On March 22, 2003, the Department of Justice announced the indictment of a New York distributor of periodicals for violation of the Sherman Act. The indictment was based entirely upon agreements with a competitor to allocate markets and to exchange customers for the implementation of the market allocation. The absence of any language in the Department's press release indicating that the parties discussed prices suggests that the evidence developed by the grand jury investigation concerned only market allocations.

Since market allocation agreements are per se violations, it is not remarkable that the Department sued the distributor. Indeed, the case is part of a recent trend of suits alleging market allocations, some of them brought criminally and others filed as civil suits.

In the New York periodical case, the distributor immediately pled guilty and was fined $500,000. Resolution of the case was evidently the result of a plea bargain and a commitment by the distributor to cooperate with the Department's continuing investigation. No individual employed by the distributor was indicted, but one or more of its employees are likely cooperating with the investigation.

The Department does not invariably challenge market allocations as criminal violations, but it consistently treats market allocations as criminal violations when they are found to be ingredient in, and supportive of, price fixing. For example, an indictment in October 2002 charged that manufacturers of polyester staples engaged in discussions of prices and customers. The Department's press release makes no claim that such a nexus with price fixing occurred in the New York periodical case.

The Department's recent challenge of agreements between Village Voice Media LLC and NT Media, LLC seems inconsistent with the pattern found in the preceding cases. In that case, the Department alleged that the two companies agreed to end their competition by swapping markets, with New Times closing its Los Angeles publication and Village Voice shutting down its Cleveland Free Times. The Department saw that "the goal of their agreement was to end their competitive war and to give one another a monopoly in each market." Despite the clarity of the evidence, the Department challenged the agreement with a civil suit.

It is possible that the Department's position regarding horizontal restraints that do not directly refer to prices is in flux and is moving in the direction of criminal challenges. The pace at which allegations of market allocations appear in Department of Justice pleadings suggests that the Department's position will soon be apparent.