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Back to the Antitrust Future – Are Attempts to Violate the Sherman Act a Crime?

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Home Perspectives Back to the Antitrust Future – Are Attempts to Violate the Sherman Act a Crime?
Thirty-one years ago, the Reed Smith Antitrust and Competition team first addressed criminal prosecution of attempts by a single actor to fix prices. Our focus then was on attempts to conspire to fix prices. Then as now, of course, it was a per se violation of Section 1 of the Sherman Act, and a crime, to agree with another economic actor to fix prices of any commodity or service. The question we confronted at the time was whether trying to agree with a competitor to fix prices could be charged as a crime. All agree that Section 1 itself does not cover an attempt to conspire.

Authors: Daniel I. Booker Daniel H. Ahn Wardah A. Bari

Back then, Department of Justice (DOJ) prosecutors turned a bit creative and charged a crime in two cases where there was a clear attempt to fix prices but where no “contract, combination or conspiracy” was reached. In those cases, the Antitrust Division charged wire fraud, not the Sherman Act, as the basis for the prosecution. The cases netted two guilty pleas by corporate defendants. But one individual executive charged with the same wire fraud for attempting to fix prices took the case to a jury. He was acquitted for lack of adequate proof of “specific intent” to defraud, which is an element of wire fraud.

Over the last three decades, the issue of criminal liability for attempting to violate antitrust laws seems to have faded away.

Last week, however, on facts that appear to be a prosecutor’s dream for a test case, the Antitrust Division and the U.S. Attorney in Montana announced a criminal information, charging an individual executive and business owner with a felony for attempting to arrange with a competitor to allocate between themselves state by state markets for highway crack-sealing services: U.S. v. Zito. Had Mr. Zito’s alleged attempt succeeded, the facts would have supported an indictment under Section 1, charging a per se illegal market allocation agreement. The attempt did not succeed because Mr. Zito’s competitor immediately contacted prosecutors about Zito’s suggestion. Prosecutors then recorded Zito’s calls with the cooperating competitor.

Not having proof of the meeting of the minds required to indict under Section 1 of the Sherman Act, the government this time around eschewed reliance on the crime of wire fraud and instead charged a criminal violation of Section 2 of the Sherman Act.

This use of Section 2 is new, and it’s a surprise. But is it an important development? Some might think Zito is a one-off flash in the pan, perhaps even a PR stunt to claim progress under the Biden administration’s ballyhooed policy of toughening antitrust enforcement and, more specifically, to show progress by the DOJ’s Procurement Collusion Task Force. Other observers (like our team) acknowledge the unique facts and political context but want to understand any new risks presented by criminal enforcement of Section 2.