Monopolists Going “Directly to Jail?” DOJ Announces Intent to Criminally Prosecute Section 2 Violations

In the latest sign of the Biden administration’s aggressive antitrust enforcement agenda, on March 2, 2022, while speaking on a panel at the ABA White Collar Crime Conference in San Francisco, Deputy Assistant Attorney General Richard Powers remarked that the Department of Justice’s (“DOJ”) Antitrust Division (“Division”) is prepared to bring criminal charges for violations of Section 2 of the Sherman Act. Section 2 prohibits single-firm conduct that creates or maintains monopoly power. In response to questions regarding the DOJ’s willingness to bring criminal charges in monopolization cases, Powers noted that the DOJ would bring criminal charges “if the facts and the law lead us to the conclusion that a criminal charge based on a Section 2 violation is warranted.” Principal Deputy Assistant Attorney General Doha Mekki later echoed Powers’ statements when speaking at a lunch at the conference.

Any such charges would be a significant departure from modern DOJ criminal antitrust enforcement policy and practice.

DOJ Has Not Pursued a Criminal Monopolization Case in More Than 50 Years

Although Section 2, on its face, makes it a felony “to monopolize, attempt to monopolize, or conspire to monopolize any part of trade or commerce,” the DOJ has not brought a criminal case solely under Section 2 in more than 50 years. The last criminal indictment brought solely pursuant to Section 2 was in United States v. Empire Gas Co.,[1] a 1972 case involving alleged physical destruction of a competitor’s assets, which the government argued was part of an attempt to monopolize retail sales of liquid petroleum in parts of Missouri. Nonetheless, Empire was acquitted and later found not liable in a subsequent civil monopolization action by the government.[2]

Despite a number of high-profile civil monopolization cases in the past few years, the DOJ has not pursued, or publicly signaled that it would pursue, criminal charges.

Pursuing Section 2 Cases Criminally Would Be a Significant Change in DOJ Policy and Practice

Division practice and policy statements further underscore the extent to which the DOJ’s announcement would represent a major shift in enforcement policy in Section 2 cases. The DOJ generally reserves criminal prosecutions to the most egregious anticompetitive conduct that violates Section 1 of the Sherman Act: agreements involving price-fixing, bid-rigging, or customer/market allocation.[3] This policy has been in place for years. In a 2003 speech calling for a tougher approach to cartels, then Assistant Attorney General Hewitt Pate explained that cases pursued criminally by 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.”[4] In contrast, an antitrust law primer issued by the DOJ for federal law enforcement personnel notes, “[v]iolations of Section 2 are generally not prosecuted criminally. Criminal prosecution is warranted, however, in circumstances where violence is used or threatened as a means of discouraging or eliminating competition, such as cases involving organized crime.”[5]

In 2007, the Antitrust Modernization Commission explained in its report to Congress that the DOJ’s practice of limiting criminal cases to “hard-core” offenses such as price-fixing allows the DOJ to focus its prosecutorial resources on the conduct most likely to harm consumers while providing little redeeming value. In contrast, according to the Modernization Commission, many types of single-firm conduct that could violate Section 2 have a more ambiguous effect on consumers and may in fact provide a number of procompetitive benefits. Determining the effect of unilateral conduct normally requires a fact-intensive analysis. The Commission commended the DOJ for limiting the use of criminal penalties to conduct that is “clearly unlawful” and recommended the DOJ continue to limit criminal enforcement to these cases.

Significantly, proof of a criminal Section 1 violation (which must be established beyond a reasonable doubt) requires proof only of the existence of an agreement.[6] No economic analysis is required: no definition of a relevant market and no proof of harm to competition.

The Division’s announced intent to now pursue Section 2 cases criminally would potentially require the Division to engage in the type of fact-intensive analysis it has explicitly sought to avoid in criminal cases and to revisit many of its own past policy statements and guidance. Specifically, the pursuit would require economic analysis. Monopolization or attempted monopolization occurs within a relevant market, which under current case law requires economic analysis (and often the use of sophisticated econometric tools) to establish. Each offense implicates numerous economic concepts, ranging from proof of “monopoly power” to distinguishing “anticompetitive conduct” from “growth or development as a consequence of a superior product, business acumen, or historic accident.”[7] These concepts are typically closely contested by dueling Ph.D. economic experts. And DOJ would also bear the burden to prove its case beyond a reasonable doubt. Establishing any of these elements by a preponderance of evidence is difficult; establishing them beyond a reasonable doubt would be incredibly challenging.

Will DOJ Roll the Dice?

There remains significant uncertainty in light of the Division’s statements as to whether or when it would bring a criminal Section 2 case.

Most importantly, it is not clear what facts would prompt the criminal prosecution of a Section 2 case. For example, monopolization cases are typically based on one or more types of exclusionary conduct including, e.g., tying or bundling, exclusive dealing, or predatory pricing. Each of these practices can arguably be justified by well-intended competitive business practices in certain circumstances and it is difficult to prove anticompetitive harm from arguably monopolistic conduct.[8] The prior DOJ criminal monopolization cases—albeit from a half a century ago—suggest that prosecutions will be limited to those cases involving conduct so egregious that the anticompetitive intent is clear, or conduct that would otherwise be subject to criminal liability (such as intellectual property theft or fraud).

It is also not clear if or when the Division will provide guidance describing the types of conduct the Division considers criminal. DOJ normally previews changes in policy through formal guidance or published speeches, rather than passing remarks in response to audience questions. For example, in 2016, when it expanded enforcement of no-poach agreements to include criminal, not just civil, penalties, DOJ issued detailed guidance stating the change. The relatively informal nature of these remarks suggest that charges are not forthcoming in the short term. If charges are brought, the Division should expect challenges to its ability to change longstanding policies regarding the prosecution of Section 2 cases, similar to the challenges it has faced in recent criminal labor market prosecutions.

In Face of Uncertainty and Heightened Enforcement Environment, Companies Shouldn’t Take Chances

Regardless of what happens next, the DOJ’s willingness to mention this possible significant policy shift publicly represents a further escalation of the Biden administration’s efforts to root out perceived anticompetitive conduct by large companies, including Big Tech.

For now, companies in all industries should view this announcement as additional incentive to ensure that antitrust compliance programs include procedures for evaluating the effects of business decisions on consumers, competitors, and other market participants and for documenting the legitimate, procompetitive reasons for decisions that may have an effect on competition.

[1] Crim. No. 23917-1 (W.D. Mo. 1972).

[2] See United States v. Empire Gas Corp., 537 F.2d 296, 304 (8th Cir. 1976).

[3] See Antitrust Division Manual at III-20 (Dec. 2008) (“In general, the current Division policy is to proceed by criminal investigation and prosecution in cases involving horizontal, per se unlawful agreements such as price fixing, bid rigging, and customer and territorial allocations.”), archived version available at https://www.justice.gov/archives/jm/antitrust-resource-manual-1-attorney-generals-policy-statement. Note that as of March 1, 2022, the Manual is currently unavailable online.  According to the Division’s website, the Manual is being revised and instructs the visitor to check back for the next edition.

[4] https://www.justice.gov/atr/speech/vigorous-and-principled-antitrust-enforcement-priorities-and-goals.

[5] U.S. Dep’t of Justice, An Antitrust Primer for Federal Law Enforcement Personnel 4 (2003) available at www.justice.gov/atr/public/guidelines/209114.pdf.

[6] U.S. Dep’t of Justice, Antitrust Resource Manual available at https://www.justice.gov/archives/jm/antitrust-resource-manual-1-attorney-generals-policy-statement#:~:text=To%20establish%20a%20criminal%20violation,joined%20the%20charged%20conspiracy%3B%20and.

[7] U.S. Dep’t of Justice, Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act (2008) available at https://www.justice.gov/atr/competition-and-monopoly-single-firm-conduct-under-section-2-sherman-act-chapter-1#:~:text=Section%202%20establishes%20three%20offenses,maintenance%2D%2Dmuch%20of%20the.

[8] Id.