Antitrust Division Secures First Criminal Attempted Monopolization Guilty Plea in Decades

In yet another indication of the renewed, aggressive antitrust enforcement program, the Justice Department recently announced the first attempted criminal monopolization case in decades — Nathan Nephi Zito, the president of a paving and asphalt company in Billings, Montana, pleaded guilty to attempting to monopolize the market for highway crack-sealing services in Montana and Wyoming.

In a famous civil prosecution in the 1980s, Robert L. Crandall, the then CEO of American Airlines, was charged civilly with attempted monopolization for attempting to arrange an illegal agreement with American’s competitor, Braniff, to divide scheduled passenger service in a number of city pairs served by the Dallas-Ft. Worth airport hub.  That case was resolved thirty years later.

DOJ’s plea agreement sends a new and significant message — attempts to monopolize through efforts to secure illegal agreements will be criminally prosecuted.  This new approach should send a shockwave through corporate boardrooms, particularly in those industries that bid for valuable government contracts. 

The rationale, however, underlying DOJ’s approach applies with equal force to other markets with high-levels of concentration — an illegal agreement between one or more competitors in these markets may be significant enough to trigger government findings of monopolization (i.e. market power).  If the companies acting together would be able to exercise market power, attempts to secure illegal collusive agreements may fall under DOJ’s scrutiny.

In the recent case, Zito attempted to monopolize the markets for highway crack-sealing services by proposing that his company and its competitor allocate regional markets among themselves.  Zito approached the competitor about a “strategic partnership” and proposed that the competitor stop competing with Zito’s company for high-way crack-sealing projects in Montana and Wyoming.

In exchange for this promise to avoid competition in Montana and Wyoming, Zito offered to cease competing with the competitor for projects in South Dakota and Nebraska.  Zito offered to pay the competitor $100,000 to compensate the competitor for lost business in Wyoming and Montana.  In addition, Zito proposed that his company and the competitor enter a sham transaction to disguise their illegal agreement.

Zito pleaded guilty in United States District Court in Montana to one count of attempted monopolization under Section 2 of the Sherman Act.  Zito faces a maximum sentence of 10 years’ imprisonment and a maximum fine of $1 million.

The guilty plea is the result of ongoing investigations being conducted by the Justice Department’s Procurement Collusion Strike Force, which was created in 2019, and is a joint law enforcement effort to combat antitrust crimes and fraud in government procurement, at all levels — federal, state and local.

The investigation began when the competitor contacted the Department of Transportation’s Inspector General to notify them of the illegal offer made by Zito.  The competitor then proceeded to record several phone calls between the competitor and Zito.

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