On October 31, 2022, the US Division of Justice’s (DOJ) Antitrust Division (Division) made good on its intention earlier this year to revitalize efforts surrounding felony enforcement of Part 2 of the Sherman Act when the president of a paving and asphalt contractor in Montana pleaded responsible to 1 rely of making an attempt to monopolize the marketplace for sure development companies in Montana and Wyoming. That is the Division’s first felony prosecution of a Part 2 case in roughly 50 years. Whereas felony enforcement of antitrust legal guidelines has historically centered on per se anticompetitive agreements between two or extra horizontal rivals, Part 2 primarily focuses on conduct by one agency or firm with vital market energy. This announcement—and subsequent felony decision—marks a major departure from long-standing DOJ antitrust enforcement of monopolization claims and is a landmark consequence for the Division’s continued growth of its felony enforcement efforts.
Most notably, seemingly unilateral conduct that “makes an attempt” to collude is now topic to felony prosecution beneath Part 2, even when such an try did not lead to any settlement. In distinction, there isn’t a “try” part of a Sherman Act Part 1 cost, the place the Division has historically investigated and prosecuted per se felony worth fixing, bid rigging and market allocation conduct requiring an settlement or “assembly of the minds” between horizontal rivals.
In response to court docket paperwork, the DOJ alleged that Nathan Nephi Zito tried to monopolize the markets for freeway crack sealing companies administered by Montana and Wyoming by proposing that his firm and its competitor allocate regional markets. Zito approached a competitor a few “strategic partnership” and proposed that his firm would cease competing for initiatives administered by South Dakota and Nebraska and the competitor would cease competing for initiatives administered by Montana and Wyoming. Zito allegedly provided a $100,000 fee as further compensation for misplaced enterprise in Montana and Wyoming and proposed that they enter right into a transaction to “disguise their collusion.” The competitor firm then approached the federal government and cooperated in its investigation, together with by recording cellphone calls with Zito.
This case, the primary Part 2 felony decision in many years, was prosecuted in coordination with the Procurement Collusion Strike Drive (PCSF), which stays a high precedence for the DOJ. The PCSF has been fairly lively in current months, acquiring a number of convictions and bringing new indictments.
Though Part 2 is usually related to unilateral monopolist conduct, it additionally makes it against the law to aim to monopolize or to conspire to monopolize. The “try” provision is what the Division relied on to acquire a conviction on this case, which is basically an tried however unconsummated Part 1 market allocation case the place one of many potential conspirators cooperated with the federal government slightly than getting into right into a probably collusive settlement.
Key takeaways from this case embrace the next:
- Now corporations want to think about probably collusive agreements with rivals—or makes an attempt to do the identical—that will exclude different rivals from a market of their antitrust danger evaluations. In apply, this might considerably broaden the scope of any compliance or inside investigation to incorporate all competitor communications, not solely to find out which of them could have constituted an settlement however to find out which of them have made makes an attempt to achieve an settlement as effectively, even when no assembly of the minds occurred.
- This case additionally broadens the vary of potential felony conduct falling in need of an settlement or assembly of the minds between alleged horizontal rivals, increasing the complexities of danger evaluations for company compliance and danger officers and company executives.
- This prosecution underscores the significance of continuous ongoing compliance evaluations and audits, together with growing controls round and figuring out communications with rivals and responding to a different firm’s solicitation to collaborate or enter right into a probably collusive settlement.