During a March 6, 2024 panel at the American Bar
Association’s annual National Institute of White Collar Crime,
California Assistant Attorney General Paula Blizzard made the surprise announcement that for the first time
in 25 years, California plans to begin prosecuting criminal
antitrust cases under the Cartwright Act, California’s state
antitrust law.
AAG Blizzard’s announcement marks the latest in a trend of
increasing focus and scrutiny from state-level antitrust enforcement agencies.
This change suggests that many states are standing ready to address
antitrust enforcement if federal enforcement, which has been
reinvigorated under the Biden administration, is weakened. The
announcement also reflects a growing effort at the federal and
state levels to pursue criminal, rather than just civil, antitrust
enforcement.
How the Cartwright Act Differs from the Sherman Act
The Cartwright Act has been the pillar of California state-level
antitrust since 1907, but in many ways, it varies greatly from its
federal counterparts. AAG Blizzard asserted during the panel that
the Cartwright Act is “broader and deeper” than federal
antitrust laws, echoing what the California Supreme Court
previously held.1 This may be correct in some
respects—section 1 of the Sherman Act simply prohibits
contracts, combinations, and conspiracies in restraint of trade,
leaving the interpretation of specific prohibited activities to
case law,2 while the Cartwright Act specifically lays
out prohibited activities.3 However, the Cartwright Act
is narrower than the Sherman Act in at least one respect—it
is silent on single-firm monopolies and only outlaws concerted
action by “two or more persons” to constrain
trade.4 By comparison, section 2 of the Sherman Act
makes it unlawful to “monopolize, or attempt to monopolize . .
. any part of the trade or commerce among the several States, or
with foreign nations.”5 AAG Blizzard acknowledged
as much during the panel discussion, noting, “I do not yet
believe I have the ability to bring a criminal monopolization
case[,] … [b]ut I will work on it.”6
Both federal and California courts have recognized that the
state’s antitrust laws do not perfectly follow federal
antitrust law and, therefore, “interpretations of federal
antitrust law are at most instructive, not conclusive, when
construing the Cartwright Act.”7 One notable
difference between federal and California law is that the
Cartwright Act makes it a crime to furnish any information in
furtherance of a conspiracy, which, according to AAG Blizzard,
means that even a third party may be subject to criminal
punishment.8 Additionally, some types of activities are
evaluated under a more stringent standard in California than in
federal court. For example, tying arrangements brought under
section 16727 are generally given per se treatment in California as
long as the plaintiff can establish either that the defendant had
market power over the tying product or that there was more than a
substantial impact on commerce.9 Similar cases at the
federal level are frequently analyzed under the rule of reason.
AAG Blizzard also emphasized California’s strong stance
against employee noncompete and no-poaching agreements. The state
recently passed new laws invalidating noncompete agreements, even
those signed outside the state, as well as requiring employers to
notify all employees that noncompete clauses in their contracts are
not enforceable.
State Antitrust Enforcement Is Strong and Growing
AAG Blizzard’s announcement continues the increase in state
antitrust enforcement over the last few years. This is partly due
to recently passed federal legislation making it
easier for state attorneys general to bring antitrust cases in the
venue of their choosing – and keep them there. Several states
have also passed legislation giving them the ability to
impose increased antitrust scrutiny over certain transactions. Just
last year, the federal government and the attorneys general of 31
states announced a partnership to investigate and
challenge anticompetitive conduct in the food and agriculture
sectors.
While California is the first state to announce its intent to
pursue criminal antitrust cases, more may soon follow, considering
the coordination that typically occurs at the state level. For
example, Gwendolyn Cooley, Wisconsin’s assistant attorney
general and chair of the Multistate Antitrust Task Force for the
National Association of Attorneys General (NAAG), announced last
year that the NAAG had created a working group specifically to look
at criminal antitrust enforcement relating to bid rigging. And just
last week during an “Enforcers’ Roundtable” at the
American Bar Association Antitrust Spring Meeting, AAG Cooley
referenced AAG Blizzard’s announcement, commenting that it was
“reminding everyone that [California] ha[s] criminal
enforcement authority.”10 AAG Cooley added that 44
states have some form of criminal-antitrust enforcement authority,
and that she expects to see more criminal investigations in the
coming year.
Criminal Antitrust Prosecution Is Increasing at the Federal
Level
California’s decision to pursue criminal prosecution of
antitrust violations mirrors the Department of Justice’s recent expansion of criminal antitrust
prosecutions to cover a wider array of conduct. In spring 2022,
the DOJ stated its intent to begin criminally
prosecuting individual executives who violate section 2 of the
Sherman Act. It has since begun following through, reaching a plea deal in one criminal monopolization case
and bringing 12 indictments in another. This
enforcement has taken place alongside more traditional section 1
cases, which the DOJ has continued to prosecute vigorously.
The DOJ has also been actively pursuing criminal prosecution of
other types of conduct, with mixed results. Just recently, the
Fourth Circuit in United States v. Brewbaker11
overturned a Sherman Act section 1 bid-rigging conviction, holding
that per se analysis does not apply when parties are in both a
horizontal and a vertical relationship. This follows several
notable acquittals in no-poach and wage-fixing cases over the last
few years. Despite these setbacks, the DOJ does not appear to be
slowing down its enforcement efforts, barring a change in
administration.
What Types of Criminal Cases Might California Prosecute?
As AAG Blizzard acknowledged, California has not criminally
prosecuted an antitrust case in roughly 25 years, and the attorney
general’s office has yet to give any real indication of what
types of cases may be brought, or what, if any, investigations are
ongoing. However, in light of the panel discussion and
California’s recently passed laws enhancing its scrutiny of
noncompete and no-poach agreements, companies doing business in the
state should exercise caution in this space. Otherwise, companies
doing business in California risk both civil and criminal
investigations at the state and federal level.
Footnotes
1 See In re Cipro Cases I & II, 61 Cal. 4th
116, 160 (2015) (the Cartwright Act is “broader in range and
deeper in reach than the Sherman Act”).
2 15 U.S.C. § 1 (2000).
3 See Cal. Bus. & Prof. Code §
16720.
4 See id. Note that the California Law Revision
Commission has been studying potential changes to the Cartwright
Act since 2022, including whether the Cartwright Act should be
amended to address single-firm conduct.
5 15 U.S.C. § 2 (2000).
6 Ms. Blizzard also stated during the panel discussion
that the possibility of prison time is “probably the biggest
deterrent” she has at her disposal. Criminal violations of the
Cartwright Act can result in three years in county jail for
individuals, as well as fines of up to $250,000 or double the gain
or loss from the conduct, whichever is greater. For corporations,
fines can reach $1,000,000 or double the gain or loss, whichever is
greater. See Cal. Bus. & Prof. Code §
16755.
7 In re Capacitors Antitrust Litig., 106 F.
Supp. 3d 1051, 1072-73 (N.D. Cal. 2015); Aryeh v. Canon Bus.
Sols., 55 Cal. 4th 1185, 1194-95 (2013).
8 Paula Blizzard, Cal. Assistant Att’y Gen., Remarks
at the American Bar Association National Institute of White Collar
Crime (Mar. 6, 2024); see also Cal. Bus. &
Prof. Code § 16755.
9 Morrison v. Viacom, Inc., 66 Cal. App. 4th
534, 542, 78 Cal. Rptr. 2d 133, 137 (1998).
10 Gwendolyn Cooley, Wis. Assistant Att’y Gen.,
Remarks at the American Bar Association Antitrust Spring Meeting
(Apr. 12, 2024).
11 No. 22-4544 (4th Cir. 2023).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
#Californias #Plan #Criminally #Prosecute #Cartwright #Act #Violations #Sign #Increasing #State #Antitrust #Enforcement #Antitrust #Competition
