Recently I wrote an article that was published in ANTITRUST magazine titled: Per Se “Plus:” A Proposal to Revise the Per Se Rule in Criminal Antitrust Cases.”  The theme of the article is that the penalties for a criminal violation of the Sherman Act have escalated so dramatically that the per se rule is no longer a fair standard of culpability. When the per se rule was first articulated in United States v. Socony Vacuum, the most severe penalty imposed on any of the individual defendants was a fine of $1,000. The Sherman Act was a misdemeanor (up to 6 months) but until modern times, jail was merely a theoretical possibility. Today, individual defendants are subject to up to ten years in prison (and the Antitrust Division has strongly argued for this sentence in several cases.) Also, indicted foreign defendants are placed on Red Notices and subject to arrest, detention and possible extradition anywhere in the world. There are also severe immigration consequences that limit an international business executives’ ability to remain employed. Despite the severe sanctions, juries are still charged that “good intentions” and even “good results” are irrelevant if the jury finds an agreement to fix prices was reached. Further, ignorance of the law is no defense. In the article I argue that the per se rule should be modified in a criminal case so that the government must prove beyond a reasonable doubt that the defendants in some way deceived or misled customers into believing there was competition when in fact there was an agreement to fix prices. This deception proves a “bad” intent. What makes price-fixing an unreasonable restraint of trade is not the price level, but an agreement that deceives customers (or sellers) into believing market forces set prices, when in fact, secret collusion was at work. Price is the “central nervous system” of the economy, and when buyers do not know that the price was set by collusion, the free market is restrained.  (Where buyers know of the restraint, i.e. an open joint venture, the agreement may restrain competition, but the agreement is judged under a rule of reason standard.)

This is a suggested proposed per se “plus” charge: “The conspiracy as charged in the indictment is illegal if the agreement was actively concealed or misrepresentations were made that the prices/bids were determined independently, without collusion with competitors.” I don’t believe this change would dramatically alter the prosecution of criminal cartels. Deception is a necessary element of every cartel. But, requiring that the prosecution prove this element would help match the crime with the severe punishment that comes with a cartel conviction today.

While I was thrilled to publish in ANTITRUST, I had some misgivings about the article. I believe in strong criminal antitrust enforcement of price-fixing and bid rigging. And, from my 33 years in the Antitrust Division, where I prosecuted many criminal antitrust cases, I am aware that these cases can already be difficult to prove. But, the dramatically escalating criminal penalties for convicted individuals warrants an increase in the proof required to impose the severe loss of liberty an individual defendant faces if convicted (or even indicted). Also, as antitrust enforcement is now global, I tend to filter my thought through a lens “How would a the US feel if another jurisdiction operated like this?” So, with respect to the per se rule in criminal cases, I wondered how it would seem to a US business person if he could face up to ten years in jail for an agreement where “good intentions” and even “good results” were irrelevant. Deception adds a universally accepted element of intent/wrongdoing that makes criminal sanctions warranted.

My proposal would only change the proof in a criminal case. The Antitrust Division could avoid the per se “plus” in a civil case where disgorgement, as opposed to a criminal fine, would be available. Likewise, an individual could face a civil case for disgorgement and other remedies. And private treble damage cases would be unaffected.  But, where the prosecutors bring a case seeking up to 10 years in jail for an individual, a higher standard should apply. And, I believe if this proof is required and a conviction obtained, jail sentences and deterrence may actually increase.  And the “dual criminality” element of extradition would be easier to meet.

The above is a very brief overview of the article. If you don’t subscribe to ANTITRUST and would like a copy of the article, please email me at [email protected], or give me a call at (215) 219-4418. This is an area of continued interest to me and I would greatly appreciate any feedback or other comments.

Thanks for reading.