DOJ Indicts Another Enterprise for a Monopolization Offense
Just days after securing its first Section 2 conviction in over 40 years in United States v. Zito on October 31, 2022,1 the U.S. Department of Justice (“DOJ”) again wielded its once-neglected ability to criminally enforce Section 2 of Sherman Act. This time, in United States v. Martinez, antitrust prosecutors joined forces with Houston’s U.S. Attorney’s Office and DOJ’s Organized Crime and Gang Section to indict 12 individuals for conspiring to fix prices and monopolize the “transmigrante forwarding industry”: a unique collection of businesses that provide customs-related services for individuals known as “transmigrantes” who “transport used vehicles and other goods from the United States through Mexico for resale in Central America.”2 The indictment was unsealed on December 6, 2022, revealing 11 charges, nine of which sound in extortion and money-laundering.3 Though seemingly unrelated to the industries and activities traditionally regulated by federal antitrust enforcers, these Section 2 charges may represent a creative attempt to establish favorable case law that DOJ can later leverage against its more typical targets.
In this case, the indictment alleges that the defendants conspired to control the market of transmigrante agency services in violation of Sections 1 and 2 of the Sherman Antitrust Act.4 Specifically, according to prosecutors, the defendants fixed prices in violation of Section 1 by pooling and dividing their revenues according to pre-negotiated agreements.5 The indictment also alleges that the defendants’ transmigrante agencies “operated as a single entity” and engaged in various anticompetitive acts in violation of Section 2.6 The alleged anticompetitive acts, however, bear little resemblance to those alleged in most Section 2 cases, including DOJ’s recent victory in Zito. There, the defendant pleaded guilty to attempting to monopolize the markets for highway crack-sealing services in Montana and Wyoming, admitting that he proposed a “strategic partnership” to a competitor over the telephone in which the two would divide the relevant markets amongst themselves.7 Simple enough.
By contrast, and unlike typical allegations in the corporate context, the defendants in Martinez allegedly used “threats and acts of violence,” including kidnappings and beatings, to maintain their criminal enterprise — hallmarks of cases usually drawing the attention of U.S. Attorney’s Offices or DOJ’s Organized Crime and Gang Division, not antitrust enforcers.8 Reinforcing the unusual nature of this case, the indictment also alleges that the defendants forced their rivals to pay an “extortion tax” for safe passage through Mexico.9
This uncommon yet instructive case shows the breadth and creativity of DOJ’s current antitrust enforcement agenda. Following its Section 2 success in Zito, this prosecution of another relatively small enterprise under a monopolization theory provides further evidence — even if modest — that DOJ intends to fulfill its commitment to bring criminal Section 2 cases.10 Tactically, and perhaps more importantly, Martinez suggests that the antitrust division may have bigger plans in mind when adding a Section 2 charge to a unique criminal case like this. It may be trying to establish favorable Section 2 case law before prosecuting more traditional monopolization claims.
1 United States v. Zito, Crim. No. 1:22-cr-00113 (D. Mont. Oct. 31, 2022).
2 Press Release, Dep’t of Just., Criminal Charges Unsealed Against 12 Individuals in Wide-Ranging Scheme to Monopolize Transmigrante Industry and Extort Competitors Near U.S.-Mexico Border (Dec. 6, 2022), https://www.justice.gov/opa/pr/criminal-charges-unsealed-against-12-individuals-wide-ranging-scheme-monopolize-transmigran-0.
3 Indictment, United States v. Martinez, Crim. No. 4:22-cr-00560 (S.D. Tex. Nov. 9, 2022), ECF. No. 1 (“Indictment”).
4 Indictment, at 1, 3−6.
5 Id. at 5–6.
6 Id. at 8.
7 See Information, United States v. Zito, Crim. No. 1:22-cr-00113 (D. Mont. Sept. 19, 2022), at 4; Plea Agreement, United States v. Zito, Crim. No. 1:22-cr-00113 (D. Mont. Sept. 19, 2022), at 3–4.
8 Indictment, at 6–15.
9 Id. at 10.
10 See Jonathan Kanter, Assistant Att’y Gen., Dep’t of Just., Opening Remarks at 2022 Spring Enforcers Summit (Apr. 4, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-opening-remarks-2022-spring-enforcers.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.