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 at least one depend of making an attempt to monopolize the marketplace for sure building providers 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 opponents, Part 2 primarily focuses on conduct by one agency or firm with important 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 end result for the Division’s continued enlargement of its felony enforcement efforts.
Most notably, seemingly unilateral conduct that “makes an attempt” to collude is now topic to felony prosecution below Part 2, even when such an try did not end in any settlement. In distinction, there is no such thing as a “try” part of a Sherman Act Part 1 cost, the place the Division has historically investigated and prosecuted per se felony value fixing, bid rigging and market allocation conduct requiring an settlement or “assembly of the minds” between horizontal opponents.
Based on courtroom paperwork, the DOJ alleged that Nathan Nephi Zito tried to monopolize the markets for freeway crack sealing providers 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 tasks administered by South Dakota and Nebraska and the competitor would cease competing for tasks administered by Montana and Wyoming. Zito allegedly supplied a $100,000 cost 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 telephone calls with Zito.
This case, the primary Part 2 felony decision in a long time, was prosecuted in coordination with the Procurement Collusion Strike Power (PCSF), which stays a high precedence for the DOJ. The PCSF has been fairly energetic in latest months, acquiring a number of convictions and bringing new indictments.
Though Part 2 is recurrently 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 actually an tried however unconsummated Part 1 market allocation case the place one of many potential conspirators cooperated with the federal government relatively than coming into right into a doubtlessly collusive settlement.
Key takeaways from this case embrace the next:
- Now firms want to think about doubtlessly collusive agreements with opponents—or makes an attempt to do the identical—which will exclude different opponents 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 succeed in an settlement as effectively, even when no assembly of the minds occurred.
- This case additionally broadens the vary of potential felony conduct falling wanting an settlement or assembly of the minds between alleged horizontal opponents, increasing the complexities of danger evaluations for company compliance and danger officers and company executives.
- This prosecution underscores the significance of constant ongoing compliance opinions and audits, together with creating controls round and figuring out communications with opponents and responding to a different firm’s solicitation to collaborate or enter right into a doubtlessly collusive settlement.