WHITE COLLAR CRIMES
Federal Antitrust Law Violations Under 15 U.S.C. §§ 1-7 (The Sherman Antitrust Act)
According to the U.S. Department of Justice (DOJ), antitrust law violations cost consumers billions of dollars each year. This is not a recent development, however. Beginning in 1890 with the passage of the Sherman Act, Congress has legislated to preserve “free and unfettered competition” as the heart and soul of a healthy market economy. Now, after a century of statutory revisions and further enactments, both the Federal Trade Commission (FTC) and DOJ are charged with enforcing a litany of federal antitrust laws designed to protect consumers from an increasing variety of criminalized business practices as the law adapts to keep pace with changing markets and the developing sophistication of business in the information age.
Although most of the statutes that remain in effect today are enforced through civil actions, the Sherman Antitrust Act, unlike its statutory counterparts, imposes criminal penalties for “every contract, combination or conspiracy” and any “monopolization, attempted monopolization, or conspiracy or combination to monopolize” that unreasonably restrains trade. Every day business professionals craft agreements to contract, organize partnerships and otherwise collaborate in ways that restrain trade to some degree, but not unreasonably so, and are therefore lawful under the Sherman Act. Some agreements, however, are deemed so detrimental to free trade and unfettered competition that they are per se violations of the Sherman Act—prosecutable crimes for which no defense or justification applies.
What are the Punishable Per Se Violations?
The per se violations include bid rigging, price fixing and market allocation agreements among business competitors and constitute those most frequently charged by federal prosecutors.
Bid rigging is the illegal practice in which business competitors collude to decide the winner of a bidding process. This practice typically results in a higher winning bid than what would have likely resulted under genuinely competitive, free market conditions. Bid rigging can take a variety of forms. Bid rotation, for instance, occurs when bidding parties take turns receiving the winning bid. Bid suppression, another form, involves competing bidders sitting out of a bid to allow another bidder to become the sole remaining bid, and the one guaranteed to win. Other forms include complementary bidding, phantom bidding and buyback.
Price fixing occurs when competitors conspire to set the prices of products or services, rather than allowing the natural forces of the free market to govern prices. There are two basic types of price fixing—horizontal and vertical. Retailers who sell the same product or service and agree to set their prices at either a premium, ensuring greater profits per item or service, or a discount, undercutting other competitors not involved in the collusion, are engaged in horizontal price fixing—the type predominantly prosecuted by federal prosecutors. Vertical price fixing involves an agreement between the manufacturers, distributors and retailers of a given product wherein the manufacturers collude to set minimum retail prices, a practice known as resale price maintenance. Contrastingly, colluding to set maximum retail prices is less likely to be deemed illegal.
Regardless of the form, price fixing is as difficult to prove as it is to detect, since companies genuinely competing in the market may naturally offer similar products or services at very similar prices, which alone is not enough to prove collusion.
Market allocation agreements are schemes whereby competitors divvy up a market between themselves. For example, competing companies may allocate specific customers or types of customers among themselves. Sometimes competitors agree to target certain geographic areas and avoid those targeted by their conspiring counterparts.The United States Sentencing Commission notes that there is a lack of consensus as to the actual harmfulness of other types of antitrust offenses, for which reason the per se violations continue to be the most frequently prosecuted.
What are the Possible Penalties?
Violations under the Sherman Act are prosecuted as felonies and carry steep penalties. Individuals face up to 10 years imprisonment and up to $1,000,000 in fines, or both. Corporations face fines up to $100,000,000.
The volume of commerce in goods or services affected by the particular violation constitutes a primary aggravating element in the sentencing of convicted defendants. Although the base offense level for Sherman Act violations is 12, 2-level incremental increases are applied for volumes of commerce ranging from $1 million to $1.85 billion, up to an additional 16 levels. Contrastingly, defendants with offense levels of 12 or less are often eligible to serve part of their sentence in community confinement or home detention. Prior criminal history, the extent of the defendant’s participation in the offense, the defendant’s role, and the degree to which the defendant profited from the violation are also factors considered in sentencing.
Antitrust in Illinois
The potential to contract, combine or conspire in a way that unreasonably restrains free trade is not limited to a particular industry or sector, all fields of business and the individuals in their employ are potential defendants. As markets and technologies evolve, so too will the laws that criminalize antitrust practices. The healthcare industry represents one such market.
In Downers Grove, the 2014 attempted merger of Advocate Health Care Network and Northshore University Health System would have created the largest health care system in northern Chicago, with twelve hospitals claiming more than 50 percent market power. The Seventh Circuit halted the merger with a preliminary injunction. The parties subsequently abandoned their merger plans. Additional cases in Illinois and other states suggest that the health care environment is an increasing hotbed for antitrust evolution. New ventures will inspire new laws which will, in turn, target new defendants.
Contact an Experienced Antitrust Defense Attorney Today!
White Collar Crimes
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