California’s Top Antitrust Enforcer Promises First Criminal Prosecutions in 25 Years

For more than a century, California’s principal antitrust statute, the Cartwright Act, has expressly authorized the California Attorney General (“California AG”) to bring criminal prosecutions for agreements that restrain trade, authorizing significant criminal fines against both corporations and individuals (as high as twice the entire “gain or loss” caused by the violation) and up to three years’ imprisonment for individuals.¹ For the last 25 years, however, these provisions have been dormant, as the California AG has focused on civil proceedings as its sole means of antitrust enforcement.

On March 6, 2024, however, California’s chief antitrust enforcer Paula Blizzard announced that criminal prosecutions will once again play a role in the California AG’s antitrust enforcement program, indicating that she would like to emulate federal enforcers’ use of criminal prosecutions as “an important part of deterrence.” Blizzard emphasized that the Cartwright Act provides for imprisonment in county jail, not a state prison or “club fed,” calling that “probably the biggest deterrent that I have.”

Blizzard’s remarks are part of a recent trend among antitrust enforcers, at both the federal and state levels, promising more aggressive criminal antitrust enforcement (and more aggressive enforcement in general) — statements that have not always led to tangible action. Over the last two years, for example, representatives of the U.S. Department of Justice’s (DOJ) Antitrust Division have emphasized a newfound willingness to criminally prosecute unilateral conduct that violates Section 2 of the federal Sherman Act.² The early returns from those statements, however, have been relatively paltry, with only a couple of prosecutions that have invoked Section 2, both of which involved concerted activity more akin to conduct commonly prosecuted under Section 1 of the Sherman Act. It remains to be seen whether Blizzard’s recent statements are merely more saber-rattling, or whether they will instead lead to a real change in the California AG’s enforcement activity.

Blizzard also sounded another note that is commonly heard about the Cartwright Act: the notion that the statute is somehow “broader in range and deeper in reach” than the Sherman Act.³ It is easy to find this general sentiment expressed in California’s antitrust case law, but much harder to find a cogent explanation of what the statute’s supposed greater breadth and depth actually amount to. This is particularly true in the criminal context, where there is virtually no modern precedent at all. Thus, it remains highly dubious that the California AG’s criminal reach under the Cartwright Act is any broader than the DOJ’s criminal mandate under the Sherman Act.

Assuming Blizzard’s promise of criminal enforcement bears fruit, what types of case might the California AG prioritize — particularly given that the Antitrust Division’s San Francisco field office is already extremely active in criminally prosecuting antitrust violations, including those involving California conduct? First, Blizzard alluded at the conference to California’s strict prohibitions against employee noncompete and no-poach agreements, which are more aggressive than the approach taken in many other U.S. jurisdictions. In particular, Blizzard emphasized that it is illegal in California even to include such a provision in an employment contract, even if the provision is never enforced. Conceivably, the California AG could use these strict prohibitions to criminally prosecute employment-related antitrust violations that are not illegal (or not high enforcement priorities) in other jurisdictions.

A second category of potential prosecutions are cases involving bid-rigging schemes and other conspiratorial conduct affecting state and local government procurement contracts. Historically, this was a common fact pattern in criminal prosecutions under the Cartwright Act.⁴ In recent years, similar cases have been prosecuted by the federal DOJ’s Antitrust Division, including its Procurement Collusion Strike Force (PCSF), or the relevant U.S. Attorney’s Office in California. Just last year, a construction company owner in California was sentenced to 78 months in prison after federal prosecution for his role in a bid-rigging and bribery scheme involving California Department of Transportation contracts.⁵ And in 2018, the U.S. Attorney’s Office for the Eastern District of California prosecuted multiple defendants for rigging bids in connection with California government Information Technology contracts, pursuant to an investigation initiated and referred to it by the California AG’s Office.⁶ As similar cases arise in the future, it would not be surprising for the California AG to take over full investigative and prosecutorial responsibility in the name of protecting California’s governmental purchasers.

Beyond these two relatively narrow categories, however, it remains to be seen whether the California AG has the economic resources — or the need — to invest in a significant amount of new criminal antitrust prosecutions. At a time when antitrust enforcers all over the country are stepping up their enforcement activity, both civilly and criminally, the most likely scenario is that the California AG’s own criminal enforcement program will remain cabined to employment and local government procurement contexts, while continuing to leave the vast bulk of criminal enforcement of antitrust violations affecting California to the federal DOJ’s Antitrust Division.

¹ Cal. Bus. & Prof. Code §§ 16755(a)(1)–(3).

² Criminalizing Monopolists: Sincere Revival, or DOJ Sabre-Rattling?, V&E Antitrust Update (March 23, 2023). Indeed, Blizzard (perhaps jokingly) struck a similar note in her recent remarks, observing that the Cartwright Act does not presently permit criminal prosecutions of unilateral activity, “but I will work on it.”

³ In re Cipro Cases I & II, 61 Cal. 4th 116 (2015).

⁴ See People v. Athens Disposal Co., Inc., No. A972331 (Los Angeles Mun. Ct. 1990) (imposing criminal fines for bid-rigging conspiracy by trash-hauling firms for local government contracts); People v. Sherwin, 82 Cal. App. 4th 1404 (1990) (affirming dismissal of conspiracy counts relating to alleged price fixing and bid-rigging scheme for the state’s purchase of foodstuffs).

⁵ Press Release, U.S. Dept. of Just., Former Public Official and California Contractor Sentenced for Bid Rigging and Bribery (Apr. 24, 2023), https://www.justice.gov/opa/pr/former-public-official-and-california-contractor-sentenced-bid-rigging-and-bribery.

⁶ Press Release, U.S. Dept. of Just., San Francisco Business Owner Pleads Guilty to Bid-Rigging Conspiracy Involving Government Contracts (Jan. 18, 2018), https://www.justice.gov/usao-edca/pr/san-francisco-business-owner-pleads-guilty-bid-rigging-conspiracy-involving-government.