Chapter IV. State Criminal Antitrust Enforcement

• Pages: 109-133

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CHAPTER IV

STATE CRIMINAL ANTITRUST ENFORCEMENT

A. Introduction

Criminal prosecutions are a powerful, although infrequently used,

weapon in the arsenals of state antitrust enforcers. The power of

criminal antitrust prosecutions derives from the wide-ranging effects of

those prosecutions.

First and foremost among these effects are the criminal penalties to

which corporations and individual actors are exposed, as well as the time

and expense required to defend any related investigation or criminal

proceeding. Indeed, if a firm does business in more than one

jurisdiction, it might face criminal prosecutions in multiple states.

Second, state criminal prosecutions can lead to federal prosecutions

for antitrust crimes and other white collar crimes, including, for example,

RICO, mail and wire fraud, tax fraud, securities fraud, bribery, and the

like, as well as federal prosecutions for obstruction of justice or false

statements.

Third, although states might be barred in some instances from

seeking both criminal remedies and punitive civil penalties, a state can,

consistently with the U.S. Constitution, pursue a nonpunitive civil claim

in addition to any criminal action.1 The state civil action can seek

injunctive relief, as well as damages (including multiple damages if

available under state law) for harm to the state itself and to political

subdivisions that are injured in their business or property by the

anticompetitive conduct. In civil actions, moreover, a state attorney

general can use a criminal conviction of a defendant as a source of

offensive issue preclusion. The attorney general can also take advantage

of the lesser civil burden of proof, proof by a preponderance of the

evidence.

Fourth, a criminal conviction under state antitrust law can spark

private civil lawsuits that seek to recover for injuries from the same fact

pattern that was brought to light in the criminal prosecution. Indeed,

1. See Hudson v. United States, 522 U.S. 93, 103-05 (1997); State v.

Farricielli, 799 A.2d 1121, 1124 (Conn. App. Ct. 2002); Cuellar v. State,

496 S.E.2d 282, 283 (Ga. Ct. App. 1998); Dawson v. Sec’y of State, 739

N.W.2d 339, 349-51 (Mich. Ct. App. 2007).

110 State Antitrust Enforcement Handbook

state criminal antitrust prosecutions can give private plaintiffs notice of

antitrust violations, and evidence of those violations, that the private

plaintiffs most likely would not obtain otherwise.

Fifth, a conviction under state criminal antitrust law can also lead to

serious collateral consequences, including mandatory or optional

debarment, which will prohibit the criminal actor from bidding for state

and local contracts for a term of years. Debarment is a heavy sanction

for those firms that depend on government business or government-

reimbursed business. A criminal antitrust conviction can also result in

administrative actions to revoke licenses held by the firm or individual

defendants. Businesses and professionals might be unable to compete

(or even work) without a license. The next step in the chain of

consequences can be similar license revocation proceedings in other

states, based on little more than the revocation in the first state.

This chapter first discusses examples of the statutes on which state

criminal antitrust prosecutions can be based, as well as the potential

penalties to which defendants can be exposed. Next, the chapter surveys

reported decisions that stem from state criminal antitrust prosecutions.

This survey notes some of the factors that can motivate an antitrust

enforcer’s decision whether to prosecute in a particular case. The

chapter then discusses the evolution of federal-state cooperation in

criminal antitrust matters. The chapter concludes by offering practice

pointers on state criminal investigations and prosecutions.

B. State Criminal Antitrust Statutes

The vast majority of states have adopted criminal penalties for

violations of their antitrust statutes.2 Many states also have criminal

provisions that protect competition in specific areas of state concern,

2. For a state-by-state discussion of individual states’ approaches to criminal

antitrust enforcement, see ABA SECTION OF ANTITRUST LAW, STATE

ANTITRUST PRACTICE AND STATUTES (3d ed. 2004) [hereinafter ABA

STATE ANTITRUST TREATISE]. A fourth edition of this treatise is

forthcoming. Connecticut, Delaware, Idaho, Kansas, North Dakota,

Washington, and West Virginia currently do not impose criminal

sanctions for violations of their general antitrust statutes. Of those states,

Connecticut, Delaware, North Dakota, Washington, and West Virginia

have long lacked criminal penalties for state antitrust violations. Idaho

and Kansas, in contrast, eliminated their criminal antitrust penalties in

2000.