Cartel Capers

A blog about cartels, competition and compliance

100 Blawg Honoree

“Every Contract Restrains Trade” I Humbly Disagree: A Different Point of View

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On December 1 2025, I had finished an article about how the defendant might avoid the application of the per se rule in his upcoming trial for allegedly rigging a bid for a multi-million dollar entertainment facility for a public university in Texas. On December 2, 2025, the President pardoned the defendant. My article did not predict a pretrial Presidential pardon. The article, slightly modified after the pardon, is posted on SSRN: Per Se Rule Related Defenses In Criminal Antitrust Prosecutions, December 10, 2025.

 I was thinking of posting excerpts from the article on Cartel Capers and a happy coincidence occurred today. Somone sent me the DOJ Statement of Interest in In Re: Apple Smartphone Antitrust Litigation, Case No. 2:24-md-03113, (D. N.J. June 7, 2024), ECF No 147, filed 12/16/2025. The Statement of Interest argues that United States v. Brewbaker,  87 F. 4th 563 (4th Cir. 2023) was wrongly decided. I agree. Another of the topics in the filing is: “All contracts are concerted action.” The paragraph begins with “By its terms, Section 1 applies to ‘every contract…in restraint of…trade.’  And the Supreme Court long has recognized that every contract restrains trade.” See Bd. Of Trade of Chi v. United States, 246 U.S. 231, 238 (1918) (“Every agreement concerning trade…restrains.”). The Statement of Interest cites other cases for this blackletter law proposition.

In my article I argued that it was unnecessary judicial legislation to modify “restraint of trade” with “unreasonable” because not every contract restrains trade.  Am I correct?  It happens sometimes. But it’s fairly inconsequential because either way you read Section One, the issue in the case will be whether the agreement in question restrained trade.

Below is the relevant excerpt from my article.

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Some Per Se Rule History: The Road Wrongly Traveled

It is well accepted, but incorrect, that “One problem presented by the language of § 1 of the Sherman Act is that it cannot mean what it says.”[1] This erroneous belief has led the Supreme Court to amend the Sherman Act, first by adding the word “unreasonable” before “restraint of trade”[2] and then by creating two rules: the per se rule and the rule of reason.[3] In doing so the Supreme Court has engaged in unconstitutional judicial legislation.[4] As Justice Gorsuch has said, “If a statute needs repair, there’s a constitutionally prescribed way to do it. It’s called legislation.”[5]But Section 1 of the Sherman Act does not need to be rewritten. To restrain is “to limit” or “to hold back.”[6] Contracts between individuals do not restrain trade in the most natural, ordinary, common sense meaning of the words. It is a rule of statutory construction not to give words an implausible interpretation.[7] A literal reading of the words of the statute which would lead to absurd results is to be avoided when they can be given a reasonable application consistent with their words and with the legislative purpose.[8] Did Senator Sherman intend that if he entered a contract to buy oil to heat his home, he was a criminal?  No. It is clear that Congress did not intend to criminalize all commercial contracts, including their own. Moreover, if the drafters intended that all commercial contracts are a restraint of trade, the Sherman Act would simply read, “all agreements in trade are illegal.” But since Congress added the qualifier “in restraint of trade” it rejected the idea that all contracts restrain trade. The statutory construction surplusage canon means Congress added “restraint of trade” for a reason—to limit the notion that all contracts restrain trade.[9]

The “trade” the Sherman Act refers to is what we now call a market—not a single transaction between two parties. Exhibit A, as said by Adam Smith, is perhaps the most famous quote in the antitrust world: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”[10] (emphasis added).  It is clear that Congress used the term “trade” as Smith did, in describing a market—not a contract between two parties. The great trusts of the day motivated passage of the Sherman Act: the Sugar Trust, Oil Trust, and Banking Trust, and others[11] did restrain trade. Thus, there was no reason for the Supreme Court to rewrite the Sherman Act and create the per se rule and rule of reason.

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I’d appreacite any reaction.  Thanks for reading.

Bob Connolly  bob@reconnollylaw.com

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[1] National Society of Professional Engineers v. United States, 435 U.S. 679, 688 (1978.)  See also, Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 63 (1911) (without the standard of reason to limit the language, “the statute would be destructive of all right to contract or agree or combine in any respect whatever.” Board of Trade of City of Chicago v. United States, 246 U.S. 231, 238 (1918) (“Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence.”).

[2] Standard Oil v. United States, 221 U.S. 1 (1911).

[3] United Sates v. Trenton Potteries Co. 273 U.S. 392, 398 (1927)(per se); Bd. Of Trade of City of Chicago v. United States, 246 US. 231 (1918) (rule of reason).

[4] In a dissent in Standard Oil v. United States,, 221 U.S. 1 (1911) Justice Harlan objected that the Court, rather than Congress, amended the legislation. Justice Harlan wrote that the Court “has now done what it then said it could not constitutionally do. It has, by mere interpretation, modified the act of Congress.” Id. at 99. (Justice Harlan dissenting). For more detail and color, see, William Kolaksy, Chief Justice Edward Douglass White And the Birth of the Rule of Reason, Antitrust, Vol. 24, No. 3, p. 77,  (On the bench, Harlan was even harsher. Those present in thecourtroom reported that Harlan “[h]aving refreshed himself with whiskey . . . denounced his colleagues from the bench in improvised language that is said to have made them blush.”).

[5] Perry v. Merit Systems Protection Board, 137 S. Ct. 1975, 1990 (2017) (Gorsuch dissenting).

[6] Merriam Webster Dictionary: 1a: an act of restraining: the state of being restrained

b(1): a means of restraining : a restraining force or influence

(2): a device that restricts movement., available at https://www.merriam-webster.com/dictionary/restraint.

[7] See Advocate Health Care Network, et al v. Stapleton, 581 U.S. 468, 480 (2017) (“Congress, we feel sure, would not have intended all National Guardsmen to get a benefit that is otherwise reserved for disabled veterans.”).

[8]  See Haggar Co. v. Helvering, 308 U.S. 389, 394 (1940).

[9]  “A corollary to this point is that the employees’ construction runs aground on the so-called surplusage canon—the presumption that each word Congress uses is there for a reason.” Advoc. Health Care Network v. Stapleton, 581 U.S. 468, 477 (2017).

[10] Adam Smith: The Wealth of Nations (1776), Book I, Chapter X, Part II, p. 152.

[11]  “In 1882 S. C. T. Dodd, an attorney for John Rockefeller’s Standard Oil Co., created a trust to facilitate a tight combination of oil refiners that could dictate price and supply while also avoiding state-level taxes and corporate regulations. The use of trusts for industrial consolidation multiplied throughout the 1880s, and in response, several states and the federal government passed antitrust laws to regulate business competition, focusing on coordination among firms and business tactics used to monopolize industries.” Laura Phillips Sawyer, US Antitrust Law and Policy in Historical Perspective, Harvard Business School Working Paper, 19-110 (2019), available at  https://www.hbs.edu/faculty/Publication%20Files/19-110_e21447ad-d98a-451f-8ef0-ba42209018e6.pdf.

Testimony of Roger P. Alford on Politicalization of Antitrust Enforcement before the House Subcommittee on the Administrative States, Regulatory Reform, and Antitrust

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                  On December 16, 2025, Professor Roger P. Alford, Professor of Law, Notre Dame Law School and former Principal Deputy Attorney General for the DOJ’s Antitrust Division in the current Administration, testified before the House subcommittee on antitrust. The topic of his testimony was the politicalization of European antitrust enforcement. But before turning to that subject, Professor Alford “want[ed] to begin my remarks with the more pressing and urgent concern of the politicalization of United States antitrust enforcement.”

                  As mentioned in a prior Cartel Capers post, President Trump issued a pretrial pardon to Timothy Leiweke who had been indicted just this last July for allegedly rigging a construction and management bid to build an entertainment arena for a public university in Texas.  The Antitrust Division had touted the indictment as a big step in bringing competition to the entertainment industry. Professor Alford had this to say about the pardon in his written remarks:

Today, Trey Gowdy is playing a leading role in promoting a politicized justice system. On July 9, 2025, the Department of Justice’s Antitrust Division charged Tim Leiweke with bid rigging “to benefit his own company and deprive a public university and taxpayers of the benefits of competitive bidding.” According to published reports, Gowdy lobbied senior leadership within the Department of Justice to get the case dropped, but to no avail. So Gowdy went above the heads of every senior official in the Department of Justice and appealed directly to President Trump. During a golf outing with President Trump on November 16, Gowdy convinced the President that Leiweke had been treated unfairly by Trump’s own Department of Justice. Precisely what was unfair? The companies and other executives had secured immunity deals if they would cooperate and testify against the principal offender, Tim Leiweke. Two weeks later, Tim Leiweke received a preemptive pardon. (footnotes omitted).

Professor Alford’s remarks also included: How to Address the Politicalization of Antitrust Enforcement.  I hope you will read his full written remarks, here.

Thanks for reading.

Bob Connolly    bob@reconnollylaw.com

New Article: Per Se Rule Related Defenses In Criminal Antitrust Prosecutions

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As I posted last week, I had written an article, with the help of Erin Lyman, a third year student at the University of Wisconsin Law School, discussing the per se rule and the various ways the defense may attack it in pretrial motions, and throughout the proceeding, including appeal should the defendant be convicted. The article was about to be published when the defendant received a full Presidential pardon. The issues raised concerning the use of the per se rule in criminal antitrust trials are likely to come up again so I have retooled the article a bit and posted it on SSRN:  Per Se Rule Related Defenses In Criminal Antitrust Prosecutions, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5895764, posted December 10, 2025.

            The article uses as a lens, an indictment the Antitrust Division returned alleging a per se Section One violation for this agreement:

  1. The charge in this Indictment arises from a scheme in which Defendant conspired with a competitor to rig the bidding to develop, manage, and operate an arena at a public university in Austin, Texas (the “Arena Project”). Specifically, the Defendant and a competitor agreed that the competitor would stand down and neither submit nor join an independent competing bid so that Defendant’s company would win the Arena Project and derive its economic benefits. In exchange for the competitor’s standing down, Defendant represented that the competitor would receive certain subcontracts for the Arena Project and other consideration.

The Defendant indicated that he would not deny an understanding with the alleged competitor but claimed it was procompetitive consortium building on the large project.

            My SSRN paper covers three possible scenarios that might have come up had the defendant been brought to trial. First, citing the Fourth Circuit’s decision in Unted States v. Brewbaker, 87 F. 4th 563 (4th Cir. 2023), the defendant could have argued that the indictment did not allege a per se violation. The defense would have argued the defendant the indictment merely sets forth lawful, ethical and procompetitive efforts of complementary businesses joining forces to deliver a compelling proposal to the customer.  The legal argument would be an agreement to form a consortium/joint venture is well-recognized as having a potential precompetitive impact and is outside the kind of agreement the Supreme Court has included in the per se category. Secondly, should the case have advanced to trial and jury, the defendant could argue, based on United States v. DaVita, that the court should reject the government’s standard per se jury instruction and instead, require the jury to find “beyond a reasonable doubt that defendant entered into an agreement with the purpose of …[rigging the bid].  See United States v Davita Inc., No. 1:21-CR-00229-RBJ, 2022 WL 1288585, at *1 (D. Colo. Mar. 25, 2022). Finally, if convicted, the defendant could appeal and argue that the per se rule is unconstitutional when applied in a criminal trial.

            I’ve been writing about the per se rule for many years so some of the ideas/material in the article are “reprints.”  I have, however, added new material.  I am going to post some of the writing I think is perhaps more interesting on the blog over the next several days.

Thanks for reading.

Bob Connolly              bob@reconnollylaw.com

Pardon the Interruption: No Trial for Oak View CEO Indicted for Rigging Multi-Million Dollar Project

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            In July of this year Timothy Leiweke was indicted by the Trump administration Antitrust Division for bid rigging on a multi-million dollar project for the Moody Center at the University of Texas at Austin.  At the time, the Antitrust Division hailed the indictment stating: “The Antitrust Division and its law enforcement partners will continue to hold executives who cheat to avoid competition accountable.”  Not so fast. The trial was scheduled for early 2026, but yesterday President Trump issued a full and unconditional pardon to Mr. Leiweke (here). There was no explanation.

            While I am glad for Mr. Leiweke, this was not a good development for my rapidly expiring writing career. For several months I have been working on an article (footnotes and everything!) that discussed the ways Mr. Leiweke might beat the rap and avoid a possible ten year prison sentence. I did not have a pretrial pardon on my bingo card. The article deals mainly with how the defense might have attacked the per se rule on the facts alleged in the indictment. Well, not every indicted antitrust defendant will be so fortunate to get a pardon so I may rework the article using a hypothetical defendant who will have to face trial and be held accountable if a jury convicts.

PS  I moved back to Palm Springs (final move) and yesterday (December 4th) I walked about in shorts in a tee shirt. I don’t blog much these days (would you?). But the Leiweke indictment caught  my attention—not likely to make that mistake again. I am going to rework my article and post it in segments on the blog which I’m still paying GoDaddy for so I may as well.

Thanks for reading.

Bob Connolly    bob@reconnollylaw.com

Some Thoughts on the Antitrust Division’s New Whistleblower Reward Program

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           As most everyone knows by now, on July 8, 2025 the Justice Department’s Antitrust Division announced a Whistleblower Rewards Program with a dedicated webpage.  Only time will tell if the program results in any cases, but the announcement has already resulted in a deluge of “client alerts” and blog posts, to which I now add my own.

            The announcement of a Whistleblower Program is unequivocally a good thing—a positive step in the right direction.  The press release states: “The Whistleblower Rewards Program will provide individuals with the opportunity to report evidence of antitrust crimes directly to the Antitrust Division and, in appropriate cases, qualify for substantial monetary rewards of up to 30% of any criminal fines recovered, for violations of law affecting the Postal Service, its revenues, or its property.” (emphasis mine). The hard part for potential whistleblowers (and their attorneys) will be to figure out what that means. The most narrow reading of this qualification would be violations where the Postal Serve puts out a bid or RFP and the vendors collude. The Postal Service procures a wide range of goods and services such as  building construction, vehicles, fuel, charging stations for electric vehicles, shipping material, maintenance and obviously, postage stamps. But there is already a whistleblower program for fraud against the Postal Service—the False Claims Act (discussed below). The most expansive reading of this qualification would be any antitrust crime where the Postal Service is used—which might mean any antitrust crime like a mail fraud hook.

            The Whistleblower Rewards Program webpage has a link to the Memorandum of Understanding [between the Division and the Postal Service] Regarding The Whistleblower Rewards Program And Procedures.  The Memorandum outlines the process for determining whistleblower eligibility after a whistleblower report is made to the Antitrust Division.

“If the Antitrust Division determines that the reported information qualifies as a whistleblower report, the Antitrust Division will disseminate the information it has received to the USPIS official designated herein (“USPIS Official”). The USPIS Official will assess whether the allegations reasonably articulate “violations of law affecting the Postal Service, its revenues, or property” MUO page 3.

Another MOU section Titled “Eligible Criminal Violations” states:

“A whistleblower reasonably articulates violations of law affecting the Postal Service, its revenues, or property when sufficient facts and evidence are provided for the USPIS Official to conclude that the Postal Service has suffered an identifiable harm. However, the harm need not be material or otherwise pose any substantial detriment to the Postal Service.” MUO p. 8.

“Need not be material” is a pretty low bar as far as standards go.  Moreover, the Antitrust Division’s press release states: “For the first time, the Antitrust Division will offer rewards for individuals who report antitrust crimes and related offenses that harm consumers, taxpayers, and free market competition across industries from healthcare to agriculture — under existing law and at no additional cost to the taxpayer.” (my emphasis). Put it all together and it is clear that it is not at all clear what violations will be eligible for a whistleblower reward.  Time and experience will tell.

            The success of this new program will be hampered by other uncertainties, perhaps unavoidable, about how the program will work. Another big question to me involves, “Who is eligible for a whistleblower reward?”  A great source for government procurement fraud leads is, not surprisingly, government procurement officials. They can flag suspicious bid patterns, identify co-workers with surprisingly large beach houses, or other signs of possible foul play in the bidding process. But since it is their job to report such things, they are not eligible to be a whistleblower. The plentiful fish in the potential whistleblower pond are, generally speaking, estimators or sales people. But these potential price fixing/bid rigging whistleblowers are likely to have some criminal liability themselves. Conspiracy law is expansive so an estimator who inflates a bid knowing his company has an agreement with competitors, or a salesperson who quotes a price knowing it was the product of collusion, may be considered a member of the conspiracy. A successful whistleblower program will hopefully make some allowance (i.e. immunity and eligibility) for lower level employees. The Antitrust Division has a very seldom used Individual Leniency Program that may be more inviting now that there is a potential for a whistleblower reward to go along with the leniency.

            A potential whistleblower reward is a necessary incentive, not because whistleblowers are motivated by money (though some may be), but because a potential whistleblower has a reasonable fear of a short career in the industry they are blowing the whistle on and a legitimate concern about the cost of hiring an attorney to help with the whistleblower process.  These fears are offset somewhat by the prospect of a whistleblower reward that will cover attorney fees and provide some economic security. Under the new program the potential whistleblower award is up to 30% of the criminal fines over $1 million recovered from cases relating to the whistleblower’s information. This payout, however, is totally in the discretion of the government and non-appealable. There is obviously no track record for this new program. Success breeds success so let’s hope there are some early cases where whistleblowers come out not regretting their bold decision to come forward.

            Trust between a potential whistleblower and the Antitrust Division will be key because the uncertainty inherent in guidelines for a new program can only be reduced with experience. There was similar uncertainty when the Division launched the 1993 Corporate Leniency Program.  Real life examples and speeches by government decision makers (who had a clear bias towards making the program successful) led to a level of trust that overcame concerns about how the new leniency program would work.  And work it did.  The same process will hopefully play out here.

            It is important to remember that a potential whistleblower already has a more well-trod path to becoming a whistleblower when a government agency, like the Postal Service, is a victim of bidding fraud.  A whistleblower can file a False Claims Act case—the false claim being invoice submitted for work/projects secured via collusion.  The False Claims Act applies to all contracts with federal agencies (or contracts funded by federal dollars).  The Antitrust Divion has had some big cases that flowed from a whistleblower(s).  For example, in November 2018 the Antitrust Division and Civil Division announced that three South Korean oil refiners had agreed to plead guilty and to enter into civil settlements for rigging bids on United States Department of Defense Fuel Supply Contracts.  The government entered into civil settlements of over $205 million. The investigation was started by a whistleblower filing a False Claims Act case.  The DOJ press release noted, “The United States’ False Claims Act civil investigation resulted from a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act.  Those provisions allow for private parties to sue on behalf of the United States and to share in any recovery.”  DOJ  Press  Release April 8, 2020 DOJ Agrees to Civil Settlement with Additional Firm Involved in Bid Rigging and Fraud Targeting Defense Department Fuel Supply Contracts for U.S. Military Bases in South Korea.  While the amount awarded to the whistleblower[s] who initiated the investigation is not known, at 15-25% of the total recovery, there was ample reward for coming forward and exposing the scheme.

            The qui tam provisions of the False Claims Act permit whistleblowers (known as “relators”) to bring certain fraud claims on behalf of the United States. 31 U.S.C. § 3730(b). These actions “are filed under seal and remain that way for at least 60 days” to give “the government an opportunity to assess the relator’s complaint and decide whether to intervene and assume primary responsibility for prosecuting the case.”

            While not a qui tam (i.e. whistleblower) case, a July 14, 2025 USDOJ press release shows how corrupting the bidding process can result in a successful False Claims Act prosecution.  A defense contractor agreed to pay $3.3 million to resolve allegations of causing fraudulent bids to be submitted. The defendant admitted that, from 2019 to 2021, it coordinated with other vendors to submit inflated quotes for rigid wall shelters so that the other vendors would win the awards at inflated prices.  This was not a whistleblower case but in a situation like this, a whistleblower would now have the option of filing a False Claims Act case or reporting as a whistleblower under the new Antitrust Division’s Whistleblower Program. There will be plusses and minuses to consider for each whistleblower route. For instance, filing a whistleblower claim with the Antitrust Division seems simpler than filing an actual FCA case under seal.  But, there is a long history of FCA cases so there is more certainty about how a False Claims Act case will proceed.

            The Antirust Division’s Whistleblower Program is an important supplement to how one can be a whistleblower on contracts involving federal funds. The biggest gap when it comes to incentivizing persons to come forward with information about price fixing/bidding rigging or other forms of undermining the competitive process is when the violation targets the private sector economy.  The FCA only applies when federal funds have been illegally obtained. It simply makes no sense to incentivize whistleblowers to come forward when the federal government is the victim of illegal collusion through the FCA, but not have similar program that provides a financial incentivize for coming forward with information about criminal antitrust violation victimizing the private sector. Perhaps the Division’s new Whistleblower Program will provide an avenue for private sector whistleblowers to come forward. That will depend on how broadly the Program is applied.  We can’t expect any quick results since it is a long road between filing a whistleblower claim and an actual case—and the Division will protect the whistleblower’s anonymity to the extent possible under the law.  My real hope is that the new Whistleblower Program is just first step in an expansion of incentives for whistleblowers to come forward, culminating someday in SEC style criminal antitrust whistleblower legistation.

See It’s Time For A Criminal Antitrust Whistleblower Statute (It Was Also Time Last Year and the Year Before Too), Cartel Capers, August 11, 2022.

PS.    I have not been blogging much lately. There are many reasons but one is that Spell Check informed me that there were 163 spelling errors and a handful of grammatical mistakes in my first draft.  You would be surprised at how many different ways I can misspell “whistleblower” when trying to get my thoughts down quickly in a draft.  I cannot type and my ability to think is becoming more questionable.

But—Thanks for reading!  Bob Connolly

Whistling in the Wind…For a Whistleblower Statute To Help Hypothetical Bill

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For many reasons, international cartels cases have all but disappeared. The increased collateral effects of seeking Leniency is a major reason. There are many potential whistleblowers in the cartel pond, yet rarely does an insider come forward (The DOJ has an Individual Leniency Policy that has rarely been used). To illustrate why an individual whistleblower is highly unlikely to come forward without any financial incentive, in a prior Cartel Capers post I’ve written a story about Hypothetical Whistleblower Bill. For years, I’ve advocated for a new cartel-busting tool—a criminal antitrust whistleblower statute. Given that we have new leadership at the Antitrust Division, I’m reposting the piece hoping to get a nibble of interest.

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Hypothetical Bill is the US sales rep for a Widget Company, a foreign manufacturer. There are five main players in the industry. As a sales rep, Bill had heard whispers of price fixing meetings. When Bill was promoted to VP of US sales he was directed to attend meetings with his competitors to discuss prices and output. Price targets were set by the senior “top” guys in each competing company, but the working group had the more detailed task of implementing the prices by region, accounting for exchange rates, maintaining relative allocations, and host of other issues that can derail a cartel. Bill understood that it was none too smart for him to be going to these meetings—especially as an American who will likely go to prison if caught. After attending a few such meetings where it was emphasized not to use emails, and to leave no trace of the meetings and discussions, Bill became very anxious. He confided in a lawyer friend who knows about criminal law but not antitrust specifically. The lawyer told Bill he can hire an attorney and go to the government and he will likely be able to negotiate an Individual Leniency immunity/cooperation agreement (but no guarantees). But a competent, experienced antitrust lawyer will be expensive [and an incompetent lawyer even more expensive]. Bill meets with a criminal antitrust defense lawyer for a consultation and learns that negotiations with the DOJ will take time and likely require multiple trips by Bill and his lawyer to visit the prosecutors for interviews–all at Bill’s expense. Widget Company will not be paying for Bill’s travel, lawyer fees and travel, etc. If Bill can secure a non-prosecution/cooperation agreement, it will last for the duration of the investigation and any possible trials; in other words, his cooperation obligation will be slightly shorter than the Hundred Years War. The Antitrust Division will ask Bill for documents to corroborate his story—travel records, emails, etc. The government may even ask him to stay on with the company and record cartel meetings. Bill may eventually be called upon by foreign competition commissions to appear for interviews. Besides the time and expense of cooperation, Bill understands he will likely be fired by his company (if he hasn’t already left) when they learn of his cooperation. After all, he is a confessed criminal and they are shocked that Bill was talking to competitors. Under new DOJ policy, Bill’s company may even get a fine reduction if they sue him and claw back his salary. The consultation was honest and sobering: “Bill, going to the government will likely keep you out of jail, but it will also be likely to bankrupt you, make you forever non-employable in your industry and drag you and your family through hell for many years. What would you like to do?”

Unless Bill is nuts (not a good quality in a witness), Bill will almost certainly not expose the cartel. He will remain quiet. He could go to the company’s compliance counsel but since the CEO is involved in the illegal activity he’s fearful that he, not the CEO, will regret his internal reporting. At best, Bill will leave his job, get out the situation and keep quiet. But maybe Bill will think of how he needs the job and the money the new promotion brought (kids/college etc.), and stay in the job and keep quiet. After all, even if the cartel gets exposed, isn’t there a chance he could get immunity then? Whatever Bill decides, it is unlikely he will choose to go to the DOJ and expose the cartel.

Now, imagine this scenario with a criminal antitrust whistleblower statute. In his consultation Bill learns that he has the option of being a whistleblower. Being a whistleblower also has significant challenges, but they are tempered by the potential of escaping prosecution, and of not having to pay his lawyer who will work on a contingency fee basis. Bill may also possibly recover a substantial “bounty” if Bill cooperates in successful prosecutions that result in corporate fines. Bill’s first step is to authorize an attorney proffer to see if the government will grant Bill non-prosectution protection in return for his full cooperation. If these negotiations bear fruit, the DOJ will start a cartel investigation with an insider, and Bill will have a non-prosecution/ cooperation agreement, no attorney fees and a possible whistleblower settlement down the road.

In this hypothetical, Bill gives the Antitrust Division all they need to obtain search warrants. The prosecutors will have many options. One option is to reach out, search warrant in hand, to Widget Company’s US counsel. Government lawyers explain that Widget Company has 48 hours to get a Leniency Marker before the investigation goes public and search warrants (and perhaps dawn raids in other parts of the world) are executed. Widget Company folds and starts the leniency process. With the ball rolling, in all likelihood there will never be a trial as cartel members plead out. Even if a holdout goes to trial, however, Bill will likely not be a witness if other cartel members have cooperated. A cartel that may never have been exposed, now falls like dominos (or auto parts, LCDS, graphite electrodes, vitamins and any number of successful cartel cases that have seemed to have disappeared).

In most cartels there are many low culpability fish in the whistleblower pond. Details would have to be worked out in the new legislation for a number of issues including preventing high culpability individuals from cashing in. If a criminal whistleblower statute is passed but produces no whistleblowers, nothing is lost. But I believe a whistleblower statute could reinvigorate criminal antitrust enforcement the way the 1993 revised Corporate Leniency Policy did.

Note: Where the government is a victim of bid-rigging/price fixing, a whistleblower can currently bring a suit under the False Claims Act, but whistleblower legislation will cover private sector cartels and also make being a whistleblower more attractive when the government is the victim.

Thanks for reading.    Bob Connolly     bob@reconnollylaw.com

 

DOJ Fugitive Page (And the Fugitive Disentitlement Doctrine) 

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          Recently the Justice Department’s Antitrust Division and the FBI jointly announced the launch of a new online portal for information on international fugitives who have been charged with antitrust offenses and other crimes affecting the competitive process.  There are 77 fugitives on the list. As the press release notes, these individuals were not indicted under seal so they presumably understand that they have been indicted and are on a Red Notice, making travel outside of their home country hazardous.  If  the offense they are charged with (e.g. price fixing or bid rigging) is not a criminal offense in their country, they are likely not subject to extradition Even if a country has a criminal antitrust statue it may not be willing to extradite its citizens to the United States for this offense.

          When I was the Chief of the Philadelphia Field Office, however, we did successfully extradite a British executive—not for the Sherman Act offense he was charged with, but for related obstruction of justice charges. He was convicted and sentenced to prison. My office also indicted an Israeli national under seal and he was arrested at the Canadian border as he entered the U.S.  He was tried and convicted as well. See Cartel Capers, Compliments to the Procurement Collusion Strike Force and a Trip Down Memory Lane, December 2, 2024.  There have since been other successful extraditions and apprehensions by the U.S. and Interpol.

          The Antitrust Division maintains a “Fugitive” web page. Among the items on the page is a YouTube video of a former fugitive who, in 2024, resolved his criminal charges by entering into a plea agreement with the Antitrust Division.  The agreement was negotiated approximately five years after indictment. “Jim” Chu of Taiwan and the United States entered a “C”[1] plea agreement that included a fine of $300,000 for Chu (the equivalent of what might have been the corporate fine but Chu’s company had been dissolved) but most importantly, the plea agreement explicitly recommended no sentence of imprisonment. In return, Chu agreed to provide assistance to the U.S. Department of Justice, Antitrust Division in connection with antitrust compliance and other public education efforts. See United States v. Yeh Fei Chu aka Jim Chu and G Nova Corporation,  4:19-cr-00070 ECF 34 (2/22/2014)(plea agreement). The YouTube video appears to be the product of that assistance.

          Mr. Chu advises Sherman Act fugitives to consider reaching out to the Antitrust Division, accept responsibility and try to resolve the outstanding charges.  Mr. Chu is certainly correct when he speaks of the real consequence of being a fugitive—especially not being able to travel outside of the home country without risking arrest. This may severely limit business travel/opportunities.  It also can cut off connections with relatives living in other countries.  Being picked up on a Red Notice is no joke:  In 2014, Romano Pisciotti, an Italian citizen, was indicted under seal for violating Section One of the Sherman Act, seized by Interpol while changing planes in Germany and eventually extradited to the United States.[2]  Even before conviction,

 Romano Pisciotti spent 669 days in custody. This included two hours in a police station in Lugano, Switzerland; 10 months in a jail in Frankfurt, Germany fighting extradition [on a Sherman Act indictment]; and eight months in a US federal prison in Folkston, Georgia, in a room with around 40 mainly Mexican inmates and a single corner toilet.” [3]

         The consequences of being a fugitive are real and serious.  But other fugitives reaching out to the Antitrust Division are unlikely to get the kind of deal Mr. Chu received.  Chu was involved in price fixing for “koozies,” also known as can coolers: a foam or rubber sleeve that thermally insulates beverage containers such as cans or bottles. The volume of commerce was small: $2,665,695.60.  Most importantly, no other defendant had been sentenced to prison. In my experience, once a single defendant agrees to a prison term, a non-prison deal is off the table for subsequent defendants.

The Fugitive Disentitlement Doctrine

          The subject of foreign fugitives reminded me of a series of Cartel Capers blog posts I wrote on the subject jointly with a distinguished lawyer from Japan, Masayuki Atsumi.  See Cartel Capers, Defending the Foreign “Fugitive” Against the Fugitive Disentitlement Doctrine[4]   The fugitive disentitlement doctrine is an equitable doctrine under which a court has the discretion to decline to consider a petition of a defendant if that defendant does not submit the jurisdiction of the court. The “paradigmatic object of the doctrine is the convicted criminal who flees while his appeals is pending….” (Gao v. Gonzales, 481 F.3d 173,175 (2d Cir. 2007). Today, however, the fugitive disentitlement doctrine has been applied to bar a foreign citizen indicted by an Antitrust Division grand jury from raising any matters with the court unless he first appears personally before the court. It may be surprising to learn that a person who has never set foot in the United States may be considered a “fugitive.” For example, if a grand jury in Detroit indicts a Japanese executive while he is having breakfast in Tokyo, he has become a “fugitive” if he does not surrender in the United States.

            The cliff notes version of our article is that the fugitive disentitlement doctrine can be overbroad when applied to foreign defendants.  The doctrine is fair (i.e. equitable) in prohibiting a foreign fugitive from litigating his case from abroad (e.g. by getting discovery and then deciding whether to submit to the jurisdiction of the court).  But, we argue, a foreign fugitive should be able to attack the facial validity of an indictment, for example on statute of limitations or jurisdictional grounds.  To have to appear before the court to raise these challenges would require the fugitive to come to the United States, get arrested, and likely spend time in jail, or at a minimum, a very long time in the United States awaiting trial since his passport would be revoked. Allowing a foreign fugitive to attack the facially validity of an indictment would provide prudent restraint on prosecutors because, without that possibility, there is no realistic way to contest what might be prosecutorial overreach on its face.  And as Mr. Chu attests in his video, and Roman Pisciotti can strongly second, there are dire consequences for a foreign business person that flow from simply being indicted.  The equitable position would be to at least allow the foreign fugitive an opportunity to facially challenge to indictment.  To be sure, this is not a situation that will be common but it is not out of the realm of possibility.  The issue is of further prevalence because it can also arise in the context of other criminal prosecutions such as FCPA or securities criminal prosecutions.

            The recent published list of criminal antitrust fugitives is unlikely to spur any new plea deals but it is a useful reminder and deterrent to executives that an indictment does not go away with time.  Being indicted for an antitrust crime is a serious handicap to a successful (and less stressful) career in international business.

I’d like to thank Erin Lyman, JD Candidate University of Wisconsin Law School (2025), for her help in producing this blog post.

Thanks for reading.

Bob Connolly  bob@reconnollylaw.com

[1] “Pursuant to Federal Rule of Criminal Procedure 11(c)(1)(C), the Defendant may withdraw from this agreement or the guilty plea if the Courtrejects the parities’ sentencing recommendations and imposes a sentence of imprisonment at the sentencing hearing.”

[2]  Lewis Crofts and Leah Nylen, December 9, 2015, Mlex Interview with Romano Pisciotti, available at https://mlexmarketinsight.com/insights-center/reports/interview-with-Romano-Pisciotti,

[3] Id.  See also Plea Agreement with Roman Pisciotti, https://www.justice.gov/atr/case-document/file/507541/download, which was discussed by Renata Hess in her remarks. See Remarks of Renata Hess,  https://www.justice.gov/opa/speech/acting-assistant-attorney-general-renata-hesse-antitrust-division-delivers-remarks. Pisciotti was not the only foreign citizen extradited and sent to prison,  In her remarks Hesse added:

And earlier this year, John Bennett, former CEO of a Canadian hazardous waste company, was convicted in a New Jersey court and sentenced to more than five years in prison for his role in a Superfund cleanup kickback scheme following his extradition from Canada in November 2014.

Id.

[4]  See Cartel Capers, Defending the Foreign “Fugitive” Against the Fugitive Disentitlement Doctrine Part 1, Part 2.

What If There Was No Per Se Rule in Criminal Cases?

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            The Supreme Court has now denied cert in three different challenges to the per se rule in criminal antitrust cases, the latest being the denial of the cross-cert petition by Brent Brewbaker. It is unlikely that a Court of Appeals will overturn the per se rule given the extensive precedent—although it is not impossible.  Instead, courts that find fault with the per se rule will likely make an end run around, as has been done in certain labor collusion cases. See e.g., United States v. DaVita Inc., 2022 WL 833368, *2, *5 (D. Colo. 2022) (finding that the DOJ had to show more than that the defendants entered the non-solicitation agreement but would have to prove beyond a reasonable doubt that the defendants entered into an agreement with the purpose of allocating the market” and that the defendants “intended to allocate the market as charged in the indictment.”). The Fourth Circuit also chipped away at the per se rule in United States v. Brewbaker, 87 F.4th 563, 583 (4th Cir. 2023), finding that a vertical component in a relationship between two horizontal competitors who rigged bids on a government contract took the agreement out of the per se rule and into rule of reason land.

            It is probably time for me to find a new hobby besides writing on my view of the unconstitutionality of the per se rule. But first, there are a couple of questions to explore: 1) would the lack of a per se rule seriously crimp criminal antitrust enforcement? and 2) if the jury charge did not receive a per se rule charge (i.e. if the court did not instruct the jury that the agreement alleged is an unreasonable restraint of trade) what would the judge charge the jury concerning finding whether the agreement unreasonably restrained trade? The latter question is for later blog post.  Below, I  share some thoughts on the potential effects of removing the per se rule from criminal antitrust enforcement.

  • Would Criminal Antitrust Enforcement be Materially, Negatively Impacted Without the Per Se Rule?

           No..  Let’s start with Brewbaker.  It was, in most antitrust observers’ opinion, a classic bid rig. One bidder (Pomona) gave its final bid price to another bidder with the understanding that the second bidder (Contech/Brent Brewbaker) would submit an intentionally higher price.  In addition to bid rigging, Brewbaker was charged with and convicted on fraud counts which alleged that he falsely and fraudulently certified that the bids his company submitted were competitive and not subject to collusion.  This finding makes it highly likely that the jury would also have found Brewbaker guilty of the Sherman Act count if they were the fact finder on whether the alleged agreement was an unreasonable restraint of trade.  Of course an acquittal on bid rigging was possible; the ingenuity of defense lawyers should not be underestimated, but neither should the ability of jurors to reach rational decisions.

            One  justifications for the per se rule is that it “avoids the necessity for an incredibly complicated and prolonged economic investigation into the entire history of the industry involved, as well as related industries, in an effort to determine at large whether a particular restraint has been unreasonable….”  Northern Pac. Ry. v. United States, 356 U.S. 1, 5 (1958).  Constitutionally speaking, that hardly seems like a justification for having the court decide an element of the offense, and the most crucial one at that—did the agreement restrain trade?  But, if there were no per se rule, would the trial really necessarily involve a “complicated and prolonged investigation into the entire history of the industry involved?” Id. Not necessarily. Going back to Brewbaker, what about the proffered defense that dual distribution agreements can be procompetitive?  The trial court excluded this defense because of the per se rule. However, even without a per se rule, the trial court may have also excluded this defense on relevance ground.  The rules of evidence apply to a criminal trial. Was the proffered expert testimony relevant describing the procompetitive benefits of dual distribution relationships? Not without a foundation.  Who for the defense was going to establish that the bidders were in a dual distribution arrangement?  What documents would they have to support this?  I suspect none. Voir dire of Brewbaker’s proffered expert may well have resulted in the expert’s testimony being excluded under Fed. R. Evid 702 and/or 403.

            It is also revealing that the Fourth Circuit acknowledged that Brewbaker went to some lengths to deceive the consumer and keep the complementary bidding scheme secret:  “Also during this time [of submitting complementary bids] Brewbaker tried to cover his tracks. He deleted conversations between Pomona and Contech employees, otherwise opted for phone calls over digital paper trails, and made sure that the percent he added to Pomona’s bid varied to avoid raising ‘red flag[s]’ to NCDOT.” United States v. Brewbaker, 87 F. 4th at 569. The Contech/Pomona agreement was kept secret to conceal the collusion from NCDOT.  Would the jury have bought a procompetitive argument, if the court had even allowed it?  Highly doubtful. Of course, instructing the jury on the per se rule removes all doubt, and as such it is a great tool for the prosecution.  But, if the Constitution requires that the jury, not the court, made the finding of whether the agreement was an unreasonable restraint of trade, it is highly likely that the jury would have done so.

            Brewbaker is just one case but it is representative of typical government procurement collusion cases.  The bidders arrange in advance who the winning bidder will be.  Other bidders submit intentionally high (complementary) bids in return for some form of future payoff.  The collusion allows the winner to inflate the bid. The winning bidder shares or pays off the loser(s) often with future reciprocated complementary bids. The payoff, however, could also be money.  The payoff also is often a subcontract from the winning bidder or an agreement to buy an input(s) from the winning bidder, also at an inflated price to share the spoils of the collusion.  The great irony of the Fourth Circuit’s Brewbaker ruling is that this form of payoff would establish a vertical relationship and take the collusion out of the reach of the per se rule.  Given the fraudulent nature of bid rigging, the division of the spoils among the colluders and the secrecy necessary to deceive the buyer, it is highly unlikely a defendant would admit the agreement to collude but successfully argue it was not an unreasonable restraint of trade.

            The other class of agreements prosecuted by the Antitrust Division as criminal cases are price fixing cases.  In cartels cases, the issue at trial has been whether there was an agreement or whether the particular defendant(s) on trial were members of the cartel.  Given the secretive nature of the cartels and other ample evidence of consciousness of guilt and deception of customers, it would be unlikely a defendant would admit that he was a member of the cartel but then defend on the ground that it was not an unreasonable restraint of trade. In any case I ever tried, I would gladly have traded for an admission from the defendant that he was a member of the charged conspiracy in return for the defendant’s’ right to argue that the agreement was not an unreasonable restraint of trade.

            Every head of the Antitrust Division in recent memory has made statements such as, “price fixing, market allocation and bid rigging steal from, and commit fraud upon American business and customers.”1  The Antitrust Division has taken the position that “the [criminal] cases that we are charging and prosecuting are unmistakable fraud.”2  It is true that having the jury, not the court, decide whether an agreement was an unreasonable restraint of trade adds an element of uncertainty that may make conviction more difficult by some unmeasurable degree, depending on the circumstances of the case.  But as long as the DOJ sticks closely to this fraud standard (which is entirely appropriate for a crime that carries a maximum jail sentence of 10 years) it is likely that the jury would find the alleged agreement constituted an unreasonable restraint of trade.

            Without reliance on a per se rule, prosecutors may be restrained from bringing criminal cases that are not clear-cut fraud. This would be a beneficial restraint. The kinds of cases that come to my mind where lack of a per se rule would seriously impact the government’s prospects might be the labor market cases and Heir Locators (where Judge Sam initially ruled the case was a rule of reason case but changed course after the government’s successful appeal to the Tenth Circuit).  See Cartel Capers, Heir Locators Is Now A Per Se Production, February 25, 2019. However, a criminal indictment is not the only option to punish and deter antitrust violations.  Many jurisdictions, such as the EU, have vigorous anti-cartel programs relying only on civil prosecutions.  The threat of jail is the most significant form of deterrent and hard core bid rigging and price fixing prosecutions would continue without a per se rule.  But in some circumstances,  much can be accomplished, and perhaps sometimes more efficiently, by bringing certain cases as civil prosecutions.

           Thanks for reading.  I understand that the topics raised here warrant much more consideration than a blog post, unless they warrant no consideration at all, but it’s a start.

Bob Connolly  bob@reconnollylaw.com

I’d like to thank Erin Lyman, JD Candidate University of Wisconsin Law School, for her help in producing this blog post.

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  1. Anne K. Bingaman, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, The Clinton Administration: Trends in Criminal Antitrust Enforcement, Remarks Before the Corporate Counsel Inst. (Nov. 30, 1995), available at http://www.justice.gov/atr/public/speeches/0471.htm.

 

2.  Scott D. Hammond, Deputy Assistant Att’y Gen., Antitrust Div., U.S. Dep’t. of Justice, Transcript of Testimony Before the United States Sentencing Commission Concerning Proposed 2005 Amendments to Section 2R1.1 at 3 (Apr. 12, 2005), available at http://www.justice.gov/atr/public/testimony/209071.pdf

Compliments to the Procurement Collusion Strike Force (and a trip down memory lane)

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             The Antitrust Division of the USDOJ recently celebrated the Fifth Anniversary of the Procurement Collusion Strike Force.  The event, held at the Great Hall of the Department of Justice, featured speeches by Assistant Attorney General Jonathan Kantor and Strike Force Director Dan Glad (here).  “Since its inception in November 2019, the PCSF has opened more than 145 criminal investigations and trained more than 39,000 people. In that time, the PCSF and Antitrust Division have obtained over 60 guilty pleas and trial convictions and have investigated and prosecuted over 85 companies and individuals involving over $575 million worth of government contracts and contract kickbacks.”

            Detecting and prosecuting procurement collusion on government contracts is a worthwhile expenditure of Antitrust Division (and their partners’) resources for a number of reasons.  Due to bidding regulations, government buyers often lack the flexibility of procurement agents in the commercial world.  Government contract $$ can be a target for bid rigging and other forms of collusion.  The harm caused by price fixing is generally spread out to many consumers (thus, class action civil suits) while bid rigging is targeted against the government and can undermine public confidence that tax dollars are being spent wisely.  Staff—prosecutors, paralegals and other members of the team–accordingly, take great satisfaction in successfully prosecuting government procurement bidding corruption.  Importantly, government procurement bid rigging cases have provided valuable trial experience for a significant number of Division attorneys.

            As an antitrust “old timer”  I like to recall that investigating and prosecuting bid rigging against the government (federal state and local) is not a recent development. I joined the Antitrust Division in 1980 and relatively quickly became involved in one of the greatest procurement fraud efforts the Division has ever known—prosecuting road construction bid rigging cases.  The road construction cases throughout the country were the first of what became known as “way of life” government procurement prosecutions.  Antitrust Division attorneys up to that point had typically conducted investigations largely on their own.  But with the road construction cases, prosecuted by every field office (there were seven field offices in the “old days”—as well as a criminal section in DC), we learned the value of teaming up with investigative agencies—in the road construction cases the Inspector General’s Office of the Department of Transportation.  It was very helpful and highly educational to work with another agency.   Over the years, government procurement cases led to a huge number of case filings in other “way of life” markets like  electrical and mechanical contracting, school milk, school E-rate programs, and government auctions.  From 1990 to 2000, the Antitrust Division filed an average of 63 criminal cases each year, and I believe these were mostly government procurement cases.

            Field offices were responsible for developing their own cases so “outreach” to various Inspector General offices, and procurement officials within those agencies, was essential to survival.  You “eat what you kill” was the motto.  “Case Development” was even a critical element in each attorneys’ evaluation.  Being in a field office with a defined region gave us the advantage of maintaining continued contact with agents in our region as opposed to one-off encounters on particular cases.  Field office management was also charged with maintaining cooperative relations with US Attorney’s Office in our territory.  The synergies of working with agents was so powerful that for some time, some field offices even had an FBI agent “detailed” to their office to work full time with that office.  There was healthy competition among the field offices and the criminal DC section [I can’t remember the name—it had several over the years] led first by Tony Nanni and then Lisa Phelan to find, develop and prosecute government procurement cases and to make more use of investigative techniques available to us such as search warrants, consensual monitors and border watches with the help of these agents.

       I can’t recount the many successes of the other Division offices bringing government procurement fraud cases.  But I clearly recall one of the most interesting cases in Philadelphia Filed Office history involving a scheme to rig bids for medical supplies purchased by the Defense Department at the Defense Personnel Support Center in South Philadelphia [now defunct—like the Philadelphia, Cleveland Atlanta and Dallas field offices.] After a bid rigging detection talk, an astute buyer alerted us to suspicion bidding patterns for certain contracts she handled. Her tip led to the exposure of a long-running bid-rigging scheme. The first defendant to be charged pled guilty, but a co-conspirator elected to go to trial.  It was a multi-count indictment charging both bid rigging and fraud. The jury convicted and the defendant was sentenced to five years in prison — a record-breaking sentence at the time. Another defendant was an Israeli national who was indicted under seal and placed on a border watch. This defendant, Amir Porat, was arrested at the Canadian border as he entered the United States. He was a likeable, smart, funny and charismatic character who acted as his own defense lawyer 9with the help of a prominent defense attorney).  Part of the government’s case was a $200,000 payoff check that Porat had deposited in his Swiss bank account. (How our team obtained records from a Swiss bank is a story that can’t be told—initially because I was sworn to secrecy and now because I can’t remember.) Porat claimed that anyone could have opened a Swiss bank account in his name, and to prove his point, he opened an account in the name of the co-lead prosecutor, Antonia Hill!  Unfortunately for Hill, there was no money in the account, but fortunately for her, Porat was convicted. While the case was on appeal, the Supreme Court overruled established precedent that materiality was an element for the court to decide, as had been the case in this trial, and held that materiality of an allegedly false statement was an issue for the jury. [I believe someday the Supreme Court will make a similar finding with respect to the per se rule].  Porat’s conviction was vacated. The prosecution team and the defendant put the gloves down and a non-jail plea agreement was reached, avoiding a retrial.

      Government procurement fraud cases have been and should always remain a top priority for the Antitrust Division.  The Procurement Collusion Strike Force will almost certainly continue its good work under the second Trump administration because it was created during Trump’s first administration.  Good luck in this important mission!

Thanks for reading.

Bob Connolly             bob@reconnollylaw.com

Supreme Court Set To Make Cert Decision On Per Se Battle

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On February 1, 2022, Brent Brewbaker, a former executive of Contech Engineered Solutions LLC was convicted by a jury for his participation in bid-rigging and fraud schemes targeting the North Carolina Department of Transportation (NCDOT). The conviction seemed an unremarkable event at the time.  “Evidence showed that Brewbaker instructed a co-conspirator to submit non-competitive bids to NCDOT and to hide his bid rigging and fraud by varying the amount of inflated bids submitted.” The jury had been given a per se instruction [the agreement, if proved, was a restraint of trade]. The Fourth Circuit, however, found that the per se rule was inapplicable because, while Brewbaker’s company submitted a complementary/cover bid for the winning bidder Pomona, Pomona purchased an input [aluminum structures] from Contech creating a vertical relationship. In the Fourth Circuit’s view, the fact that the companies had a vertical relationship as well as being horizontal competitors created a “hybrid” horizontal and vertical restraint of trade with possible procompetitive benefits. This put the restraint outside the bounds of the per se rule and Brewbaker’s bid rigging conviction was overturned. United States v. Brewbaker, 87 F. 4th 563 (4th Cir. 2023).

The Fourth Circuit’s novel view of the scope of the per ser rule set up a battle of petitions for certiorari in the Supreme Court.  The DOJ’s Antitrust Division sought to preserve the Sherman Act conviction and filed a Petition for a Writ of Certiorari,  No. 23-1365, June 28, 2024 with the question presented as: “Whether the existence of a vertical relationship between the competing bidders precluded the application of the established per se rule against horizontal bid rigging to [Brewbaker’s] conduct.”  Brewbaker fired back with a cross cert petition, arguing that if the Fourth Circuit improperly overturned his conviction on per se rule grounds, his conviction should remain overturned on constitutional grounds.  Brewbaker presented this question: “Does the criminal provision of Section 1 of the Sherman Act violate Article 1 of, and the Fifth and Sixth Amendments to, the United States Constitution?” Brewbaker v. United States, Conditional Cross-Petition for Writ of Certiorari, No. 23-1365, filed August 5, 2024.

On October 23, 2024 the United States filed the final brief in the matter:  Reply Brief for the Petitioner which opens with “Since the enactment of Section 1 of the Sherman Act, 15 U.S.C. 1, courts have understood that ‘an agreement between intending bidders at a public auction or a public letting not to bid against each other, and thus to prevent competition, is per se unlawful.” United States v. Addyston Pipe & Steel Co., 85 F. 271, 293 (6th Cir. 1898)(Taft, J.), aff ’d as modified, 175 U.S. 211 (1899).

  1. Was the Scheme in Brewbaker a Per Se Violation?

            The government is correct that a vertical relationship between bidders does not by itself take the agreement outside the per se rule.  The government cited U.S. v Socony Vacuum, 310 U.S. 150 (1940) to highlight that some vertical relationship between conspiring bidders is not at all unusual. In a classic bid rigging scheme, the company agreeing to bid high and lose is often “paid off” via a vertical relationship–a subcontract or by selling an input to the winning bidder.  The creation of a vertical relationship is a way to share the illegal profit generated by the collusion. Why would a losing bidder (i.e. Brewbaker’s company] even submit a bid?—to restrain trade by creating the appearance of competition when there is none. See Cartel Capers, December 13, 2023 you are A Competitor If You Say So—My Disagreement with the Fourth Circuits Brewbaker Opinion.

     The Fourth Circuit bought the red herring argument that because Pomona was a distributor for Contech, their bidding agreement potentially had the pro-competitive benefits of a dual distribution arrangement. Whether the conspirators had a dual distribution relationship [they did not], however, is irrelevant to the nature of the horizontal agreement to collude on their bid.  Contech and Pomona were not bidding to simply sell aluminum structures o NCDOT.   The Brewbaker indictment reads:

“From at least as early as 2009 and continuing through at least June 2018, Defendant BRENT BREWBAKER and Defendant … obtained bid prices from [Pomona] and submitted bids to NCDOT for aluminum structure projects that were intentionally higher than [Pomona’s] bids.” (emphasis added).

Pomona was not a distributor for completing government aluminum structure projects–it was a competitor.   The Fourth Circuit, however, thought the bid rigging scheme could have pro-competitive benefits by strengthening the relationship between Contech and Pomona.  I’m sure it did—until they got caught. But pro-competitiveness is measured by impact on the consumer.  The lengths that the Brewbaker and his conspirators went to hide the scheme from the consumer is a sure tip off that “consumer welfare” was not enhanced by the secret agreement.

  1. Is the Section 1 of the Sherman Act Unconstitutional?

            Should Brewbaker’s conviction stand under the per se rule?  No.  I side with Brewbaker on this point, though my position is more narrow.  The per se rule when applied in criminal cases is unconstitutional, but not Section One of the Sherman Act itself. For further discussion see Brewbaker Strikes Back: The DOJ’s Per Se “Death Star” Attacked,Cartel Capers, August 13, 2024.

The government’s Reply Brief states:  “He [Brewbaker] never disputes that the type of agreement alleged in the indictment would have been per se unlawful at common law. He instead contends, in his cross-petition for a writ of certiorari, that the common law is “irrelevant.” 24-124 Pet. 6 n.2 (citation omitted).” Reply Brief for Petitioner at 2.  It is disputable whether the type of agreement alleged in the indictment would have been per se unlawful at common law.[1] But whatever the common law, Brewbaker is correct that it is irrelevant.  The common law was developed with courts, not juries, being the fact-finder of what is lawful. Brent Brewbaker was charged with a criminal violation of the Sherman Act for an agreement in restraint of trade. Where the critical element of a criminal offense is whether the defendant restrained trade, it seems inescapable that the defendant must be found, by a jury, to have restrained trade.

In Addyston Pipe, Judge Taft explained the fact-finding the court undertakes in deciding whether a restraint is unlawful or a pro-competitive ancillary restraint.[2]  The government expands on this in its reply brief:

“Under that approach [ancillary restraints doctrine], a court first decides whether the challenged restraint is ancillary to a legitimate collaboration and then (if the court answers that question in the affirmative) determines whether the overall arrangement is procompetitive under the rule of reason.”  Reply Brief of United States at 4. (emphasis added).

But “a court first decides….” is inconsistent with constitutional law which requires that a jury find every element of the offense in a criminal case.

Per se rules were developed largely in the context of civil cases but even in a criminal case like Socony-Vacuum no analysis was given to a defendant’s constitutional right to have a jury decide every element of the offense.  This constitutional issue is now before the Supreme Court and it’s a critical question because: “[T]he per se rule is the trump card of antitrust law. When an antitrust [party] successfully plays it, he need only tally his score.” Med. Ctr. At Elizabeth Place, LLC v. Atrium Health Sys., 922 F.3d 713, 718 (6th Cir. 2019) (quoting United States v. Realty Multi-List, Inc., 629 F.2d 1351, 1362–63 (5th Cir. 1980).

There is another section of the government’s brief that sheds light on the constitutional breach in applying the per se rule in criminal felony cases.  In its brief the government quotes Arizona v. Maricopa County Medical Society, 457 U.S. 332, 351 (1982):

“The anticompetitive potential inherent in all [such] agreements justifies their facial invalidation even if procompetitive justifications are offered for some.”  Respondent therefore cannot avoid per se liability by asserting (Br. in Opp. 5-6) procompetitive justifications.” Reply Brief for Petitioner at 3-4.

That explanation of the per se rule in essence states: “Respondent cannot avoid liability for restraining trade by asserting that he did not restrain trade.”  The constitution says otherwise.  The rest of the quote from Maricopa County Medical Society further highlights why the per se rule has no place in a criminal prosecution:  “Those claims of enhanced competition are so unlikely to prove significant in any particular case that we adhere to the rule of law that is justified in is general application.” Id. The defendant might respond: “My defense may be unlikely to succeed your Honor but I’d like to give it a go anyway.” [By the way, had Brewbaker had been permitted to present evidence to the jury regarding why the scheme was not a restraint of trade, I have no doubt the jury would have still found him guilty of the Sherman Act offense, as evidenced by the fact Brewbaker was found guilty of submitting false non-collusion certifications.]

The briefing is concluded and the Supreme Court Docket No. 23-1365, of October 23 2024 reads: DISTRIBUTED for Conference of 11/8/2024.  While this could be the most important criminal antitrust decision since Socony Vacuum there is also good chance cert will be denied to both parties.

[1] See Morris, Arval (1958) Is Price-Fixing Per Se Reasonable? A Discussion, Kentucky Law Journal: Volume 47: Issue1, Article 5 at 71 (with numerous citations).

[2] United States v. Addyston Pipe & Steel Co., 85 F. 271, 282 (6th Cir. 1898), aff’d as modified, 175 U.S. 211, 20 S. Ct. 96, 44 L. Ed. 136 (1899).