DOJ Antitrust Division Leadership States No Guidance Forthcoming On Criminal Monopolization Cases – Antitrust, EU Competition

In a major departure from previous enforcement practices, the
U.S. Division of Justice Antitrust Division (DOJ) lately
introduced a new focus on prosecuting felony
monopolization circumstances below Part 2 of the Sherman Act. DOJ has
not prosecuted a felony monopolization case in practically 50 years.
Nonetheless, Division Deputy Assistant Lawyer Basic for
Felony Enforcement Richard Powers has indicated that DOJ has no
intention of offering steerage to the enterprise group associated
to this new concentrate on felony prosecutions for monopolization.
Companies will subsequently have to redouble efforts to adjust to
Part 2, regardless of a “dearth of Section 2 case law
addressing modern markets,” as Assistant Lawyer Basic
Jonathan Kanter, the DOJ’s prime antitrust enforcer, put it in a
January speech to the New York State Bar Affiliation.

Monopolization Underneath Part 2 of the Sherman Act

Part 2 of the Sherman Act outlaws monopolization. It
states:

The results for an organization or particular person going through an
indictment below Part 2 are extreme. Felony violations of the
Sherman Act are punishable by as much as $100 million in fines for
corporations and $1 million in fines for people, or twice the
gross acquire or loss from the offense, whichever is bigger.
People could also be sentenced to as much as 10 years of imprisonment.

However regardless of the statute’s express felony language and
vital penalties, within the trendy period, the federal government has
introduced solely civil circumstances below Part 2, reserving felony
enforcement for agreements in restraint of commerce (e.g.,
value fixing and bid rigging) below Part 1.

DOJ’s Justice Guide, which offers steerage to the
division’s prosecutors, beforehand made this distinction
express, stating that:

However following bulletins from prime antitrust enforcers this
previous spring, the Justice Guide was modified to learn:

Assistant Lawyer Basic Kanter first signaled the shift in
his January speech when he remarked that DOJ would use “each
instrument out there to advertise competitors.” Powers thereafter
introduced the brand new coverage on the American Bar Affiliation (ABA)
White Collar Crime Institute in March. In response to a query at
that convention, Powers said that DOJ is ready to deliver
felony fees below Part 2 “if the information and the regulation
lead us to the conclusion {that a} felony cost based mostly on a Part
2 violation is warranted.” Kanter echoed Powers’ statement at
the April Enforcers’ Summit, declaring “if the information [and]
the regulation, the cautious evaluation of the division’s insurance policies
guiding our use of prosecutorial discretion, warrant a felony
Part 2 cost, the Division won’t hesitate to implement the
regulation.”

No Plans by DOJ to Concern Business Steerage

This vital departure from previous enforcement follow has
led to questions on whether or not DOJ will challenge trade steerage on
what conduct DOJ will contemplate felony.

At a June 7 webinar sponsored by the ABA Antitrust Part,
Powers made clear that DOJ has no plan to challenge such steerage, as
it has in others areas of antitrust enforcement.²
Relatively, Powers said that the enterprise group ought to look to
the textual content of Part 2 and the case regulation on felony Part 2 circumstances,
although the latest such case regulation is sort of 50
years previous. This echoes prior comments on June 3, 2022,
the place Powers said the “lengthy historical past of Part 2
prosecutions and accompanying case regulation present us the best way
ahead.” These current statements appear to battle, nonetheless,
with Kanter’s remarks in January that “there’s a dearth
of Part 2 case regulation addressing trendy markets.”

The Sherman Act was handed in 1890. Throughout the first
roughly 80 years of its existence, DOJ pursued felony
Part 2 circumstances. In his June 7 feedback, Powers identified that
there have been greater than 100 prosecutions throughout that point interval. However
the final such prosecution was in 1977, when DOJ prosecuted two
airways below Sections 1 and a pair of, below a principle that the airways
conspired to create a monopoly and hold out rivals.

Since that 1977 Braniff Airways prosecution, DOJ has centered its
felony enforcement solely on per se antitrust
violations below Sherman Act Part 1 equivalent to value fixing, bid
rigging and market allocation agreements, as mirrored within the
now-revised part of the Justice Guide quoted above. On the similar
time, it has prosecuted Part 2 circumstances solely as civil violations,
which yield treble damages however not fines or jail time.

In speeches and feedback all through the previous spring, senior
antitrust enforcers have expressed a perception that competitors
enforcement has gone “astray.” In
explicit, Kanter has argued that historic
under-enforcement has led to much less resiliency within the markets and an
erosion of shopper selection that threatens democracy itself. Echoing
these sentiments, Powers said on the June 7 webinar that the dearth
of Part 2 prosecutions because the Seventies signifies that
anticompetitive conduct by monopolists has “gone
unpunished” and that DOJ is decided to reverse this pattern
and return to the times of vigorous felony enforcement of Part
2.

Panelists on the June 7 webinar raised a number of questions on
felony Part 2 circumstances. Amongst them have been issues about whether or not
the courts will depend on the felony Part 2 case regulation from over
50 years in the past, or as a substitute the newer physique of civil Part 2
case regulation. Civil circumstances alleging monopolization require the
presentation of financial and different specialists to show the related
product and geographic markets. Convention attendees requested Powers
whether or not DOJ’s felony Part 2 prosecutions would require the
similar sort of proof. In that case, the attendees identified, these
prosecutions might be much more troublesome than DOJ’s
price-fixing, bid-rigging and market-division circumstances, the place
DOJ’s burden is to easily show the existence of an unlawful
settlement, as a result of such violations are per se
illegal.

As well as, DOJ’s document on Part 2 civil enforcement is
blended. So why is DOJ now planning to revive felony Part 2
cases-with the upper “past an affordable doubt” burden
of proof-when it has had issue even proving civil Part 2
violations?

Powers answered these questions by stating that he believed the
courts would apply the older felony circumstances and never the newer
civil circumstances, and thus DOJ won’t be required to current financial
testimony or show related markets. As to why DOJ is pushing into
felony Part 2 circumstances regardless of its blended document in civil circumstances,
Powers merely said that DOJ has an obligation to implement the legal guidelines
that Congress handed.

Lack of Business Steerage Runs Counter to DOJ’s Coverage of
Transparency

Along with the antitrust enforcement steerage paperwork DOJ
has issued in different areas (see footnote 2), DOJ has issued steerage concerning
its antitrust leniency program-whereby corporations that self-report
cartel exercise can keep away from prosecution-in the type of a ceaselessly
requested questions (FAQ) web page on its web site. In explaining current
revisions to the FAQs on the April Spring Enforcers Summit, Kanter stated the
following:

In gentle of this dramatic shift in felony Part 2
enforcement coverage, and with no current enforcement historical past to attract
from, it’s troublesome to find out the “clear and
predictable standards” DOJ will use in figuring out what conduct
might be topic to felony prosecution for monopolization. It’s
one factor for corporations and executives to be unclear on what
conduct will topic them to a civil enforcement motion and
potential damages, however fairly one other to not know what conduct may
result in a company indictment, felony fines and jail phrases for
executives. In brief, the stakes are greater now than they’ve been
in a long time.

And as a number of of the panelists on the June 7 ABA webinar
identified, steerage could be useful not solely to the enterprise
group, but additionally to the courts. An instance is the DOJ/FTC
Horizontal Merger Tips-while they don’t have the pressure of
regulation, courts typically depend on them in deciding whether or not a proposed
merger is more likely to result in a considerable lessening of competitors
in violation of Part 7 of the Clayton Act. A steerage doc
concerning felony Part 2 enforcement may have an identical
profit to courts that might be grappling with such prosecutions
with no current case regulation to information their evaluation.

Conclusion

DOJ is clearly signaling that it’s transferring ahead on bringing
felony Part 2 circumstances. Such investigations are time-consuming,
so we shouldn’t be stunned if it takes many months and even years
earlier than the primary prosecution. Powers’ recommendation to corporations at
the June 7 webinar-not to attend for DOJ to deliver circumstances, however as a substitute
to spend money on sturdy and efficient compliance packages now-is price
heeding.

DOJ is more likely to hear pleas from some within the antitrust group
for trade steerage on the brand new coverage. Whether or not DOJ heeds these
calls stays to be seen. With out a steerage doc from DOJ,
companies and their executives that might doubtlessly be topic
to a felony Part 2 prosecution might want to take additional
precautions and keep away from conduct that could possibly be thought of predatory or
exclusionary towards a competitor. And whether or not or not steerage is
issued, corporations and people ought to seek the advice of with skilled
antitrust counsel to assist them navigate this quickly shifting
terrain.

Footnotes

1. Justice Guide, Part 7-2.200 (emphasis
added).

2. Examples of different areas of antitrust enforcement the place
DOJ has issued steerage embrace the FTC/DOJ Statements of Antitrust
Enforcement Coverage in Well being Care (1996); the FTC/DOJ Horizontal
Merger Tips (final revised in 1997); the FTC/DOJ Antitrust
Tips on Competitor Collaborations (2000); the FTC/DOJ
Antitrust Steerage for Human Assets Professionals (2016); the
FTC/DOJ Antitrust Tips for the Licensing of Mental
Property (2017); and the FTC/DOJ Vertical Merger Tips (2020,
withdrawn by the FTC in 2021).

For Extra Data

When you’ve got any questions on this Alert, please
contact Christopher H. Casey, Melissa S. Geller, Sean P. McConnell, Brian H. Pandya, any of the attorneys in our Antitrust and Competition Group or the
lawyer within the agency with whom you might be usually in touch.

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