GeyerGorey has extensive experience in civil and criminal antitrust investigations and trials. The firm’s attorneys have worked with anti-cartel (antitrust) enforcement agencies in North America, South America, Europe and Asia and are familiar with procedures followed in investigations in the United States and elsewhere, including with leniency (amnesty) application procedures in the United States and internationally.
The United States and many jurisdictions around the world recognize and protect competition. Competition after all encourages firms to develop new products, services and technologies that give consumers greater selection and better products often at lower prices. Companies can also enter into agreements that may substantially lessen competition or tend to create a monopoly. Companies may also abuse their dominant position by engaging in behavior that is lawful for smaller companies. Over 100 jurisdictions now have variations of competition laws to address this perceived harm.
The two most important federal antitrust laws in the United States are the Sherman Act, 15 U.S.C. § 1 et seq., and the Clayton Act, 15 U.S.C. § 12 et seq. Section 1 of the Sherman Act prohibits contracts, combinations and conspiracies that unreasonably restrain trade.
The federal government can prosecute any Sherman Act violation criminally or civilly. Over the past 30 years, the United States has prosecuted cartels criminally. Price fixing, bid rigging and other horizontal conduct falling into the per se category are the sorts of joint activity that are considered to have no redeeming virtue. For this reason, in a criminal case, the government need not show any actual effect on competition or anticompetitive intentions of the actors to prove an offense.
A corporation convicted of violating Section 1 of the Sherman Act is punishable by a fine of up to $100 million, or more, if the loss to victims or the gain to the perpetrators exceeds $50 million. In such a case, the fine amount may be doubled. Individuals who violate the Sherman Act are punishable by fines of up to $1 million and jail sentences of up to 10 years, or both.
When conduct does not fall within the per se category, the Department of Justice brings the case civilly and generally seeks an injunction against the conduct as the remedy. When the effect of the conduct in question is ambiguous or arguably has redeeming benefits, it is evaluated under the Supreme Court’s rule of reason standard. In deciding whether the conduct or practice violates the law, the courts examine the restraint’s effect on competition, any non-pretextual business justifications for the conduct, and whether any lesser restrictive alternatives exist.
If the practice is ultimately determined to suppress competition, the court will enjoin it. This means that the defendant, or defendants, will be ordered to cease the practice on pain of contempt (future sanctions), if the court’s order is violated. While a case initiated by the government would not generally result in a fine, it often is the precursor to a civil case by private parties claiming to have suffered injury from the conduct. Such persons would be entitled, if they could establish that they suffered an “antitrust injury,” to treble damages and reasonable attorneys’ fees.
The Clayton Act, which is purely civil in nature, makes unlawful mergers and acquisitions that may substantially reduce competition or tend to create a monopoly. The government virtually always brings its action before the acquisition or merger has been completed and seeks an injunction to prevent the merger or acquisition from taking place. The remedy in such a case is an order preventing the business combination altogether or the divestiture of assets necessary to restore competition.
Criminal offenses under the Sherman Act are prosecuted by the Department of Justice, Antitrust Division. The Antitrust Division has offices in Washington, D.C., as well as field offices in several major cities around the country. Civil offenses under the Sherman Act are also prosecuted by the Antitrust Division. Violations of the Clayton Act may be prosecuted either by the Antitrust Division or the Federal Trade Commission.
As noted, in addition to proceedings that may be initiated by the government, persons or companies injured by violations of the antitrust laws have a private right of action to seek damages for “antitrust injury” from violators.
Antitrust Criminal Defense
In the past decade, criminal antitrust enforcement has become a global enterprise, with all major industrialized countries having active antitrust enforcement agencies, each of which has the power, either in agency or court proceedings, to impose substantial fines on companies as well as, sometimes, individuals, for engaging in cartel conduct — usually bid rigging or price fixing. While most countries have not yet criminalized their anti-cartel laws, there is a decided trend toward criminalization, placing individuals at risk of jail sentences. In the United States, of course, conspiracies to rig bids, fix prices or allocate customers or territories have long been held per se unlawful and are prosecuted criminally.
Firms with worldwide businesses have exposure to enforcement actions by both national and multi-national authorities, such as the European Union. To encourage self-reporting of wrongful conduct, the United States, the European Union and a number of national enforcement agencies have adopted amnesty programs THAT provide substantial benefits for firms that self-report wrongdoing. These benefits may include an agreement not to prosecute the reported conduct (this agreement may cover not only the company but also its executives and employees).
The legal issues are often not clear-cut. for example, an asset swap between two competitors, can be deemed (a) per se illegal under Section 1 of the Sherman Act as a horizontal market allocation agreement, or (b) a potentially legitimate sale of assets, the legality of which is determined under the Sherman Act’s rule of reason standard, or the standard relevant to Section 7 of the Clayton Act. The case law and antitrust commentary on this issue vary. The implications for your company of these different analytical approaches are significant in terms of the available defenses. How do you determine whether your company is planning an agreement or transaction that could be deemed to unreasonably restrain trade, and, at worst, could result in a criminal prosecution?
There are dangerous pitfalls for inexperienced counsel who attempt to navigate in these waters. Mistakes can be costly, leading to heavy fines and jail terms for executives.