- U.S. v. Nathan Nephi Zito is the first criminal monopolization case in more than 40 years, reversing the Antitrust Division's practice of pursuing monopolization cases only civilly.
- The elements enumerated in the Zito plea agreement are the same elements required in a civil case, but prosecutors may encounter obstacles trying to prove these elements beyond a reasonable doubt to a lay jury in future criminal monopolization cases.
- It remains to be seen if Antitrust Division prosecutors will seek jail time for Zito and how the court would calculate an appropriate sentence, as the sentencing guidelines contemplate conspiratorial conduct among horizontal competitors.
Background of 'U.S. v. Nathan Nephi Zito'
On Oct. 31, the Antitrust Division of the Department of Justice (DOJ) secured its first criminal monopolization conviction in almost half a century.1 The prosecution comes after the Antitrust Division this spring proclaimed its intention to aggressively pursue criminal monopolization cases.2
Individual defendant Nathan Zito was charged with, and pled guilty to, one count of attempted criminal monopolization, in violation of Section 2 of the Sherman Act. Zito was the owner of a Montana-incorporated paving and asphalt company that primarily provided crack-sealing services for publicly funded highway projects. In 2020, he tried to persuade a competitor to agree to divide territories - he would take Montana and Wyoming and the competitor would take South Dakota and Nebraska. Zito told the competitor the agreement would improve margins and stabilize their respective revenue streams, and he offered to pay the competitor $100,000 for lost business. Ultimately, the competitor declined to join the conspiracy. Reflecting on these facts, the Antitrust Division seems to have effectively brought an attempted territorial market allocation case as a Section 2 criminal case, which, if completed, could have been brought as a Section 1 conspiracy case.
The Zito charge marks the first criminal monopolization case in more than 40 years and a reversal of the Antitrust Division's practice of pursuing monopolization cases only civilly. While the Antitrust Division brought parallel civil and criminal cases to ensure adequate penalties before Section 1 criminal offenses became felonies, the Division has brought very few stand-alone Section 2 criminal cases, and none since the 1970s.
There are a few interesting features of this first modern criminal monopolization case. The first is that the elements enumerated in the plea agreement for attempted monopolization are the same elements required in a civil case:
(1) Knowingly engaging in anticompetitive conduct.
(2) The intent to gain monopoly power.
(3) A dangerous possibility that had the defendant's proposed agreement been effectuated, the relevant company would have gained monopoly power in the relevant market(s).
These are agreed-upon elements in the plea. Given the difficulty of proving a relevant market, intent to monopolize and a dangerous probability of success even under a preponderance-of-the-evidence standard in civil cases, Antitrust Division prosecutors may encounter significant obstacles trying to prove each of these elements beyond a reasonable doubt to a lay jury in a criminal case.
The second issue of note is the recommended sentence. The plea appears to contain a jointly recommended $27,000 fine, 1 percent of the agreed-upon volume of commerce affected. Other than referencing sections of the sentencing guidelines, the plea agreement does not indicate a recommended jail sentence. It remains to be seen whether Antitrust Division prosecutors will seek jail time and how the court would calculate an appropriate sentence. The antitrust sentencing guideline USSG §2R1.1 is titled "Bid-Rigging, Price-Fixing or Market-Allocation Agreements Among Competitors" (emphasis added).3 It contemplates conspiratorial conduct among horizontal competitors, so it will be interesting to see whether and how the court will calculate the applicable sentencing guidelines range and impose a sentence.
While the DOJ can now cite to a modern criminal monopolization case, it remains to be seen whether the shift toward criminally prosecuting this conduct will succeed in cases that go to trial or whether the cases will go the way of the "no poach" labor cases, where the government similarly sought to aggressively expand the boundaries of criminal antitrust prosecution and, in recent months, has suffered a string of trial losses.4
1 DOJ, Press Release, Executive Pleads Guilty to Criminal Attempted Monopolization, available at https://www.justice.gov/opa/pr/executive-pleads-guilty-criminal-attempted-monopolization. (Information and plea agreement also available at links on this page.)
2 See DOJ, Assistant Attorney General Jonathan Kanter Delivers Opening Remarks at 2022 Spring Enforcers Summit (Apr. 4, 2022) (emphasis added), available at https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-opening-remarks-2022-spring-enforcers; MLex, "U.S. DOJ stands ready to bring criminal charges in Section 2 monopolization cases, Powers says" (Mar. 2, 2022),available athttps://content.mlex.com/#/content/1363181.
3 United States Sentencing Commission Guidelines Manual, §2R1.1 - Bid Rigging, Price-Fixing or Market-Allocation Agreements Among Competitors, available at https://guidelines.ussc.gov/gl/%C2%A72R1.1.
4 Ann O'Brien and Lindsey Collins, "DOJ Antitrust Division Loses Two Bellwether Criminal Antitrust No-Poach and Wage-Fixing Trials," bakerlaw.com, available at https://www.bakerlaw.com/webfiles/DOJ%20Antitrust%20Division%20Loses.pdf.
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