitrust conduct, and defendants cannot say there is no precedent for such action either. Further, while doing so would certainly promote transparency and good government, the DOJ may hesitate to issue formal guidance on criminal enforcement of Section 2, as it did with no-poach and wage-fixing, to avoid potential arguments from future defendants that the fact such guidance was necessary means they were not on fair notice. While defendants in the DOJ’s recent labor-market cases have been unsuccessful in dismissing criminal charges on constitutional grounds, they have prevailed in defeating the DOJ’s Sherman Act claims on the merits—with the jury delivering “not guilty” verdicts in both of the DOJ’s recent wage-fixing and no-poach trials.
In addition to the fair notice issues, it is unclear how the DOJ could prove each of the elements of a monopolization or attempted monopolization claim beyond a reasonable doubt, as would be required to obtain a criminal conviction. With respect to the first element of a monopolization claim—monopoly power—claims under Section 2 often involve intense battles between leading economists and other experts on both sides who opine on the parameters of the relevant markets and resulting market shares, as well as direct evidence (or lack thereof) of monopoly power. With respect to the second element of a monopolization claim—anticompetitive or exclusionary conduct—differentiating anticompetitive from procompetitive conduct is notoriously difficult and presents “one of the most vexing questions in antitrust law.” Given the difficulty of proving both elements under even a preponderance standard in civil cases, it is likely the DOJ would encounter significant obstacles trying to prove each of these elements beyond a reasonable doubt in a criminal case.
What To Look For Going Forward
Without guidance from the DOJ regarding what conduct crosses the line to warrant criminal prosecution, we expect the DOJ will likely only criminally prosecute conduct under Section 2 when they have some other basis for criminal prosecution anyway. For example, the DOJ may attempt to criminally prosecute a conspiracy among companies to monopolize a relevant market, which the DOJ arguably also could charge under Section 1.
It remains to be seen whether the DOJ statements indicate a real policy change at the DOJ and an omen of indictments to come, or only an attempt to gain leverage against targets or deter future violations. In any event, it is important to revisit antitrust compliance policies and conduct antitrust training for employees to ensure that these issues and others do not result in either criminal or civil enforcement. And it is yet to be seen how modern courts would respond to a criminal prosecution of Section 2 given significant case law developments since the historic criminal prosecutions under Section 2.
