The Newest Wave Of Antitrust "Crimes": Revival Of Criminal Monopolization

• Jurisdiction: United States,Federal
• Law Firm: Sheppard Mullin Richter & Hampton
• Subject Matter: Antitrust/Competition Law, Criminal Law, Antitrust, EU Competition , Crime
• Author: Mr Samuel J. O'Brien
• Published date: 28 February 2023

BY ANN O'BRIEN¹

The Antitrust Division of the Department of Justice is aggressively enforcing and expanding the scope of criminal antitrust cases it is willing to bring, including a first wave of novel criminal no-poach cases. In its next criminal wave, the Antitrust Division has revitalized its use Section 2 of the Sherman Antitrust Act to criminally prosecute monopolization, something the Division has not done in over 40 years. These modern criminal monopolization cases raise many questions for companies and the counsel who advise them. Is the mere invitation to collude now a prosecutable criminal offense? How will the U.S. Sentencing Guidelines, which lacks a section explicitly governing criminal monopolization, apply in these cases? These seismic shifts from the Antitrust Division underscore the importance of robust and regular antitrust compliance for companies and executives so that employees and counsel are aware of the changing landscape, can spot new red flags, and know to immediately report any potential issues to counsel.

I. INTRODUCTION

The Antitrust Division (the "Division") of the Department of Justice ("DOJ") is zealously expanding the types of conduct it is prosecuting criminally. In recent years, the Division has aggressively exercised its prosecutorial powers to criminally prosecute more conduct under both Section 1 and Section 2 of the Sherman Antitrust Act.² Indeed, waves of significant policy and practice changes are making the criminal waters of antitrust choppier than ever.

II. THE FIRST WAVE - CRIMINAL NO POACH AND LABOR FOCUS

The first wave of criminal antitrust expansion was the criminalizing of no-poach agreements as part of an intense focus on labor movement.³

In 2016 the DOJ and FTC issued joint guidance for HR professionals about the application of the federal antitrust laws to hiring practices and worker mobility.⁴ The DOJ said it would criminally prosecute no-poach agreements and other forms of collusion in the labor market, with a pointed warning: "Going forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poach agreements."⁵

Wage-fixing, a form of price-fixing, includes agreements among firms to fix salaries at a certain level or within a certain range, which the Division analogizes to price-fixing. No-poach agreements, on the other hand, are agreements among firms not to solicit or hire each other's employees, which the Division analogizes to market allocation. Comparing to these long-recognized categories of per se antitrust conduct - price fixing and market allocation - is important to the Division's criminal prosecution of this conduct because per se antitrust offenses typically require no showing of actual harm or affect; the agreement itself is considered a per se crime. While criminal antitrust cases, like any other federal criminal case, require DOJ proof beyond a reasonable doubt, the per se classification allows a shortcut, i.e. converting the conduct to essentially a strict liability crime, once the DOJ shows an agreement.

For years after the release of the 2016 HR Guidance, the DOJ continued to foreshadow criminal no-poach and labor market charges were coming.⁶ Yet, they did not bring the first criminal wage-fixing case until December 2020;⁷ the first criminal no-poach case did not come until 2021.⁸ The first criminal wage-fixing and no-poach trials began on April 4, 2022, and both resulted in across-the-board acquittals for all defendants on all antitrust charges.⁹

Despite back-to-back losses in these critical first criminal trials, Antitrust Division Assistant Attorney General Kanter has repeatedly vowed that he and the Division won't back down in efforts to investigate and criminally charge no-poach and wage-fixing agreements.¹⁰

The Division has brought other criminal no poach cases that are pending trial,¹¹ and obtained one plea in a no poach case, resulting in the payment of a $62,000 fine and $72,000 in restitution¹² and a post-indictment pretrial diversion for the charged executive.¹³ However, the Division has yet to convince a jury to criminally convict a single defendant for no-poach or wage-fixing conduct.

The Division has spent significant resources investigating and attempting to prosecute no poach crimes, with, so far, underwhelming results. But, given its aggressive approach, we can expect to see the Division bring more labor cases as it forges forward relentlessly into the choppy waves of these murky labor-focused criminal antitrust waters.

III. THE NEW WAVE - CRIMINAL MONOPOLIZATION

The Division has recently returned to criminally prosecuting monopolization, bringing its first criminal monopolization case under Section 2 of the Sherman Act in over 40 years.¹⁴ The DOJ has long been able to bring criminal charges under both Sherman Act Sections 1 (collusion) and 2 (monopolization), but for decades it has exercised its prosecutorial discretion to reserve criminal antitrust cases under Section 1 for only the post pernicious horizontal agreements among competitors not to compete deemed by courts per se harmful to competition - such as price-fixing, bid-rigging, and market allocation.

When the Division last brought criminal Section 2 cases in the 1970s, the Sherman Act did not carry felony penalties, so a corollary Section 2 case brought alongside a traditional Section 1 case allowed for cumulative penalties for multiple...