State criminal antitrust enforcement

• Pages: 263-290

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CHAPTER VIII

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,1 a state can,

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

in addition to any criminal action.2 The state civil action can seek

1. Some state statutes include “election of remedies” provisions under

which the state can pursue either a civil or a criminal claim, but not both.

See, e.g., IOWA CODE § 553.15 (bringing criminal prosecution prevents

suit to assess civil penalty and vice versa); ME. STAT. tit. 10,

§ 1104(3)(C); N.M. STAT. ANN. § 57-1-9 (bringi ng criminal prose cution

bars suit for civil penalties, but criminal prosecution not barred unless a

judgment to award a civil penalty is obtained); People v. Gold Medal

Farms, Inc., 449 N.Y.S.2d 618 (N.Y. Sup. Ct. 1982).

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

Farricielli, 799 A.2d 1121, 1123–24 (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).

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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.3 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, state

criminal antitrust prosecutions can give private plaint iffs notice of

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

plaintiffs most likely would not have obtained 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 wh ether 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.

3. See, e.g., MD. CODE ANN. COM. LAW § 11-210 (final judgment in favor

of the state considered prima facie evidence against defendant in

proceeding brought b y another party); N.J. STAT. ANN. § 56:9-13 (same).