Criminal Antitrust Enforcement

Criminal Antitrust Enforcement

Description

For many years critics of antitrust policy have argued that the antitrust laws were not being adequately enforced on the criminal side. The Sherman Act, passed in 1890, prohibits in broad language ‘contracts, combinations, and agreements in restraint of trade" as well as "monopolization". Violation of the statute has been a crime since its enactment. Nevertheless, criminal enforcement had traditionally been weak. In the first half-century of the Sherman Act there were only 173 criminal prosecutions, less than 3.5 criminal cases per year. Although historically there have been few criminal prosecutions, early enforcement efforts did show a willingness to pursue important corporations through the criminal process. Four years after the Sherman Act was passed there were proposals for criminal prosecution of the “Tobacco Trust” arid, in 1906, the government did prosecute officers of an American Tobacco Company subsidiary for an attempt to monopolize trade. In 1912 thirty executives and employees of the National Cash Register Company (the pioneer in the cash register business, with ninety-five percent of the market) were prosecuted criminally for creating a monopoly. As late as 1940 the Government was still willing to use criminal enforcement to proceed against monopoly. These efforts notwithstanding, by the 1950s one could fairly say that criminal enforcement was not only infrequent but was also carefully constrained. The 1955 report of the Attorney General's National Committee to Study the Antitrust Laws wrote that then-current enforcement criteria “insure[d] that criminal action will be limited to outright price fixing, boycotts, racketeering and the like when such misdeeds occur in areas where antitrust coverage is well settled. As the 1960s began, criminal enforcement criteria did not change, but the Government did catch some substantial corporate violators. Twenty-nine electrical equipment manufacturers, including the General Electric Company, plus a number of their executives, were prosecuted for a long-standing conspiracy to rig bids and fix prices on the sale of heavy electrical generating equipment. This major criminal prosecution against a Fortune 500 corporation attracted national media attention, including a famous Life Magazine cover showing the convicted executives (seven were sentenced to all of thirty days in jail) grasping the bars of their cells. Perhaps as importantly, the convictions opened up the era of private antitrust treble-damage actions. In the “follow on” cases subsequently brought, substantial monetary relief was obtained by the victims of the price-fixing conspiracy, notably government entities that had purchased equipment through what they had thought was a system of competitive bidding. This one-two punch seemed like just the sort of deterrence Congress had ordered in 1890. Although the 1960s brought some increase in attention to criminal prosecutions, other antitrust problems moved to center stage. The government showed itself more willing to challenge mergers, and the courts readily agreed with the government's position. By the end of the 1960s, the government had embarked on a broad and ambitious civil enforcement agenda, which included an attack on anti-competitive government regulation, litigation against conglomerate mergers, and monopolization litigation against IBM. Criminal prosecutions continued, but the sights were lowered. The potato-chip industry (one target of criminal prosecution) was not on quite the same level as the electrical equipment manufacturing industry. The 1970s were characterized by a convergence of two somewhat conflicting trends. First, the courts became less generous towards the government's position in antitrust cases. In 1974 the government suffered its first loss in a merger case in the Supreme Court since 1948, while doctrinal developments (often occurring in the context of private civil litigation) showed that the courts had become far less willing to condemn alleged anti-competitive agreements as per se illegal. At the same time, government enforcers began to respond to the persistent criticism that inadequate attention had been paid to criminal enforcement. Between 1970 and 1975 criminal prosecutions increased by more than fifty percent over the previous five years. This increased attention to the criminal side received legislative impetus in 1974 when Congress amended the Sherman Act, making a violation a felony rather than a misdemeanor and increasing the penalties substantially. Corporate fines jumped from a maximum of $50,000 to $1 million; prison time, from one year to three. In 1976 the head of the Antitrust Division in the Ford Administration appeared personally in court to argue for imprisonment of corporate executives in a criminal prosecution. And in 1977 the Antitrust Division issued its own “Guidelines for Sentencing Recommendations in Felony Cases Under the Sherman Act,” which called for substantially longer prison terms than judges generally imposed even under the newly enhanced statute.

Source Publication

Corporate and White Collar Crime: An Anthology

Source Editors/Authors

Leonard Orland

Publication Date

1995

Criminal Antitrust Enforcement

Find @ NYU

Share

COinS