Everything Old Is New Again: DOJ Revives Criminal Charges for Section 2 Attempted Monopolization Claims

What’s New

The United States Department of Justice secured its first criminal conviction for attempted monopolization in violation of Section 2 of the Sherman Act in decades. Nathan Nephi Zito, the president of Z&Z Asphalt Inc., a paving and asphalt contractor based in Billings, Montana, pled guilty to attempting to monopolize the market for highway crack-sealing services in Montana and Wyoming. In a one-count felony charge filed on September 19, 2022 in the US District Court for Montana, the DOJ stated Zito attempted to monopolize the market by proposing that his company and its competitor allocate regional markets. Notably, approximately 95% of Zito’s business comes from providing crack sealing services on publicly-funded highway projects.

The charge states that Zito approached his competitor about entering into a “strategic partnership” and proposed that they stop competing with him in the Montana and Wyoming markets. In return, Zito agreed not to compete for government projects administered in South Dakota and Nebraska and offered to pay his competitor $100,000 for any lost competition in Montana and Wyoming. Zito explained to his competitor that if they agreed not to compete, their companies’ revenue streams would be more stable and their margins would be higher. The charge also states Zito proposed the companies enter into a written contract that memorialized the market-allocation agreement, but his competitor rejected the offer.  

Zito faces up to 10 years in prison and a $1 million fine, in the discretion of the court.

DOJ Announced Its Intent to Bring Criminal Charges for Section 2 Violations

In the early months of 2022, the DOJ Antitrust Division indicated its intent to criminally prosecute Section 2 monopolization claims. Assistant Attorney General Jonathan Kanter lamented the absence of Section 2 enforcement over the last several decades and signaled that enforcement of Section 2 would be a top priority for the Division. In March 2022, Deputy Assistant Attorney General Richard Powers re-affirmed the DOJ’s commitment to revive criminal prosecution of Section 2, emphasizing “market concentration and consolidation is not only a civil antitrust issue.”

For decades, the DOJ pursued Section 2 attempted monopolization charges as civil matters. While the Sherman Act provides for both civil and criminal penalties, until this prosecution was brought in September 2022, the Antitrust Division had not prosecuted a Section 2 case in more than 50 years.

Why This Matters

The Antitrust Division made good on its stated intention to criminally prosecute violations of Section 2 and signaled more is to come. AAG Kanter said in a statement on the case “Congress criminalized monopolization and attempted monopolization to combat criminal conduct that subverts competition” and “[t]he Justice Department will continue to prosecute blatant and illegitimate monopoly behavior.”

As the Biden administration continues to push an aggressive antitrust enforcement agenda, antitrust cases like this one that revive underutilized enforcement tools are likely to be more common, such as Section 8 of the Clayton Act’s prohibition on interlocking directorates. Companies should update their compliance materials to consider the level of antirust risk even when agreements are not formed. The experienced team at Hunton Andrews Kurth LLP stands ready to help companies navigate these decisions and the ever-changing antitrust enforcement landscape.