Business owner pleads guilty to attempted monopoly in violation of Section 2 of the Sherman Act // Cooley // Global Law Firm

On October 31, the Antitrust Division of the US Department of Justice (DOJ) made good on its promise to continue criminal enforcement of Section 2 of the Sherman Act when it obtained a guilty plea from a paving contractor who suggested that its main competitor enter a market-sharing scheme, to try to monopolize the markets for highway crack sealing services.

The plea marks the first criminal enforcement under the Sherman Act’s monopoly law in more than 40 years and represents another step in the DOJ and Federal Trade Commission’s (FTC) efforts to dust off lesser-common theories, laws and case law, a aggressive approach to antitrust enforcement.1 The indictment comes after a deputy assistant attorney general alleged that the DOJ had “effectively ignored Section 2 in law enforcement” since the 1970s.

DOJ law enforcement has traditionally focused on conspiracy patterns per se illegal agreements between competitors, for example to fix prices or to share markets. Against this background, statements by DOJ leadership forecasting an interest in criminal enforcement of the Monopoly Act prompted questions about how the DOJ would determine which monopoly violations were egregious enough to be prosecuted since none existed per se or light line in the context of Section 2 distinguishing between lawful and unlawful exclusionary behavior. In fact, many courts have a hard time distinguishing between the two, even when adjudicating alleged civil violations of the monopoly law.

This latest measure offers some guidance, albeit perhaps in a limited context. The behavior of the contractor, Nathan Zito, included an invitation conspire Divide markets and avoid competition. It is therefore similar to an “attempt” at criminal conspiracy and more closely resembles a traditional criminal antitrust enforcement case than a civil monopoly case. While the case is certainly notable and demonstrates the DOJ’s determination to criminally pursue such Section 2 conspiracy invitations—as opposed to civilian, as it has done at least once in the past—its importance should not be overstated.

United States vs. Zito: An invitation to collusion to divide markets

According to the settlement document, in January 2020, Zito invited its main competitor to allocate markets for highway crack sealing projects. However, instead of agreeing to Zito’s proposal, the competitor reported the incident to the DOJ and provided the government with evidence of Zito’s proposal and anti-competitive intentions through recorded phone calls. In particular, Zito suggested that if his competitor withdrew from competing for such projects in Montana and Wyoming, he would withdraw from bidding for crack-sealing projects in Nebraska and South Dakota. Zito also offered to pay his competitor for lost business in Montana and Wyoming, and he suggested they remember the market-sharing agreement.

The facts underlying the DOJ’s indictment closely resemble a textbook market sharing scheme, except for one important fact: There was no settlement. Like price fixing, market allocation agreements are generally prosecuted by the DOJ under Section 1 of the Sherman Act, which requires evidence of an anticompetitive agreement between competitors for a determination of liability. In this case, however, no agreement was reached because Zito’s competitor did not accept his invitation to collude.

If Zito’s competitor had accepted the proposal, the DOJ would almost certainly have pursued the scheme under Section 1. Instead, the DOJ charged the conduct as a criminal attempted Section 2 monopoly, alleging that Zito and its competitor were often “the only two companies bidding on crack waterproofing projects” in the area. Thus, the DOJ argued, a successful market-sharing system would have effectively allowed anyone to gain a monopoly in their assigned states. Consistent with that premise, Zito pleaded guilty to knowingly proposing the market allocation agreement “with specific intent to obtain monopoly power in the highway crack sealing service markets in Montana or Wyoming.”

Prior enforcement of invitations to collusion

In the past, the DOJ and FTC have filed civil lawsuits challenging invitations to collusion.

For the past 30 years, the FTC has reviewed invitations to collusion in diverse industries ranging from healthcare distribution to truck rentals under Section 5 of the FTC statute — a civil statute that prohibits “unfair or fraudulent acts or practices in or affecting commerce” prohibits” (15 USC § 45). For example, the FTC has alleged that a coupon book publisher improperly encouraged its sole competitor to collude through the President and CEO’s public statement made during a earnings call. Another example is the civil lawsuits against Nationwide Barcode and, in which the FTC alleged that a company’s client sent an electronic message asking its competitor to increase the price of barcodes sold over the Internet.

The DOJ has also prosecuted invitations to collusion where communication was by phone, fax, or email as mail fraud and wire fraud. These types of criminal enforcement actions are expected to continue. In addition, in 1983 in United States v American Airlines, Inc., the DOJ brought an attempted monopoly civil suit against American Airlines and its President for unsuccessfully asking American Airlines’ main competitor, Braniff Airlines, to set prices on certain city-pair routes out of Dallas/Fort Worth International Airport. Braniff—like Zito’s competitor—did not agree to the proposal, instead cooperating with the DOJ. In the absence of an agreement on the basis of a Section 1 fee, the DOJ brought an attempted monopoly lawsuit on the theory that the pricing system, if agreed, would have allowed these competitors to collectively monopolize the commercial air travel market on the routes.

The “shared monopoly” theory has been criticized over the years for attempts to set prices collectively in a single market, but these criticisms seem less applicable to market-sharing efforts, as in the Zito indictment.

In this regard, the agencies have also given a signal that they intend to pursue signaling cases where a competitor publicly signals its company’s interest in coordinated price increases or capacity cuts, leading competitors to increase prices or reduce production. For example, FTC Chair Lina Khan warned of the antitrust implications companies could face in the current inflationary environment if, through public statements, they “signal each other that they are engaging in coordinated price increases.”

Important considerations for businesses

The DOJ prosecutes invitations to collusion when the conduct resembles a failed attempt to form a cartel and the agreement, if executed, would allow the companies involved to monopolize markets. Penalties can be harsh and include imprisonment, with violations of the Sherman Act carrying a maximum penalty of up to 10 years in prison and a maximum fine of up to $1 million.

Civil enforcement of certain collusive requests is likely to continue. In particular, the FTC and DOJ focus on collusive invitations and signaling fact patterns based on public pronouncements seemingly designed to facilitate coordinated price increases or capacity cuts. Businesses should seek advice before making any public statements (e.g., in earnings calls or industry conferences) on strategies related to future pricing, capacity, performance, or customers.

As the DOJ and FTC become more aggressive in enforcing antitrust laws, it is important for companies to invest in an antitrust compliance program and regularly train employees to reduce the likelihood of criminal and civil liability. The DOJ has clarified that when evaluating charging decisions in criminal antitrust investigations, it will evaluate the effectiveness and robustness of a company’s pre-existing antitrust compliance program, suggesting that an effective antitrust compliance program is critical in the face of criminal charges under Section 2 may prove crucial.


  1. Other notable efforts include the DOJ’s recent wave of enforcements aimed at dissolving certain “interlocking directorates” prohibited under Section 8 of the Clayton Act; the FTC’s efforts to revive Section 3 of the Clayton Act, which prohibits certain exclusive distribution practices; and the DOJ’s ongoing efforts to prosecute criminal cases per se Dealing with wage agreements and non-solicitation clauses.