DOJ Obtains First Criminal Monopolization Conviction In Over 40 Years: Revolution Or Reprise?

Published date04 November 2022
Subject MatterAntitrust/Competition Law, Criminal Law, Antitrust, EU Competition , Crime
Law FirmWilmerHale
AuthorMr Thomas Mueller, Leon Greenfield, Perry A. Lange, Nana Wilberforce and John W. O'Toole

On October 31, 2022, the US Department of Justice (DOJ) secured a criminal guilty plea from Nathan Zito, the president of a Montana paving and asphalt contractor, to attempted monopolization under Section 2 of the Sherman Act. The guilty plea marks the first criminal conviction for monopolization or attempted monopolization in over 40 years.

Zito is alleged to have pursued, unsuccessfully, a geographic market allocation scheme with a competitor.1 According to the charging document, Zito's company and its competitor are often "the only two companies that submit bids for crack sealing projects" in the relevant states. As a result, the market allocation scheme that Zito proposed would have effectively resulted in monopolies in those states.2

The prosecution comes several months after former Deputy Assistant Attorney General for Antitrust Richard Powers announced that "if the facts and law lead us to the conclusion that a criminal charge based on a Section 2 violation is warranted, then that's what we'll do, we'll charge it."3 And one month later, Assistant Attorney General for Antitrust Jonathan Kanter remarked that DOJ "will aggressively pursue enforcement of the criminal antitrust laws to protect consumers, workers and businesses harmed by unlawful collusion and monopolization."4 These broad statements received substantial attention in the antitrust community: Would DOJ begin pursuing criminal cases for heartland monopolization conduct'say, exclusionary exclusive dealing agreements'that the antitrust agencies have challenged only civilly for the past many decades?

Even with the conviction in Zito, a definitive answer to that question remains outstanding. Zito involves very specific circumstances: (i) if a market allocation agreement had been consummated, the agreement would have been a per se violation of the antitrust laws; and (ii) because Zito's company and its competitor were the only two suppliers in relevant geographic markets, a consummated agreement would have given Zito's company or its current competitor monopolies in relevant markets. Because there was no consummated agreement, DOJ could not have challenged Zito's conduct under Section 1 of the Sherman Act. Finally, while this is DOJ's first criminal conviction under Section 2 since 1979, the underlying theory conforms with a long history of the antitrust agencies employing creative approaches to pursue conduct civilly under a theory of invitation to collude.

Zito: An Invitation to Collude

Zito pleaded guilty to engaging in anticompetitive conduct with the intent to gain monopoly power, which DOJ premised on Zito's proposal in January 2020 to a competitor that they enter into a "strategic partnership."5 Instead of agreeing to the plan, however...

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