Economic Crime: Antitrust Offenses

Corporate executives at the close of the twentieth century committed and concealed a remarkable amount of antitrust crime. The discovery of these crimes underlined a criminal offense that has existed in the United States since 1890 but that nonetheless has remained a peripheral and exotic species within the general criminal law.

American antitrust law begins with the Sherman Act of 1890 (15 U.S.C. §1, et seq.). This landmark statute has but two main sections: Section 1's prohibition of agreements "in restraint of trade" and Section 2's ban on "monopolizing." Congress delegated considerable policy power to the federal courts by declining to define these two pregnant but vague phrases, and it upped the ante by making the rules criminal as well as civil in character. Congress later added the Clayton Act, the Federal Trade Commission Act, and the Robinson-Patman Act, but violations of these laws are not crimes. (The exception to this statement is the price discrimination provision of §3 of the Robinson-Patman Act, 15 U.S.C. §13a, which provides for imprisonment of not more than a year and a fine of not more than $5,000 or both. This law is virtually never invoked.)

Four types of litigants enforce the Sherman Act:

• private plaintiffs, for whom section 4 for the Clayton Act authorizes civil suits for treble damages, costs, and attorneys fees;
• state attorneys general, who may sue on behalf of an injured state itself and as parens patriae on behalf of injured citizens;
• the Federal Trade Commission, which in effect can enforce the Sherman Act by enforcing the FTC Act; and
• the Antitrust Division of the U.S. Department of Justice, which has the power to bring civil equitable actions to restrain antitrust violations.

Of these four groups, only the Antitrust Division also has the power to enforce the criminal provisions of the federal antitrust laws.

The Antitrust Division has made varied use of the criminal antitrust sanction over time. Before 1938, the government hardly used the tool at all. During Thurman Arnold's tenure at the Antitrust Division from 1938 to 1943, however, 220 of the 330 cases he brought under Section 1 included criminal charges (Russell, p. 680; see also Posner (1970) and Gallo et al. (1994 and 2000)). Later in the twentieth century, the government made its criminal prosecution policy far more selective and restrictive, confining criminal investigation and prosecution to "cases involving horizontal, per se unlawful agreements such as price fixing, bid rigging and horizontal customer and territorial allocations." Even in these cases, moreover, the government may decide criminal prosecution is inappropriate where there is "confusion in the law" or where people "were not aware of, or did not appreciate, the consequences Table 1 SOURCE: Updated and modified from Calkins (1997) p. 131. of their action" (Antitrust Division Manual, Chapter III.C.5.).

In the latter half of the twentieth century, the government periodically stiffened the criminal penalties for Sherman Act violations. Despite these increases, Gallo and others (1994) and Craycraft (1997) found that actual statutory fines are less than one percent of the optimal fines needed to deter cartelization attempts.