Morrison & Foerster Discusses California Plan to Criminally Prosecute Antitrust Violations

In the latest development signaling California’s increasing efforts to police antitrust violations, on March 6, 2024, Senior Assistant Attorney General Paula Blizzard announced that the California Office of the Attorney General (“California AG”) Antitrust Section is reviving its criminal antitrust program under the California Cartwright Act, Cal. Bus. & Prof. Code § 16700 et seq.  This change represents a significant move by the California AG, which has not brought a criminal Cartwright Act prosecution in over 25 years.

Although it has been decades since California’s last criminal prosecution for an antitrust violation, criminal enforcement is a part of the Cartwright Act.  The Act makes it a crime to “engage[] in any [conspiracy against trade], or take[] part therein, or aid[] or advise[] in its commission, or who as principal, manager, director, agent, servant or employee, or in any other capacity, knowingly carries out any of the stipulations, purposes, prices, rates, or furnishes any information to assist in carrying out such purposes, or orders thereunder or in pursuance thereof.”  Cal. Bus. & Prof. Code § 16755(a).  Violations can result in criminal penalties for individuals of up to three years in county jail and fines of the greater of $250,000 or two times the gain or loss from the conduct, and for corporations, fines of the greater of $1 million or two times the gain or loss from the conduct.  Cal. Bus. & Prof. Code §§ 16755(a)(1)-(2).

While speaking on a panel about criminal antitrust enforcement at the ABA National Institute on White Collar Crime in San Francisco, Ms. Blizzard emphasized that the Cartwright Act covers “broader” conduct than its federal counterpart, the Sherman Act, 15 U.S.C. §§ 1-7, highlighting that even third parties supplying information in furtherance of a conspiracy may constitute actionable “furnish[ing of] information” under Section 16755. She also posited that pleading a Cartwright Act violation does not require meeting the heightened pleading standard of Federal Rule of Civil Procedure 9(b).  She stated that the significant penalties authorized by the Cartwright Act should serve as an important deterrent.  Finally, Ms. Blizzard highlighted new California legislation that went into effect on January 1, 2024, S.B. 699 and A.B. 1076, confirming the illegality of non-compete and no-poach agreements.

Ms. Blizzard further indicated that the California AG intends to coordinate with the U.S. Department of Justice Antitrust Division (DOJ), as well as California district attorneys, who have independent authority to charge offenses under the Cartwright Act.  In doing so, the California AG is likely to evaluate and potentially borrow elements from the DOJ’s existing criminal enforcement program, such as creating its own leniency program.  On the same panel, Emma Burnham, the DOJ’s Director of Criminal Enforcement, expressed mutual interest in collaborating with state enforcers to make the best use of the agencies’ resources.  Ms. Burnham also underscored how active the DOJ’s San Francisco office has been in prosecuting recent federal criminal monopolization charges.

Because of the California AG’s renewed interest in criminal enforcement of the Cartwright Act, companies doing business in California should proactively consider the Cartwright Act when developing effective antitrust compliance programs.

This post comes to us from Morrison & Foerster LLP. It is based on the firm’s memorandum, “California Announces Intent to Criminally Prosecute Antitrust Violations,” dated March 8, 2024, and available here.

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