Over the years, competition enforcement efforts in the US have influenced competition policy in the European Union (EU). To give one notable recent example, US enforcers’ focus over the past six years on eliminating competitive restrictions in labour markets has been followed by labour-market investigations and enforcement actions by the European Commission.[1] The reverse is true, too. The EU has been ahead of the US in combatting perceived market dominance by the tech companies, passing new regulations governing big tech firms and bringing aggressive enforcement actions that have led to massive fines. Democrats and some republicans in Congress have tried to address this enforcement imbalance by proposing similar legislation, although the proposed legislation appears to have stalled in the Senate.

Both jurisdictions are now directing significant attention to the technology sector, specifically at the “big four” platform companies – Google, Apple, Meta (formerly Facebook) and Amazon. However, as it currently stands, each jurisdiction has a tool in the fight that the other does not. Thus, the time seems ripe for each jurisdiction to borrow enforcement ideas from the other. The EU has Article 102’s “abuse of dominance” standard, which is in many ways a far more powerful tool against monopoly power than section 2 of the Sherman Act. On the other hand, the US has the ability to bring criminal enforcement under the Sherman Act, while the EU is limited to civil enforcement.

Perhaps sensing that the US has fallen behind the EU in policing digital markets – and cognizant of the limits of civil enforcement of section 2 – the US Department of Justice Antitrust Division (DOJ) has signaled its intention to exert its criminal enforcement authority under section 2, after a nearly 50-year hiatus. Here we examine how the DOJ got to this place, the challenges it will face, and what effect, if any, these efforts are likely to have on competition enforcement by the European Commission.

Enforcement against monopolisation in the US

In the US, competition enforcement at the federal level derives from the Sherman Act, providing for criminal and civil penalties for competition violations, and the Clayton Act, providing authority to pursue civil competition actions, such as merger challenges In addition, most states have statutes that mirror the Sherman Act. The DOJ relies mostly on the Sherman Act to enforce the competition laws.

Section 1 of the Sherman Act prohibits conspiracies in restraint of trade, such as price fixing, bid-rigging, and similar conduct. The DOJ has prosecuted criminal actions under section 1 for decades, obtaining large fines, criminal convictions, and jail time for executives.

Section 2 of the Sherman Act outlaws monopolisation.It states:

“Every person who shall monopolise, or attempt to monopolise, or combine or conspire with any other person or persons, to monopolise any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.”

Criminal violations of the Sherman Act are punishable by up to US$100 million in fi nes for companies and US$1 million in fi nes for individuals, or twice the gross gain or loss from the offence, whichever is greater. Individuals may be sentenced to up to 10 years of imprisonment.

Despite section 2’s explicit authorisation to bring criminal charges and the statute’s significant penalties, the DOJ has bought only civil cases in the modern era, reserving criminal enforcement for agreements in restraint of trade (for example, price fi xing and bid-rigging) under section 1. In fact, the DOJ has not bought a criminal case under section 2 since 1977, leaving monopoly enforcement to civil litigation, either by the DOJ or the Federal Trade Commission (FTC), which has no criminal jurisdiction. Civil competition actions may yield treble damages, but do not allow for criminal fines against companies and jail terms for executives.

But as with many other areas of competition enforcement in the US, the status quo that has existed for decades may soon change. In a series of speeches in the spring and summer of 2022, senior DOJ officials signaled an intent to revive criminal prosecution of section 2 violations. The first sign of this change in policy was in a speech by Deputy Assistant Attorney General Richard A Powers, the head of criminal enforcement at the DOJ, at the American Bar Association’s White Collar Crime Conference in March 2022. In response to a question, Powers stated that the DOJ intends to bring criminal cases “if the facts and law lead us to the conclusion that a criminal charge based on a section 2 violation is warranted”.

Assistant Attorney General Jonathan Kanter, the DOJ’s top competition enforcer, followed suit in a 4 April 2022 speech at the Spring Enforcers Conference in Washington DC. In his speech he stated: “if the facts [and] the law, the careful analysis of the department’s policies guiding our use of prosecutorial discretion, warrant a criminal section 2 charge, the Division will not hesitate to enforce the law”.[2] Shortly thereafter, in a 21 April 2022 speech at the University of Chicago, Kanter outlined a five-point plan for the revival of competition enforcement, the fourth point of which is “vigorous[…] enforcement of section 2”.[3]

In addition to these statements, the DOJ revised the Justice Manual, which provides guidance to the department’s prosecutors. The Justice Manual previously reflected a policy of reserving criminal enforcement for per se section 1 violations:

“While a violation of [the Sherman Act] may be prosecuted as a felony, in general the Department reserves criminal prosecution for ‘per se’ unlawful restraints of trade among competitors, eg price fixing, bid rigging, and market allocation agreements.”

In April 2022, following the statements from top US competition enforcers, the DOJ revised the Justice Manual to read:

“While a violation of [the Sherman Act] may be prosecuted as a felony, in general, the Department reserves criminal prosecution under section 1 for ‘per se’ unlawful restraints of trade among competitors, eg price fi xing, bid rigging, and market allocation agreements. It may also bring, and has brought, criminal charges under section 2 .”[4]

The DOJ’s challenges in renewed criminal section 2 enforcement

The DOJ faces considerable challenges in implementing this change in enforcement policy. And unlike other areas of competition enforcement, the DOJ has offered little guidance to the business community as to the type of conduct that will lead to a criminal investigation.

The first and most obvious challenge is the lack of current, applicable case law applying section 2 as a criminal statute. Indeed, the most recent law on criminal section 2 enforcement is nearly 50 years old, with key substantive case law dating back to the 1940s and earlier.[5]

Relying on more recent section 2 case law, all involving civil actions, presents other diffi culties for the DOJ. Unlike criminal prosecutions of per se violations such as price fixing and bid-rigging – where the government need only prove that the agreement occurred, and the harm to the market is presumed – civil cases alleging monopolization require the presentation of economic and other experts to prove the relevant product and geographic markets. To prevail in a civil monopolisation case, the government must establish: (1) the relevant product and geographic markets within which the court should analyse the restraint on competition; (2) that the defendant has monopoly power (also called market power) in the relevant market; and (3) that the defendant abused that power.[6] Because defining markets and establishing market power can be complex, civil section 2 cases often involve a “battle of experts.”

The FTC’s civil section 2 case against Meta (Facebook) highlights the difficulties in establishing market power in digital markets. The FTC alleged, among other things, that Facebook had monopoly power and abused that power by buying up potential competitors WhatsApp and Instagram before they could pose a credible threat to Facebook.

The first complaint against Meta (Facebook) was dismissed on 28 June 2021. In dismissing the complaint, the court held that the FTC had plausibly pled the definition of a market for “personal social networking,” while noting that the allegations barely met the threshold (“While there are certainly bones that one could pick with the FTC’s market-definition allegations, the court does not find them fatally devoid of meat”). But the court, noting that the market was “unusual” in that “the products therein are not sold for a price”, held that the FTC had failed to adequately plead market power, in part because the FTC’s complaint failed to adequately address the consumer’s ability to switch social media networks. The FTC repleaded and survived Facebook’s subsequent motion to dismiss. The court observed, however, that the potential battle of the experts still looms as the case moves into discovery.

No less complex is the civil action brought by the DOJ and several states against Google for monopolistic conduct in the markets for search services and advertising.[7] Filed in 2020, the case is tentatively set for a trial in September 2023.

Deputy Assistant Attorney General Powers has stated that the DOJ will be able to avoid complex market definition hurdles by relying on the criminal section 2 precedent from 50-plus years ago. On 3 June 2022, Powers stated that the Antitrust Division “will no longer ignore section 2” and that “[a] long history of section 2 prosecutions and accompanying case law can show us the way forward ”.[8] A few days later, in response to panelist questions at a webinar hosted by the Antitrust Section of the American Bar Association, Powers stated that he believed that courts would apply the older criminal section 2 cases and not the more recent civil cases in future criminal section 2 cases and thus the DOJ would not have to prove relevant markets or present expert economic analysis.

Nevertheless, these statements are in direct tension with Assistant Attorney General Kanter’s recent statements that new digital markets require new approaches in competition cases, including a speech on 21 April 2022, in which Kanter stated that addressing today’s market realities cannot begin with “assumptions embedded in out of date models or cases”. He has suggested the same in various other speeches as well. In fact, he identified “Address[ing] Today’s Market Realities, Not Yesterday’s” as third in his five-point plan for reviving competition enforcement.[9] He has made other comments of a similar nature. In a 24 January 2022 speech to the New York State Bar Association Antitrust Section, Kanter bemoaned the “dearth of section 2 case law addressing modern markets”. In his March remarks at the ABA White-Collar Crime conference, Kanter observed that “many businesses no longer fit the models … that resulted in the development of prevailing competition policy”.[10] Needless to say, precedent that is dated over 20 years before the internet was even accessible by the public does not reflect “modern markets” or “today’s market realities”.[11]

In addition to the difficulty of applying old case law to modern markets, the DOJ will face a higher burden of proof in criminal section 2 cases (“beyond a reasonable doubt”) than in civil section 2 cases (“preponderance of the evidence”). As Kanter has repeatedly pointed out, the DOJ has brought very few civil section 2 cases in recent years and, as many private plaintiffs can attest, a section 2 violation is difficult to prove even under the civil standard of proof. Thus, the question arises: why is the DOJ now planning to revive criminal section 2 cases – with the higher burden of proof – when the lower “preponderance of the evidence” standard for civil section 2 violations already presents a significant hurdle?

In light of the many challenges facing the DOJ in carrying out this significant departure from past enforcement practice, several commentators have questioned whether the DOJ will issue industry guidance on what monopolistic conduct it will consider criminal. But it does not appear that any such guidance is forthcoming. At the 7 June webinar sponsored by the ABA Antitrust Section, Powers made clear that the DOJ has no plans to issue such guidance, as it has in others areas of competition enforcement. Rather, Powers stated that the business community should look to the text of section 2 and the case law on criminal section 2 cases, despite how old the cases are.

The European Commission leads the DOJ in enforcement against monopolisation

While the DOJ heads down an uncertain path in using its criminal enforcement powers to attempt to rein in tech companies, the European Commission has been successful in using its civil enforcement powers under Article 102 against these companies for years. The EU and its member states have had several significant victories: in 2017, €2.42 billion for Google’s self-preferencing of its own comparison shopping service; in 2018, €4.34 billion for illegal tying of Google software with Android phones; and, in 2019, €1.49 billion for exclusive supply agreements connected to Adsense, Google’s ad placement program. Google continues to appeal. The European Commission also obtained a €997 million fine against Qualcomm for its exclusive supplier agreement with Apple.

In 2021, the Commission opened an investigation into rules imposed by Apple on music streaming apps available on Apple’s App Store which compete with Apple Music.[12] Specifically, the European Commission alleges that the rules imposed by Apple disadvantage potential competitors. Further, the Commission recently stated that it is close to a settlement with Amazon over dual investigations into Amazon’s use of non-public data in aid of its own businesses, and its Buy Box and Prime programs. In both the number of cases and success rate it has had, the EU is ahead of the US in pursuing the large tech companies for competition violations.

Moreover, while lawmakers in both the US and the EU have proposed legislative solutions to big tech monopolies, only the EU has been able to get legislation enacted into law. In July 2022, the EU passed the Digital Markets Act, which imposes regulatory obligations and restrictions on “gatekeeper” online platforms (ie search engines and messaging services) with a certain number of users.[13] Meanwhile, legislation in the US aimed at curbing self-preferencing by big tech companies is stalled in the Senate. The American Innovation and Choice Online Act did not get a vote on the Senate floor before recess, after which attention will turn to the mid-term elections.

Effect of the DOJ’s criminal enforcement of section 2 on EU enforcement

So will the DOJ’s push into criminal section 2 enforcement have any effect on monopolisation enforcement in the EU? Time will tell. The DOJ’s policy changes mentioned above could be rolled back by the current leadership or future administrations. In the meantime, the civil Google and Facebook cases will be important test cases for US enforcement, and, depending on the outcomes, may set the stage for criminal section 2 prosecutions by the DOJ.

If the DOJ is able to bring successful criminal section 2 prosecutions, the effect on EU enforcement may depend on whether the DOJ gets corporate fines or jail terms for individual executives. Corporate fines in the US are unlikely to have any effect on enforcement in the EU, as the European Commission has already proven its ability to get such fines against tech companies. But if the DOJ is able to get jail terms for corporate executives for criminal section 2 violations – which the EU is currently unable to achieve – the EU is likely to take notice and seek other ways to increase enforcement efforts in tandem with the US.

At a minimum, the development of the law in this area – the economic theories, expert analysis, research, and grafting of new concepts onto old law – will almost certainly have an effect on competition thought in the EU and among the member states.

Conclusion

The DOJ’s renewed interest in bringing criminal cases under section 2 remains, for now, theoretical. The DOJ has apparently not even opened any such investigations, let alone brought a successful case. This policy change is undoubtedly driven, in part, by a perception that the US has lagged behind the EU in policing big tech companies for years. Thus, whether we can expect any changes in the EU’s enforcement programme depends upon the results the DOJ is able to get. But it is safe to assume that the EU will be watching, and if the US succeeds in jumping the line in its aggressiveness, we may see the EU pushing for similar actions.

Endnotes 

1. See eg European Commission, “Speech by Executive Vice President Margrethe Vestager at the Italian Antitrust Association Annual Conference – A new era of cartel enforcement”, 22 October 2021.

2. Department of Justice, “Assistant Attorney General Jonathan Kanter Delivers Opening Remarks at 2022 Spring Enforcers Summit”, 4 April 2022.

3. Department of Justice, “Assistant Attorney General Jonathan Kanter Delivers Keynote at the University of Chicago Stigler Center”, 21 April 2022.

4. Justice Manual, § 7-2.200 (updated April 2022) (emphasis added).

5. Eg American Tobacco v United States, 66 S. Ct. 1125 (1946).

6. United States v Microsoft Corp, 253 F.3d 34, 51 (DC Cir 2001).

7. United States et al v Google , Complaint, 1:20-cv-03010 (DDC) (20 October 2020) (ECF No 1).

8. Department of Justice, “Deputy Assistant Attorney General Richard A Powers Delivers Keynote at the University of Southern California Global Competition Thought Leadership Conference”, 3 June 2022 (emphasis added).

9. Department of Justice, “Assistant Attorney General Jonathan Kanter Delivers Keynote at the University of Chicago Stigler Center”, 21 April 2022.

10. Department of Justice, “Assistant Attorney General Jonathan Kanter Delivers Keynote at CRA Conference, 31 March 2022.

11. The internet was first made generally available to the public in 1993 when the European Organization for Nuclear Research placed it in the public domain, and the first web browser went live. “World Wide Web Timeline”, Pew Research Center, pewresearch.org.

12. Press Release, European Commission, “Antitrust: Commission sends Statement of Objections to Apple on App Store rules for music streaming providers”, 30 April 2022.

13. See Press Release, European Council, “DMA: Council gives final approval to new rules for fair competition online,” 18 July 2022.