If you have been following the price-fixing trials against the chicken industry executives, you know that after failing to convict any of the ten defendants in two previous trials, the Antitrust Division narrowed its case by dismissing five defendants. A reportedly unprecedented third trial against the five remaining defendants ended last Friday when the jury acquitted each defendant. See, Chicken Industry Executives Found Not Guilty of Price Fixing, Bob Van Voris, Bloomberg, July 7, 2022.

After the verdict, the government issued a statement: “Although we are disappointed in the verdict, we will continue to vigorously enforce the antitrust laws, especially when it comes to price-fixing schemes that affect core staples. We will not be deterred from continuing to vigilantly pursue cases to protect the American people and our markets.” This is how it should be. But win or lose, and certainly in this case, the government should reflect on what it did right and what it did wrong. One thing it did very wrong was the failure to engage with any defense counsel in preindictment meetings. None of the individuals indicted received a target letter informing them of the government’s decision to seek their indictment and thus had no opportunity to seek a preindictment meeting. Preindictment meetings provide the staff with the opportunity to listen to defense counsel argue, both factually and/or legally, why the government’s case does not meet the Principles of Federal Prosecution standards for indictment. Also, at the government’s discretion, a preindictment meeting may be an opportunity for the government to put some of its evidence on the table in an attempt to induce a cooperation agreement with the target. The defendants who ended up being put on trial three times before finally being acquitted (as well as the five defendants who the government dropped after the second hung jury), never had this opportunity. The Antitrust Division’s decision to proceed to trial without the benefit of a preindictment meeting was mistake that I hope will not be repeated.

The Antitrust Division’s new policy on preindictment meetings is baffling and a pointless self-inflicted wound. In a July 21, 2021 speech (here), Assistant Attorney General Richard Powers warned that an individual about to be indicted may not receive notice via a target letter if the Division staff believes defense counsel has not been “interested in meaningful good-faith interactions.”  While there have always been exceptions to sending a target letter based on the need for secrecy, it has, to my knowledge, never been the Antitrust Division’s policy to not issue a target letter based on what staff attorneys believe to be uncooperative conduct by defense counsel. This is too subjective a standard, improperly punishes an individual or corporation about to be indicted for the ‘sins’ of the defense attorney and is inconsistent with the Antitrust Division’s well-earned reputation for civility and fair play.

The importance of preindictment meetings (generally triggered when defense counsel receives a target letter indicating her client is seriously being considered for indictment), is more important now than ever. The Antitrust Division has taken an expansive view of per se violations, recently bringing its first ever wage-fixing and first ever no-poach cases. The Division has also publicly stated that it is considering bringing criminal Section 2 monopolization cases. Regardless of how the staff feels about a defense lawyer, the Department of Justice owes it to themselves and the taxpayer to listen to defense arguments in a preindictment meeting before committing the substantial resources to a criminal prosecution.   Before securing an indictment is the time to listen to an experienced defense counsel (often a distinguished Antitrust Division alum) argue why your case stinks. The prosecutor is not obliged to agree, but a wise prosecutor will listen.

While under no obligation to notify a target prior to indictment, the government typically does so, only refraining in the rare case where, “notification…might jeopardize the investigation because of the likelihood of flight, destruction or fabrication of evidence, endangerment of other witnesses, undue delay or otherwise would be inconsistent with the end of justice.”  JM 9-11.153-Notifcation of Targets. In his speech, Mr. Powers laid out a new basis upon which the Antitrust Division may decline to issue a target letter:

“Occasionally, we cannot delay our investigation for targets to be notified, and sometime situations arise where notification creates other risks we cannot bear.  Otherwise, the Antitrust Division typically takes a generous approach, particularly when a subject and counsel have engaged productively and affirmatively with staff throughout the investigation. But this process is a two-way street.  When a subject and counsel make clear they are not interested in meaningful, good-faith interactions—the kind that enhance the Division’s ability to reach a just result rather than serving as a distraction—the Division’s prosecutors are under no obligation to notify a target of its status. (emphasis added).

As the Justice Manual further provides, ‘[i]n investigations handled by the Antitrust Division, a target’s counsel is usually afforded an opportunity to meet with staff and the office or section chief regarding the recommendation being considered.’ But that is far from absolute.  If the target and counsel have declined to engage throughout the investigation, or made apparent to staff that further engagement will not be productive, then the Division will not continue to spend its valuable time and resources on pointless meetings—and if we have decided not to notify the target of its status, of course there will not be an opportunity for a meeting.” (emphasis added).

The Justice Manual does not list “productive and affirmative” engagement by defense counsel with the staff as a prerequisite for issuing a target letter. This subjective standard could be interpreted [or intended?] as an attempt to chill vigorous representation by a defense attorney of her client. Below are a few additional thoughts on why I believe target letters and an opportunity for a preindictment meeting should be afforded to an individual and a corporation, unless doing so would threaten the integrity of the investigation.

Issuing a Target Letter And Affording a Preindictment Meeting Is The Right Thing To Do

1)         Sending a target letter and granting a meeting are two different things. Even if the request for a preindictment meeting is denied, the target has been informed that indictment may be imminent. The target letter gives defense counsel an opportunity to prepare the “target” for the imminent negative publicity. Getting indicted is a traumatic event. It is important to remember that it is not the defense counsel who will be indicted–it is an individual or corporation, who at this point, is presumed to be innocent. An individual most likely will have a family who will also be severely impacted by the publicity of the indictment. A corporation will have shareholders and employees. Prior notice of indictment is an act of civility; warranted even if thought to be unearned. Mr. Powers speaks as though the Department of Justice is an ordinary litigant when he says, “But this process is a two-way street.” Prosecutors, especially when bringing criminal cases, are public servants obligated to do the right thing even if miffed at the way an attorney is defending their client.

2)         It is in the prosecutor’s self-interest to issue a target letter and grant a meeting with defense counsel if one is requested. A target letter sharpens everyone’s perception of the evidence, and positions can change. Clients’ memories sometimes improve. Clients sometimes even change defense attorneys. New arguments and positions may be advanced. Previously stated defense arguments may sound different at this stage of the investigation. It is to the prosecutors’ advantage to learn what they can in these meetings, before trial, even understanding that defense counsel will likely not be putting all their cards on the table. The Division staff lawyers may sit stone silent in this meeting simply making mental notes of how to counter these facts/arguments at trial. The prosecutor may decide that, even though there is indicatable evidence against a particular target, the chances of winning against more culpable individuals is greater if this person is not indicted. It may be beneficial to drop a prospective defendant from a multi-defendant case and perhaps put that person in the grand jury to help neutralize an expected defense. Or the prosecutor may choose to provide some feedback to a particular defendant which may possibly encourage a pre-indictment plea. And yes, the meeting may be a contentious waste of time. But the target letter and preindictment meeting are dynamic events with unpredictable outcomes. That one of those outcomes may be, or even is likely to be, a waste of time, is not sufficient reason to preclude all other possibilities.

3)         Humility should also compel a prosecutor to sit through a “don’t indict my client” pitch meeting. Indicting an individual or a corporation is a tremendous responsibility and while every Antitrust Division prosecutor I have ever known has tried their best to make the right decision, no one is infallible. Antitrust cases are unique and complex—that is why there is an Antitrust Division enforcing the Sherman Act and not the US Attorney’s office. No prosecutor is so experienced and foresighted that he can’t learn something by listening to experienced defense counsel pitch the weaknesses in a case against their client. A boring or even contentious pitch meeting is the price to pay to take every measure to ensure that the momentous decision to indict is the correct one and is in the interests of justice.

“There is a principle which is a bar against all information, which is proof against all arguments, and which cannot fail to keep a man in everlasting ignorance – that principle is contempt prior to investigation.” William Paley [sometimes attributed to Hebert Spencer].  If the prosecution refuses to have a preindictment meeting, they will never know whether they would get what’s behind Door #1 (a waste of time) or  Door #2 (a useful preview of some of the weaknesses in the case and/or strengths of the defense) or Door # 3 (a target with whom you share information who ultimately becomes a cooperating witness).

Conclusion

            There is no dispute that target letters and preindictment meetings are not a matter of right. The perceived cooperation of defense counsel, however, should not be the basis for declining to give notice of indictment. Granting a pre-indictment meeting is a separate question, but one that should also be answered in the affirmative absent a legitimate need for secrecy. It is not only in the interest of the particular case in question, but in the long-term interest of the Antitrust Division to maintain its reputation as an institution that  conducts itself with the highest level of fairness, decency and civility.

Thanks for reading.  Bob Connolly   [email protected]

This post is an expanded/revised version of a Cartel Capers post of July 27, 2021, Why I think the Antitrust Division Should Reconsider Its Policy on No Notice/No Target Letter Indictments

It has become common for defendants indicted on criminal antitrust charges to argue that the use of the per se rule in their trial is unconstitutional.  The United States, however, has beaten back each attack with ample precedent from the relevant court of appeals fortified with long standing Supreme Court precedent (i.e. Trenton Potteries and Socony Vacuum) that hold that price fixing is a per se Sherman Act violation.

In one per se challenge before the Ninth Circuit a panel member was sympathetic to defendants’ position and noted: “I think if it’s going to get straightened out [whether the per se rule is constitutional] it’s going to have to require an en banc panel of this court or more likely the Supreme Court itself.” Joshua Sisco, Mlex, January 16, 2019 “In foreclosure auction appeal, court questions applicability of per se standard, (behind pay firewall)].  The Ninth Circuit turned back the per se challenge in that appeal and Supreme Court denied certiorari. Sanchez et al. v. United States,140 S. Ct. 2655 (2020)(cert petition denied, January 13, 2020).  Just recently the Supreme Court had another chance to review the constitutionality of the per se rule in a criminal antitrust case.  Christopher Lischewski was convicted at trial of conspiring to fix the price of canned tuna.  Lischewski preserved his objection to the per se rule in his trial; his appeal was denied by the Ninth Circuit and he filed a petition for cert with the Supreme Court. The Supreme Court again denied a cert petition challenging the constitutionality of the per se rule in a criminal trial.  Lischewski v. United States, No. 21-852 (May 2, 2022).  The per se rule lives!

More challenges lie ahead, however, for the per se rule.  On May 2, 2022 the Second Circuit released an opinion rejecting yet another challenge to the per se rule. U.S. v Aiyer, Case No. 20-3594 (2d Cir. May 02, 2022). Aiyer was convicted after trial for his participation in a conspiracy to fix prices and rig bids in connection with his trading activity in the foreign currency exchange market. The Second Circuit rejected various challenges Aiyer raised to the use of the per se rule in his criminal trial. As other defendants have, Aiyer argued that when the judge instructs the jury that the alleged agreement, if found, is a per se violation of the Sherman Act, the court takes away from the jury an element of the offense, namely whether the alleged agreement restrained trade.  Aiyer also argued that the trial court, citing the per se rule, impermissibly prohibited him from offering evidence of the procompetitive effects of the alleged agreement.

It seems likely defendant Aiyer will file a cert petition with the Supreme Court.  What are the odds the Court will review the per se rule in Aiyer’s case?  Not good I would imagine with the Court having recently rejected two similar cert petitions.  The best chance Aiyer may have for a grant of cert is that, without going into details, the FOREX market is more complicated than the real estate auction bid rigging conviction that was the subject of the cert petition in Sanchez or the garden variety price fixing agreement that was the subject of the Lischewski cert petition.

A defendant never wants to be in a position of seeking a cert petition with the Supreme Court because, first you have to get convicted in the trial court and then lose your appeal.  Many people think that labor market collusion cases may be the most likely vehicle for Supreme Court to revisit the per se rule, but so far the Antitrust Division is 0 for 2 in labor market collusion trials.  But there are more labor market collusion cases on the way so perhaps the United States will score a conviction and a case will make its way to the Supreme Court.

While losing at trial, the Antitrust Division has won judicial rulings upholding the per se rule in their first wage-fixing and labor allocation cases.  In those cases the challenges to the per se rule was focused more on an argument that the conduct in question was not the type with which the courts had sufficient experience and, thus, the per se rule should not apply.  The courts rejected those arguments, in essence holding that while they may not have had experience with labor market collusion cases, the types of agreements alleged in the indictments were agreements the court had sufficient experience with to treat them as per se violation.  Curiously enough, this line of reasoning highlights what I consider to be the constitutional flaw with the per se rule in criminal cases.  The courts are making fact-finding decisions in determining whether they have enough experience with a given type of agreement to label it as per se violation i.e. “always or almost always an unreasonable restraint of trade.”  In some opinions, we see the court deferring a ruling on whether the per se rule applies until there is further factual development in the case.  Courts are clearly making factual determinations about whether the per se rules applies-i.e., whether the alleged agreement violates the Sherman Act as a matter of law.  In 30 plus years of prosecuting criminal antitrust cases I never questioned the per se rule.  But now I find myself asking, “Shouldn’t the jury always be making the decision of whether the agreement in question is a restraint of trade?”  It shouldn’t matter how much experience a court has with a particular type of restraint and/or how comfortable the court is that the charged agreement is a per se violation in a criminal case the jury, and only the jury, should decide whether the agreement in question (if proven) is a restraint of trade. (After all, the Supreme Court has changed its mind many times regarding what constitutes a per se Sherman Act violation. Remember, vertical price fixing was once considered a per se violation. See e.g. Dr. Miles.)

In opposing cert petitions challenging the per se rule, The Department of Justice effectively cites decades of per se rule precedent at every level of the federal courts. The DOJ cert opposition can be summarized: “Nothing to see here; nothing has changed.”  But things have changed.  The per se rule was created by the Supreme Court at a time when the Sherman Act was a misdemeanor and before the Supreme Court began to focus on requiring prosecutors to prove every element of the offense.  In the 1940 case of United States v. Socony Vacuum Oil Co.,[1] the individual defendants were fined $1,000.[2]  As was customary for this then misdemeanor, no jail sentences were imposed.  Compare Socony Vacuum to Sherman Act as a felony: In 2014, Romano Pisciotti, an Italian citizen, was indicted under seal for violating Section One of the Sherman Act,[3] seized by Interpol while changing planes in Germany[4] and eventually extradited to the United States.[5] 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.” [6]

Times have changed.[7]  Fines have taken off as well. The largest corporate fine in Socony Vacuum was $5,000.  The largest corporate fine today stands at $925 million![8]  The per se rule remains undefeated in taking on all challenges and perhaps will remain so.  But the challenges will keep coming.

Thanks for reading.   Bob Connolly  [email protected]

PS.   If I am wrong, (it happens), and the per se rule is never found to be unconstitutional, this is a good issue to be wrong about.  After all, cartels are “the supreme evil of antitrust.”  It says so on my blog mast head and the Supreme Court has said so too.  Verizon Communications v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004). I don’t think juries would have any difficulty finding hard core cartels are a restraint of trade, but nonetheless, the per se rule is a prosecutor’s best friend.

*************************

[1]  United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940).

[2]  See Daniel A. Crane, The Story of United States v. Socony-Vacuum: Hot Oil and Antitrust in the Two New Deals, in ANTITRUST STORIES 107 (Eleanor M. Fox & Daniel A. Crane eds., 2007).

[3]  https://www.justice.gov/atr/case-document/file/507556/download  On March 28, 2011 Pisciotti was indicted under seal for violating Section One of the Sherman Act.

[4]  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,  see also, Gianni De Stefano, Meet the First Extradited Businessman on Cartel Charges, 8 J.E.C.L. & Pract. 5 (2017), available at https://academic.oup.com/jeclap/article/8/5/281/3074470.

[5]  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,

[6] Id.  See also See 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 also Remarks of Renata Hess,  https://www.justice.gov/opa/speech/acting-assistant-attorney-general-renata-hesse-antitrust-division-delivers-remarks.

[7]   The increases took place in the context of the Sherman Act being elevated from a misdemeanor to a felony in 1974.  In 1994 there was an even more significant enhancement to criminal penalties, including a maximum jail sentence of 10 years.

[8]   See SHERMAN ACT VIOLATIONS RESULTING IN CRIMINAL FINES & PENALTIES OF $10 MILLION OR MORE, available at https://www.justice.gov/atr/sherman-act-violations-yielding-corporate-fine-10-million-or-more.

 

I am in Washington, D.C. for the ABA Antitrust Spring Meeting.  My excitement that my suit still fits was short-lived as I painfully learned that my shoes do not. I’ve done a bit of walking and developed a nice blister (graphic photo censored). I’ve learned/relearned a few other non-competition related things since I arrived:

• I lived in Palm Springs for five years where it only rains three days a year. Back East it can top that–in four days.
• I first realized I may need a hearing aid at the last ABA Spring meting before the pandemic.  I thought my hearing had gotten better though because I can hear the TV at home just fine with close captioning on.  But the problem does return a bit at certain times.
• On the plus side, kudos to the ABA for having very large print for the names on the badges. (The entire conference seems so very well run and the conferece site is spacious making it easy to catch up with old friends.)
• I am an odd fellow that would rather go back to my hotel room and start this blog post over enjoying the many festivities that go well past my bed time. (I did enjoy some early bird receptions).

I won’t say much about the panels because I could not do them justice–except to say each I’ve attended (including Tuesday’s GCR Live-Cartels) were well worth attending. The panelists are all so well prepared and excellent speakers with important facts and/or a point of view to share. There is also a diversity of backgrounds among the panelists including diversity in experience levels: from people who have worked in the field since they helped draft the Sherman Act to the new crop of leaders.

I attend only a fraction of the many panels that cover every facet of competition law, not just here in the US but around the globe.  In the area of cartels there are important debates over some criminal enforcement program policies.  That’s not a bad thing in itself and It sure makes for interesting panels.  But, there is one thing everyone agrees on which is what makes competition law a wonderful area to practice in: Free Markets = Free People.  Now, lets rumble some more over what exactly that means.

Its only Thursday morning so if you see me around please say hello. If we haven’t yet met you will see my easy to read name tag, or if that’s not visible, you may recognize me by my newly purchased footwear.

 

Bob Connolly   [email protected]

On April 4, 2022 Assistant Attorney General Jonathan Kanter Delivered Opening Remarks at 2022 Spring Enforcers Summit in Washington,  DC (here).  AAG Kanter’s remarks outlined the Antitrust Division’s approach to merger enforcement explaining, “the Division has a preference for remedies over settlements.”  Kanter outlined some of the success the Division has had in blocking certain mergers.

AAG Kanter’s remarks also covered the criminal program including important announcements about revisions to the leniency program and an updated “Frequently Asked Questions” document:

“On criminal enforcement, I am excited to announce that as of today, the division is making important updates to its leniency program. Leniency is one of the division’s most important enforcement tools for rooting out cartels because it incentivizes corporations involved in wrongdoing to do the right thing by self-reporting.

While these core incentives have not changed, the updates to the leniency policy will further promote accountability. First, under the revised leniency policy, to qualify for leniency, a company must promptly self-report after discovering its wrongful conduct. A company that discovers it committed a crime and then sits on its hands hoping it goes unnoticed does not deserve leniency.

Second, to qualify for leniency, a company must now undertake remedial measures to redress the harm it caused and improve its compliance program.

Just as important as the changes to the policy is the division’s commitment to making that policy transparent, predictable, and accessible to the public. As of today, the division’s leniency policy lives in the antitrust chapter of the Justice Manual, which is easy to find on the DOJ website and is the definitive go-to source for internal policy and guidance across the department.

Today we are also issuing an updated version of the Frequently Asked Questions about our leniency policy. Front and center in our minds when updating that document was the need to simplify and demystify our practices. The FAQs are written in plain language. And we have added nearly 50 FAQs to ensure they address all the recurring questions we’ve received — and then some. This document will make it even easier for the public to learn about leniency and understand what benefits it provides and what the division requires in return.”

The speech does not contain links to the documents but they can all be found on the Antitrust Division’s Criminal Enforcement page on its web site (here).  I’ve also provided links below:

• 7-3.400 – Antitrust Division Leniency Policy and Procedures

DOJ Justice Manual, April 4, 2022

• FREQUENTLY ASKED QUESTIONS ABOUT THE ANTITRUST DIVISION’S LENIENCY PROGRAM

Originally Published November 19, 2008, Update Published January 26, 2017, Update Published April 4, 2022

• Model Conditional Corporate Leniency Letter

April 4, 2022

I’m sure the update will be the topic of much conversation at the ABA Spring Meeting this week and more will be written about what these changes mean.

Thanks for reading.  Bob Connolly  [email protected]

After two plus years of connecting with my colleagues via Zoom I am excited to be heading to Washington D.C. next week for two great competition law programs–the ABA Antitrust Spring Meeting and GCR Live–Cartels.

The GCR Live Cartel program is on Tuesday April 5, 2022 and has numerous panels covering topics such as labor markets cases, international cartels and other related issues.  I know many of the panelists so I’m sure this will be a great program. The ABA Spring Meeting follows (April 5-8). I love the ABA Spring meeting because of the wide range of panels and the outstanding panelists. The panelists (and audience) are people who have great experience and passion for competition law so I get the chance to hear what’s going on and where people think things are heading on the great issues of the day in competition law.

I have been going to the ABA Spring Meeting for many years. I joined the Antitrust Division in 1980 just as the Chicago School revolution was getting traction.  Is another revolution or evolution brewing today?  Seems so. It’s another pivotal moment in the history of antitrust law.  At some point it will be my last Spring Meeting so I will enjoy the knowledge, debate and catching up next week for sure.

Hope to see you next week.

Bob Connolly   [email protected]

Yesterday Attorney General Merrick B. Garland gave an important talk to the ABA Institute on White Collar Crime (here).  The 2022 White Collar Crime National Institute in San Francisco is just ending: March 2-4, 2022.

The talk was notable for several reasons–the first being that it is wonderful to see in-person conferences again.  More to the point, AG Garland made frequent mention of the work and mission of the Antitrust Division. It is a great boost for the morale of the Division team to see that they have the interest and support of the Attorney General.  That morale is particularly boosted when the words are followed by actions and AAG Garland announced a significant funding boost for the Division and its partner, the FBI’s White Collar Crime Program.

I suggest you read the short speech in its entirety because it dealt with a number of DOJ criminal enforcement priorities including pandemic fraud and enforcement of sanctions against Russian oligarchs. Below are a few highlights related to criminal antitrust enforcement:

• Fraud, theft, corruption, bribery, environmental crime, market manipulation, and anticompetitive agreements threaten the free and fair markets upon which our economy is based.
• We will, of course, continue to hold companies accountable for their criminal conduct. Today, I want to focus on individual defendants.  As the Deputy Attorney General noted, I have made it clear that the Department’s first priority in corporate criminal cases is to prosecute the individuals who commit and profit from corporate malfeasance.
• But most important, the prosecution of individuals is our first priority because it is essential to Americans’ trust in the rule of law. As I said a moment ago: the rule of law requires that there not be one rule for the powerful and another for the powerless; one rule for the rich and another for the poor.  When people see individuals walk while their companies pay the fines, they cannot help  but think that essential principle has been violated.
• As the Deputy Attorney General reported when she spoke with you last fall, we have restored prior Department guidance making clear that, to be eligible for any cooperation credit, companies must provide the Justice Department with all non-privileged information about individuals involved in or responsible for the misconduct at issue. This means all individuals, regardless of their position, status, or seniority, and regardless of whether a company deems their involvement as “substantial.”

The Attorney General noted the accomplishments and busy schedule of the Antitrust Division’s Criminal Enforcement Program:

• The Department’s Antitrust Division has also been busy investigating and prosecuting price-fixing and other criminal violations of the antitrust laws. It ended the last fiscal year having brought 25 criminal cases against 29 individual and 14 corporate defendants, and with 146 open grand jury investigations — the most in 30 years.
•  The Antitrust Division is now trying or preparing to try 18 indicted cases against 10 companies and 42 individuals, including 8 current or former CEOs or company presidents.

And the AG’s words were backed up by financial support:

• In that regard, the President’s FY22 budget seeks increases for the Justice Department’s corporate criminal enforcement efforts. These increases extend to our 94 U.S. Attorneys’ Offices, as well as to the Criminal, Antitrust, Tax, and Environment Divisions.
•  The FY22 budget also seeks $325 million to fund more than 900 FBI agents to support the FBI’s White Collar-Crime Program.

The Attorney General closed his remarks with this warning: “As a defense attorney, prosecutor, and judge, I have also seen the Justice Department’s interest in prosecuting corporate crime wax and wane over time. Today, it is waxing again.”

Besides all the exciting intellectual debate over the “consumer welfare standard” “post-Chicago School antitrust economics” and other civil enforcement challenges, there is still a DOJ/Antitrust Division focus on the nuts and bolts of deterring, uncovering and prosecuting white collar crime; and in particular, holding individuals accountable.

There’s never been a better time for defense counsel impress upon their clients the need of serious antitrust compliance training and when necessary, continue their efforts to defend those who believe they are wrongly accused.

Thanks for reading.

Bob Connolly  [email protected]

I have no expertise in predicting whether the Supreme Court will grant certiorari on any given petition. But I am hopeful that the high court will do so on the issue of whether the application of the per se rule in a criminal antitrust case is unconstitutional. I have seen a couple of items recently that may be a sign that the Court is ready to address this issue.

First, there have been a number of Supreme Court cases where the constitutional rights of criminal defendants have been strengthened/upheld. In Hemphill v. New York, No. 20-637 (January 20, 2022) the Supreme Court upheld a criminal defendant’s right to cross-examine a prosecution witness, overturning the conviction of a man who was found guilty of killing a 2-year-old boy. The defendant, Hemphill, had claimed that another man was the gunman in the stray bullet shooting. Prosecutors read to the jury the transcript testimony of this man, an unavailable witness, over the hearsay objection of the defendant. The testimony was portions of the plea allocution of the unavailable witness to possession of a gun different than the murder weapon. The Supreme Court ruled that this evidence was improperly admitted as a hearsay exception and reversed the conviction.

Another recent case is Van Buren v. United States, 141 S. Ct. 1648 (2021). In Van Buren the Court adopted a narrow reading of the Computer Fraud and Abuse Act statute and concluded that it was not violated when the defendant had legitime access to a police database but improperly accessed it for personal purposes. The Court relied primarily on the text of the statute, particularly the definition of “exceeds authorized access.”  The majority found that Van Buren was authorized to access the material he obtained and in the manner that he obtained it. He did access the information for an improper purpose but his conduct did not fall within the prohibition of the text of the statute.

Petition for Certiorari of Christopher Lischewski Challenging the Per Se Rule

Hemphill, Van Buren and other cases[1]addressing defendants’ constitutional rights have nothing to do with the per serule. There is, however, a petition for cert before the Supreme Court challenging the per se rule application in a criminal antitrust case. On December 6, 2021, Christopher Lischewski filed a petition for a writ of certiorari. Lischewski v. United States, __U.S.__ , case no. 20-10211(December 8, 2021). Lischewski was convicted of orchestrating and participating in a conspiracy to fix the price of tuna. The jury had been given a typical per se charge:

Conspiracies to fix prices are deemed to be unreasonable restraints of trade and therefore illegal, without consideration of the precise harm they have caused or any business justification for their use.

Therefore, if you find that the government has met its burden with respect to each of the elements of the charged offense, you need not be concerned with whether the agreement was reasonable or unreasonable, the justifications for the agreement, or the harm, if any, done by it. It is not a defense that the parties may have acted with good motives, or may have thought that what they were doing was legal, or that the conspiracy may have had some good results. If there was, in fact, a conspiracy to fix the prices for canned tuna as alleged, it was illegal.[2]

The “Question Presented” in Lischewski’s petition is: “…whether the operation of the per se rule in criminal antitrust cases violates the constitutional principle that every element of an offense must be submitted to a jury and proven beyond a reasonable doubt.”

On December 17, 2021, the Government filed a notice stating, “The Government hereby waives its right to file a response to the petition in this case, unless requested to do so by the Court.”  The Court replied on December 29, 2021: “Response requested.” The government’s response is due February 28, 2022. It seems interesting that the Court requested a response from the government. Does that mean that the Court may give serious consideration to granting the petition? Or that the petition caught the eye of one or more Justice? Seems so, but I don’t know. If anyone who has some expertise in this area would care to comment that would be much appreciated. 

The Supreme Court has recently denied cert in a previous appeal from the Ninth Circuit regarding the per se rule. Sanchez v. United States, case 19-288, (January 13, 2020)(cert. denied). Sanchez involved a conviction for bid rigging at public auctions. Nonetheless, defendants have continued to raise and preserve constitutional objections to the per serule in virtually (and perhaps every) current criminal price-fixing/bid rigging/market allocation case being prosecuted by the Antitrust Division. It is time for the Supreme Court to weigh in on this issue. As one Ninth Circuit judge said: I think if it’s going to get straightened out [whether the per se rule is constitutional in a criminal case] it’s going to have to require either an en banc panel of this court or more likely the Supreme Court itself.”[3]

What if the Per Se Rule Is Struck Down?

 Cartels are the supreme evil of antitrust. It says so on my blog masthead–and Justice Scalia said it first in Verizon v. Trinko, 540 U.S. 398, 408 (2004). But a robust criminal enforcement program is not as reliant on a per se rule as many think. When the government charges cartel behavior such as price fixing or bid rigging the case almost always involves secrecy, code names, covert meetings, document destruction and other fraudulent activity. The Lischewski indictment, for example, alleged the conspirators:

employed measures to conceal their conduct, including, but not limited to, using code when referring to coconspirators, meeting at offsite locations to avoid detection, limiting distribution and discouraging retention of documents reflecting conspiratorial contacts, and providing misleading justifications for prices.

US v. Lischewski, Indictment, Paragraph 10 H, Case 3:18-cr-00203-RS, filed 05/16/18 (N.D. Cal). To raise a defense that an agreement was “pro-competitive” a defendant would first have to admit that there was an agreement that he/she knew about and participated in. As a prosecutor, if you get that admission you are already rounding third base and on your way to home.  Also, eliminating the per se rule does not eliminate the Federal Rules of Evidence.  The evidence relevant to a price fixing trial need not be as expansive as the evidence relevant in a monopolization case.

There may be some cases where, without a per se rule, the government may have great difficulty proving an unreasonable restraint beyond a reasonable doubt. Perhaps those cases should not be brought as criminal cases. The per se rule was created by the Supreme Court when price fixing was a misdemeanor and there was no realistic threat of an individual going to jail. Today, the Sherman Act has a maximum penalty for an individual of 10 years in prison, which the Antitrust Division has actually sought. When lobbying Congress to pass a 10-year maximum prison sentence, the DOJ leadership stated: “the [criminal] cases that we are charging, and prosecuting are unmistakable fraud.”[4]  As long as the Antitrust Division remains faithful to that pledge, the lack of a per se rule should not deter the prosecution of hard-core cartels.

Thanks for reading.  Bob Connolly   [email protected]

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[1] See generally, Joseph Mark Stern, Sotomayor and Gorsuch Resume Their Fight for the Future of the Sixth Amendment, Slate, January 7, 2019, available at. https://slate.com/news-and-politics/2019/01/sotomayor-gorsuch-supreme-court-dissent-criminal-restitution.html;  see also Mark Joseph Stern, “Neil Gorsuch and Sonia Sotomayor Team Up to Protect Criminal Defendants,” Slate November 19, 2018.  available at https://slate.com/news-and-politics/2018/11/neil-gorsuch-sonia-sotomayor-sixth-amendment-dissent.html.

[2]  As an aside, doesn’t it seem a bit odd that for a felony that carries a maximum penally of 10 years in jail, the jury is instructed that good motives and even good results are irrelevant?

[3]  Mlex, Joshua Sisco, January 16, 2019 “In foreclosure auction appeal, court questions applicability of per se standard, (protected by firewall).

[4]   Scott D. Hammond, Deputy Assistant Att’y Gen., Antitrust Div., U.S. Dep’t. of Justice, Transcript of TestimonyBefore 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.

Recently I ran a post about the FTC’s interest in hiring junior attorneys:   “FTC Has the Help Wanted Sign Out.”  Yesterday the Antitrust Division, USDOJ announced that it is seeking experienced trial lawyers to serve as first and second chairs on the Division’s active and growing litigation docket.   More information from the announcement is below:

The United States Department of Justice, Antitrust Division, is seeking experienced first-chair and second-chair trial lawyers to take leadership roles on high-profile antitrust and competition cases involving challenges to anticompetitive mergers and business conduct, including monopolization cases. The attorneys hired can expect to be given significant responsibility and have immediate involvement with antitrust matters of national importance.

Senior Trial Counsel will be hired for 13-month Term Appointments, with the option of extension up to 4 years. The positions will be based out of the Division’s Washington, San Francisco, New York, or Chicago offices.  Our office places a high value on diversity of experiences and perspectives and encourages applications from all qualified individuals from all ethnic and racial backgrounds, veterans, LGBT individuals, and persons with disabilities.

Some of the required qualificators are:

• At least seven years of complex litigation and trial experience (more than 15 years preferred), with a preference for experience in civil litigation;
• Trial team leadership experience, preferably as first-chair or second-chair;
• Significant brief-writing and oral-argument experience;

For full information about these openings, see here.

Thanks for reading.

Bob Connolly              [email protected]

The FTC is hiring a number of attorneys to beef up its enforcement effort in the Bureau of Competition.  The FTC calls the hiring “Continuous.”  Complete information about these openings can be found here.

The FTC’s Bureau of Competition (BC) enforces the nation’s antitrust laws, which form the foundation of our free market economy. BC is currently seeking attorneys to support enforcement work in its Litigation Divisions. Learn more about BC here.

Here are some bullet points from the FTC announcement:

• Location: Washington, DC
• Telework eligible    Yes—as determined by the agency policy.
• Salary   $89,834 – $138,868 per year
• Pay scale & grade    GS 12 – 13
•  Appointment type   Term – 14 months – NTE 4 years.  This is a TERM appointment in the Excepted Service and will be filled on a full-time basis.

I had a career in government service with the Antitrust Division, Department of Justice and never regretted a moment of my time so I’m happy to be able to pass on this information for your consideration.

Bob Connolly             [email protected]

On November 29, 2021 in U.S. v.  Neeraj Jindal and John Rodgers, Civil Action No. 4:20-CR-00358A (N.D. Texas), District Court Judge Amos L. Mazzant rejected defendants’ motion to dismiss the indictment on various grounds, including challenges to the per se rule. Among  other arguments, defendants argued that “wage-fixing” was not covered by the Sherman Act because it did not involve the purchase and sale of goods. Defendants also argued that courts did not have enough experience with wage-fixing (this was the government’s first wage-fixing indictment) to label the conduct a per se violation.

The indictment charges Neeraj Jindal, the former owner of a physical therapist staffing company, and John Rodgers an ex-director of the company, with a per se Sherman Act violation by agreeing to fix the wages paid to physical therapists and therapist assistants in the Dallas-Fort Worth area.

Judge Mazzant wrote a thoroughly researched and well-reasoned opinion finding that the per se rule applied to an agreement to fix wages. The opinion dealt with number of issues raised but in this blog post I discuss two important aspects of the Court’s ruling.  The full opinion is well worth reading (here).USvJINDAL20211129.

The Per Se Rule Applies to Buyers as Well as Sellers

Judge Mazzant recognized that the facts of the case were unusual.  This was the first ever criminal wage fixing case brought by the Antitrust Division. Price-fixing cases nearly always involve the sale of good with the restraint resulting in increased prices for consumers.  A successful wage-fixing conspiracy could arguably reduce the price paid by consumers–if the savings in suppressed wages was passed on. Nonetheless, the Court found that “[J]ust because the typical price-fixing conspiracy involves certain hallmarks does not mean that other less prevalent forms of price-fixing agreements are not likewise unlawful.”  The Court noted that price-fixing agreements among buyers have been condemned as per seviolations citing Mandeville Island Farms, Inc. v. Am. Crystal Sugar Co., 334 U.S. 219, 235 (1948)(“It is clear that the agreement is the sort of combination condemned by the Act, even though the price-fixing was by purchasers, and the persons specially injured . . . are sellers, not customers or consumers.”) and Nat’l Macaroni Mfrs. Ass’n v. Fed. Trade Comm’n., 345 F.2d 421, 426–27 (7th Cir. 1995)(finding a price-fixing agreement among manufacturers to standardize the composition of their product in an effort to depress the price of an essential raw material to be illegal per se).

The Per Se Rule Covers All Price Fixing Schemes Even If it Is The First Time an Industry Has Been Targeted.

The defendants also argued that the per se rule applies only after the courts have had enough experience with a particular restraint to find that it always or almost always would restrain trade and since this was the first ever wage-fixing case, that threshold was not met here.  “Defendants contend that agreements are deemed unlawful per se “only after courts have had considerable experience with the type of restraint at issue” (Dkt. #36 at p. 10)(quoting Leegin, 551 U.S. at 886).”  The Court wrote that judicial experience is needed to create a new per se rule, “Judicial experience informs the decision to recognize a “new per serule.”  But price-fixing is not a new per se rule and judicial experience is not needed in every industry before applying the established per se rule against price-fixing to a new form. (“As courts have recognized, price-fixing agreements come in many forms.”).  After surveying many cases Judge Mazzant wrote:

“the definition of horizontal price-fixing agreements cuts broadly. As such, any naked agreement among competitors—whether by sellers or buyers—that fixes components that affect price meets the definition of a horizontal price-fixing agreement. See Socony-Vacuum, 310 U.S. at 221.”

The Court concluded, “The indictment thus alleges a naked price-fixing conspiracy among buyers in the labor market to fix the pay rates” and “As such, the indictment describes a price-fixing conspiracy that is per se unlawful.”

Judge Mazzant also quoted higher authority, Justice Kavanaugh, who wrote in his concurrence in National Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141 (2021): “Price-fixing labor is price-fixing labor. And price-fixing labor is ordinarily a textbook antitrust problem because it extinguishes the free market in which individuals can otherwise obtain fair compensation for their work.” Id. at 2167–68 (Kavanaugh, J., concurring) (citations omitted).

I wholeheartedly agree with Justice Kavanaugh and Judge Mazzant.  In an earlier blog post I wrote:

“Labor is an input for making any product. Businesses can’t collude with competitors about the price they will pay for inputs to make a product or to allocate suppliers.  Think about a company that produces widgets.  This widget requires copper wire, glass products, machinery and labor.  It seems obvious (hopefully) that an executive in one company cannot call a competitor and say, “Let’s agree to not pay any more than X for the copper?”  Or “If you don’t solicit quotes from my supplier, I won’t from yours.”  Labor is also an input.  Why would it be OK to call a competitor and say, “Let’s agree not to pay any more than X per hour” for the input of labor?”  https://cartelcapers.com/blog/prosecutors-focus-on-labor-market-collusion-sharpens-the-need-for-compliance-training/,  November 15, 2021.

Will There Problems With the Per Se Rule Down the Road? (Or In the Supreme Court?)

While I agree that the per se rule applies to labor markets with the same force (and exceptions for ancillary agreements) as it does to other markets, there are two points of blackletter law relied on in Judge Mazzant’s opinion that I believe may eventually be overturned by the Supreme Court and lead to the ultimate demise of the per se rule in any criminal antitrust cases.

The Court As Fact Finder On An Element Of the Offense

Judge Mazzant correctly noted that, “Whether the allegations in an Indictment constitute a per se violation is a legal question for the court.”  But under the per se rule the court is the finder of fact on an element of the offense: whether the agreement constituted a “restraint of trade” beyond a reasonable doubt.  I doubt, under current Supreme Court jurisprudence, whether the court can do that.  It reminds me of a case when I was Chief of the Antitrust Division’s Philadelphia Field Office.  We prosecuted and convicted a defendant for making a false statement.  The trial court, as every court before it had done, found that the “materiality” element of the statement/offense was an issue for the court to decide.  The  conviction was overturned as a companion case to United States v. Gaudin, 115 S.Ct. 2310 (1995), where the Supreme Court reversed long standing precedent and held that materiality is an issue to be determined by the jury. The Supreme Court explained that if materiality is an element of the offense, that element must be submitted to the jury, and the jury must find materiality beyond a reasonable doubt to convict.  Whether an agreement constitutes a “restraint of trade” is an element of the Sherman Act (indeed the very conduct Section One condemns) so it follows that a jury must make that finding.  Reading Judge Mazzant’s correct statement, that whether the per se rule applies is a matter of law, gives me a flashback to how surprised we were (but ultimately agreed) when the Supreme Court ruled in Gaudin.  Is the antitrust bar in for a big surprise if the per se rule challenges ever reach the Supreme Court?

Did the Sherman Act or the Supreme Court Create the Per Se Rule?

Judge Mazzant also correctly notes that under current jurisprudence the Supreme Court has created two substantive rule for analyzing restraints of trade: the per se rule and the rule of reason. (“In determining whether a restraint is unreasonable, and thus unlawful, courts use one of two rules of decision [per se and rule of reason].”). This is another passage I’ve read hundreds of times as a prosecutor and never had pause–it is, after all, blackletter law. But can the Supreme Court do that?  Well, they did.  But will the current Supreme Court have a different view?

One problem with having a per se rule and rule of reason may be that a textualist Supreme Court may fail to see those words in the text of Section One of the Sherman Act. Do these three words “restraint of trade” set forth a per se rule and/or a rule of reason? That’s a curious and expansive way to read “restraint of trade” and not one to be found in any dictionary.  Could it be that in a criminal antitrust case, the proper interpretation of the Sherman Act Section One would be to put it to the jury whether the restraint alleged existed and whether it was a restraint of trade?[1]  And if the Supreme Court created the two substantive rules, (per se and rule of reason), is that not judicial legislation?  Justice Gorsuch Justice wrote in one of his last opinions while on the 10th Circuit Court of Appeals, explaining  the court’s job: “[I]t is (or should be) emphatically to apply, not rewrite, the law enacted by the people’s representatives.”  A.M. ex rel. FM v. Holmes, 830 F.3d 1123, 1170 (10th Cir. 2016).  How then might a court apply the Sherman Act as written.  I believe that in every Sherman Act Section One indictment, the question should be put to the jury “Is the agreement [if you find one] a restraint of trade?”  This does not mean every criminal trial will be a wide open for requiring evidence of product market, market power, etc.  Instead the concepts of per se, quick look and rule of reason are not substantive rules, but are guideposts under the Federal Rule of Evidence 401 and 403 of what is relevant evidence given the particular charge in the case.

Congress, of course, could amend the Sherman Act to actually say, “Price fixing, bid rigging and market allocation are per se illegal.”  Condemning price-fixing is still among a shrinking number of policies that have bipartisan support.

Challenges to the per se rule have appeared in various forms in almost every recent criminal antitrust case.  Lower courts will almost certainly continue to bat down these challenges with ample precedent, including, of course, Supreme Court precedent establishing the per se rule.  At oral argument in the Ninth Circuit on a per se challenge one panelist commented, “I think if it’s going to get straightened out [whether the per se rule is constitutional] it’s going to have to require an en banc panel of this court or more likely the Supreme Court itself.”  I have written before about what I perceive to be fatal flaws in the use of the per se rule in criminal antitrust cases, see e.g., The End is Near For the Per Se Rule in Criminal Sherman Act Cases, April 2019, and since then, in numerous blog posts.  I am hoping to revise my writing on this issue with some new thoughts and discussion of recent cases.

I would be most grateful if anyone cares to give feedback from “Connolly, you’re an idiot” to “Have you thought about…”  Please contact me if you’d like to discuss.  [email protected] (215) 219-4418.

Thanks for reading. 

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[1]   From watching television shows  about UFO’s and aliens, I’ve learned a good way to hedge your bets is with statements like “Could it be…?” “Some people say….” ”Is it possible?,” etc.