This case is unusual not only because of the criminal use of Section 2, but also because Section 2 claims and charges against individuals are rare and relatively untested legally.

Consistent with its promise to revive criminal charges under Section 2 of the Sherman Act, the U.S. Department of Justice Antitrust Division recently announced that the owner and president of a paving and asphalt contractor based in Billings, Montana, pled guilty to a criminal count of attempted monopolization under Section 2. The DOJ’s press release indicates that the guilty plea was the result of a joint investigation conducted by the Antitrust Division, the U.S. Attorney’s Office for the District of Montana and the Department of Transportation Office of Inspector General as part of the Justice Department’s Procurement Collusion Strike Force. The case represents the first time in nearly 50 years that the DOJ has brought criminal charges against a defendant under Section 2.

According to the one-count information filed by the government, the defendant, Nathan Zito, called the executive of a competitor and proposed an arrangement to allocate the market for publicly funded highway crack-sealing services. Zito suggested that under the agreement, the competitor company would decline to bid on all projects in Montana and Wyoming, and in return, Zito’s company would decline to bid on projects in South Dakota and Nebraska. Upon receiving the phone call, the executive of the competitor company notified the Department of Transportation, and did not agree to allocate markets as the defendant had proposed.

Had the competitors agreed to the market allocation, the information would typically be charged under Section 1―as bid rigging and market allocation are classic horizontal agreements that are per se illegal under the Sherman Act. However, Section 1 claims require the government to prove an agreement―and in this case, the competitor did not agree. According to the information filed in this case, Zito’s company and the competitor were often the only two companies to bid for highway crack-sealing projects administered by the state departments of transportation in these states. Likely as a result of these facts, the government framed the case as an attempt to monopolize the market for highway crack sealing services in Montana and Wyoming. The fact that DOJ brought criminal charges under Section 2 is notable because in recent decades, DOJ has brought civil charges under Section 2 for similar behavior. See, e.g., United States v. American Airlines, Inc., 743 F.2d 1114 (5th Cir.1984).

This case is unusual not only because of the criminal use of Section 2, but also because Section 2 claims and charges against individuals are rare and relatively untested legally. Such charges present additional legal hurdles to overcome compared to a Section 1 claim. For example, to prove a Section 2 violation, the government has to show monopoly power—or, in the case of attempted monopolization, a dangerous probability of achieving monopoly power—which is analytically difficult when the defendant is an individual. In this case, however, the defendant pled guilty, so DOJ’s legal theory was not put to the test.

This case is part of an enforcement trend to bring claims and charges against individuals for violations of the antitrust laws, and reflects the DOJ’s renewed focus on Section 2—and fulfillment of its intent to revive criminal charges under Section 2—which Assistant Attorney General Jonathan Kanter announced earlier this year. DOJ still has not provided any guidance related to criminal enforcement of Section 2, and the plea sheds little light on this issue. Businesses should invest in robust and effective compliance programs, and both businesses and their employees should take extra precautions to avoid anticompetitive conduct. Companies should consult with experienced antitrust counsel to help them navigate this rapidly changing landscape.

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