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Antitrust Crimes

In 1890, the Sherman Anti-Trust Act made it illegal for individuals or corporations to limit or attempt to limit interstate or international trade.  The objective of 15 U.S.C. §§ 1 et seq. is to "protect trade and commerce from restraints, monopolies, price-fixing, and price discrimination” (Black’s Law Dictionary 104, 8th ed. 2005). The types of actions prosecuted under antitrust laws have expanded recently to include such activities as horizontal mergers and bid-rigging. For more information regarding antitrust laws, refer to UNITED STATES DEPT. OF JUSTICE, Antitrust Enforcement and the Consumer by clicking here (last viewed Jul. 13, 2005). If a defendant is charged with committing a crime in violation of Title 15, Assistant U.S. Attorneys may decide to prosecute the defendant under both Title 15 and other criminal statutes. For example, in the case of United States v. Romer, 148 F.3d 359 (4th Cir. 1998), the defendant received an enhanced sentence when he was charged with obstruction of justice in addition to antitrust violations.

The UNITED STATES DEPT. OF JUSTICE, Antitrust Division Manual, Chapter II, Provisions and Guidelines of the Antitrust Division, which may be found here, outlines the provisions that affect the enforcement and prosecution of antitrust crimes (last visited Jul. 13, 2005). Additionally, the UNITED STATES DEPT. OF JUSTICE AND FED. TRADE COMM., HORIZONTAL MERGER GUIDELINES (APR. 8, 1997), which may be accessed here, provides the updated guidelines for horizontal mergers (last visited Jul. 13, 2005).  The guidelines dictate the manner in which the United States Department of Justice Antitrust Division analyzes whether a merger will significantly reduce competition, but it does not address how the litigation of these cases must be conducted (Id. at § 0.1; last visited Jul. 13, 2005, available here). An investigation by the Antitrust Division begins with a consideration of what actions consumers or produces are likely to take in their own interest.

The guidelines also give insight into how an investigation proceeds: First, it is determined by the Antitrust Division whether a merger would produce a concentrated market.  The Antitrust Division then analyzes whether the merger may have negative effects on competition. Next, the Antitrust Division decides upon whether the merger would be timed in a manner that offsets problematic effects on competition. The Antitrust Division additionally determines whether the merger will enable an increase in efficiency that the parties cannot attain in another manner. Lastly, the Antitrust Division analyzes whether any of the parties would fail if they were not to engage in the merger. By investigating these potential effects of the merger, the Antitrust Division is able to assess the merger’s power to generate or expand markets. (See Id. at § 0.2 here; last visited Jul. 13, 2005).

According to 15 U.S.C. § 24, agents of a corporation who are engaged in a violation of antitrust laws are subject to the penal provisions under 15 U.S.C. §§ 1 et seq. if the corporation is under the authority of the laws of the United States, any U.S. Territory, any U.S. State, or any foreign nation. In other words, individuals are not exempt from prosecution under 15 U.S.C. §§ 1 et seq. merely because they are agents of a foreign corporation.

Activities excluded from punishment by antitrust laws
Some activities and organizations cannot be punished under antitrust laws. Major League Baseball and labor organization have received exemptions for antitrust laws under 15 U.S.C. § 26b (2005) and 15 U.S.C. § 17 (2005). Furthermore, antitrust laws are not usually applicable to charitable gift annuities and charitable remainder trusts according to 15 U.S.C. § 37(a) (2005).

Behavior not punished by the antitrust laws
Certain behavior has been given exemption to prosecution under the antitrust laws. For example, labor organizations have certain exemptions available. See 15 U.S.C. § 17 (2005). Major League Baseball has exemptions as well. See 15 U.S.C. § 26b (2005). With certain exceptions, the antitrust laws will not apply to charitable gift annuities or charitable remainder trusts. 15 U.S.C. § 37(a) (2005).

15 U.S.C. § 1 (2005).

The Crime
Under section 1, "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations," is illegal. 15 U.S.C. § 1 (2005). Therefore any person who makes such a contract, or engages in any such combination or conspiracy, is guilty of a felony. Id.

The Punishment
Punishment for a violation of section 1 is:

  • a fine of not more than
    • $100,000,000 if the violator is a corporation, or
    • $1,000,000 if the violator is any other person; or
  • imprisonment for not more than 10 years; or
  • both, by the discretion of the court. Id.

Case Law Interpreting Section 1
Prosecutions under the antitrust laws are notoriously complicated and lengthy. The elements of an antitrust violation appear to be relatively straightforward. In a criminal case, the government must prove that the defendants entered into a contract, combination, or conspiracy; that this agreement "unreasonably" restrained trade; and that the restraint affected interstate commerce. See Reyn's Pasta Bella, LLC v. Visa U.S.A., Inc. 259, F. Supp. 2d 992, 997-98 (N.D. Cal. 2003) (elements as expressed in Federal civil case). Notice, however, that the case law that interprets section 1 has evolved over the years to include an "unreasonable" requirement to the restraint of trade component that is not in the statute. See Sitkin Smelting & Refining Co. v. FMC Corp. 575 F.2d 440, 446 (3d Cir. 1978) (although 15 U.S.C. § 1 prohibits "every" contract, combination, or conspiracy in restraint of trade, the law has been construed as precluding only such agreements which "unreasonably" restrain competition because every agreement restrains trade in some way). Furthermore, determining what constitutes contracts, combinations, and conspiracies has proven to be contentious, as has defining what exactly constitutes a restraint of trade.

United States v. Nippon Paper Indus. Co., 109 F.3d 1 (1st Cir. 1997).
This case raised a question that, at that time, had not been answered: can a foreign corporation be convicted under the antitrust laws for price-fixing schemes that took place entirely in Japan? Nippon Paper at 2. The district court declared that it could not, and dismissed the indictment. Id. The government appealed and the Court of Appeals ruled that it could. Id. The defendant in this case, a Japanese corporation, was indicted under section 1 for agreeing with unnamed coconspirators to fix the price of thermal fax paper throughout North America. Id. The court noted that the Supreme Court, in Hartford Fire Ins. Co. v. California, 509 U.S. 764 (1993), permitted a civil antitrust claim under section 1, deeming it "'well established by now that the Sherman Act applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States.'" Nippon Paper at 4 (quoting Hartford Fire at 796). The court then noted that "in both criminal and civil cases, the claim that [section 1] applies extraterritorially is based on the same language in the same section of the same statute. … It is a fundamental interpretive principle that identical words or terms used in different parts of the same act are intended to have the same meaning." Id. Therefore, "unless some special circumstance obtains in this case, there is no principled way in which we can uphold the order of dismissal." Id. at 6. The court did not find one. "Hartford Fire definitively establishes that [section 1] of the Sherman Act applies to wholly foreign conduct which has an intended and substantial effect in the United States. We are bound to accept that holding. Under settled principles of statutory construction, we are also bound to apply it by interpreting [section 1] the same way in a criminal case." Id. at 9.

Hester v. Martindale-Hubbell, Inc., 493 F. Supp. 335 (E.D.N.C. 1980) aff'd 659 F.2d 433 (4th Cir. 1981).
In this civil case, the plaintiff brought suit against the defendants arguing that they "conspired … to exclude him from advertising in the biographical section of the [Martindale-Hubbell] Directory and thereby unlawfully restrained interstate trade." Hester at 338. The court, mentioned the following "crucial factors" in determining what constitutes "'concerted activity' within the meaning of the Sherman Act:

  1. all members of the combination knew of the defendant's purpose to restrain trade;
  2. at least two members of the combination benefited by the restraint of trade and, in that sense, shared a common purpose in restraining trade;
  3. the agreement by two members of the combination actually restrained trade, as opposed to merely facilitating the restraint; and
  4. at least two members of the combination intended to restrain trade.

Id. at 338-339 (quoting Harold Friedman, Inc. v. Kroger Company, 581 F.2d 1068, 1073 (3d Cir. 1978).) In this particular case, the court found that the plaintiff "failed to present sufficient evidence of a conspiracy or concerted activity." 659 F.2d at 435.

15 U.S.C. § 2 (2005).

The Crime
It is a felony violation of section 2 for a person to

  • monopolize, or
  • attempt to monopolize, or
  • combine or conspire with any other person or persons to monopolize
any part of the trade or commerce among the several States, or with foreign nations. 15 U.S.C. § 2 (2005).

The Punishment
Punishment for a violation of section 2 is:

  • a fine of not more than
    • $100,000,000 if the violator is a corporation, or
    • $1,000,000 if the violator is any other person; or
  • imprisonment for not more than 10 years; or
  • both, by the discretion of the court. Id.

Case Law Interpreting Section 2
Similar to cases brought under section 1, cases under section 2 are also complicated. It should be noted at this point that the prime purpose of the antitrust laws is to protect the public from the failure of the market, Walgreen Co. v. Organon, Inc. 335 F. Supp. 2d 522, 527 (D.N.J. 2004), and to prevent single firms that monopolize or attempt to monopolize, as well as conspiracies and combinations to monopolize. Spectrum Sports v. McQuillan, 506 U.S. 447, 454 (1993). To prove a case of attempted monopolization, the government must prove

  1. that the defendant has engaged in predatory or anticompetitive conduct with
  2. a specific intent to monopolize and
  3. a dangerous probability of achieving monopoly power. Id. at 456.

In order to determine whether there is a dangerous probability of monopolization, "courts have found it necessary to consider the relevant market and the defendant's ability to lessen or destroy competition in that market." Id.

15 U.S.C. § 3 (2005).

The Crime
Section 3 is an extension of sections 1 and 2. Under section 3(a), "every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce" that occurs in any Territory of the United States, in the District of Columbia, or among any such location and any State or foreign nation, is illegal. 15 U.S.C. § 3(a) (2005). Therefore, any person makes any such contract or engages in any such combination or conspiracy, is guilty of a felony. Id.

It is a felony violation of section 3(b) for a person to

  • monopolize, or
  • attempt to monopolize, or
  • combine or conspire with any other person or persons to monopolize
any part of the trade or commerce in any Territory of the United States, in the District of Columbia, or among any such location and any State or foreign nation. 15 U.S.C. § 3 (2005).

The Punishment
Punishment for a violation of section 3(a) is:

  • a fine of not more than
    • $100,000,000 if the violator is a corporation, or
    • $1,000,000 if the violator is any other person; or
  • imprisonment for not more than 10 years; or
  • both, by the discretion of the court. Id. § 3(a).

Punishment for a violation of section 3(b) is:
  • a fine of not more than
    • $100,000,000 if the violator is a corporation, or
    • $1,000,000 if the violator is any other person; or
  • imprisonment for not more than 10 years; or
  • both, by the discretion of the court. Id. § 3(b).

Case Law Interpreting Section 3
Section 3 is, by its terms, the exact counterpart of sections 1 and 2 of title 15, only it expressly applies to the territories and the District of Columbia. See Dart Drug Corp. v. Parke, Davis & Co. 344 F.2d 173, 174 n.1 (D.C. Cir. 1965) (interpreting section 1). It is, however, slightly more expansive than section 1 in that it does not require an interstate component. See United States v. Oregon State Medical Soc. 343 U.S. 326, 339 (1952). Other than those two tweaks, a case under section 3 will be prosecuted in the same manner as a case under section 1.

15 U.S.C. § 8 (2005).

The Crime
Section 8 (also known as the Wilson Act) expands the proscribed behavior found in section 1 (combinations, conspiracies, trusts, agreements, or contracts in restraint of trade or commerce) and applies it to behavior made "by or between two or more persons or corporations [who are] engaged in importing any article from any foreign country into the United States," when that behavior is intended to

  • operate in restraint of lawful trade or free competition, or
  • to increase the market price in the United States of
    • any article or articles imported or intended to be imported, or
    • any manufacture into which the imported article enters or is intended to enter. 15 U.S.C. § 8 (2005).

Therefore, it is a misdemeanor violation for a person to

  • engage in such proscribed behavior, or
  • conspire or combine to engage in such proscribed behavior. Id.

The Punishment
Punishment for a violation of section 8 is:

  • a fine of not less than $100 and not more than $5,000, and
  • imprisonment, in the discretion of the court, for not less than three months and not more than twelve months.

Case Law Interpreting Section 8
Section 8 is not more comprehensive in its scope than the Sherman Act, and it serves only to make the law more specific in its application to foreign commerce. Fosburgh v. California & Hawaiian Sugar Refining Co., 291 F. 29, 32 (9th Cir. 1923). Furthermore, since it does not supersede sections 1 or 2, both Acts can be applied to restraints on import trade. 152 F. Supp. 818, 821 (N.D. Cal. 1957). In one case, Western Concrete Structures Co. v. Mitsui & Co., 760 F.2d 1013 (9th Cir. 1985), the Ninth Circuit held that allegations that the defendants conspired to import steel into the United States at prices below those permitted by import restrictions, in order to obtain steel at prices lower than those which the defendant's competitors could obtain it legally, were sufficient to state a claim under section 8. Id. at 1018-19. It is important to note that while section 8 relates to section 1, it is not analogous to section 2. Id.

15 U.S.C. § 24 (2005).

The Crime
Under section 24, the directors, officers and agents of a corporation which violates any of the penal provisions of the antitrust laws, will also be deemed to have committed a misdemeanor violation the antitrust laws if they

  • authorized,
  • ordered, or
  • did any of the acts constitution in whole or in part

such violation. 15 U.S.C. § 24 (2005).

The Punishment
Punishment for a violation of section 24 is:

  • a fine of not more than $5,000
  • imprisonment for not more than one year, or
  • both, by the discretion of the court. Id. § 24.

Case Law Interpreting Section 24
United States v. North American Van Lines, Inc., 202 F. Supp. 639 (D.D.C. 1962).
The defendants in this case were charged with violating 15 U.S.C. §§ 1 and 3. North American Van Lines at 640. The defendants moved to dismiss the indictment as to them, asserting that the indictment did not allege any acts done by them other than as representatives of their corporations in their capacity as corporate officers, and therefore, any acts authorized by them are not covered by sections 1 and 3, but only by 15 U.S.C. § 24. Id. at 640-41. The government opposed the motion, maintaining that the defendants should be charged in a dual capacity, "that is, as representatives of their corporation in their corporate capacity and also as individuals in a personal capacity." Id. at 641. In effect, the court notes, "the argument of the defendants is that if corporate officers acting in their representative capacity ever were within [s]ection[s] 1 and 3 of the Sherman Act, then they were lifted out of these sections when [s]ection 14 ... was adopted." Id. at 642. However, section 14 was intended to "'supplement the purpose and effect of other antitrust legislation.'" Id. (quoting Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, 355 (1921)). The court also notes the legislative history of section 14 which makes it clear that section 14 does not supplant other penal provisions, but supplements it. Id. at 642-43. "[T]he claim of the individual defendants that section 14 … affords the Government its sole statutory basis for prosecuting them is not well founded, and that under the allegations of the indictment they are subject to prosecution" under sections 1 and 3. Id. at 646.

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