Supreme Court Set To Make Cert Decision On Per Se Battle

November 5, 2024 by Bob Connolly

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. 4^th 563 (4^th 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).

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.

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).

DOJ Filed Cert Petition in United States v. Brewbaker

July 15, 2024 by Bob Connolly

The Department of Justice has filed a cert petition (here) asking the Supreme Court to reverse a Fourth Circuit decision which held that a bid rigging scheme was not a per se violation where the competing bidders also had a vertical relationship. In United States v. Brewbaker, 87 F. 4th 563 (4th Cir. 2023), the Fourth Circuit overturned the conviction of an executive [Brewbaker] for conspiring to violate Section 1 of the Sherman Act, 15 U.S.C. 1, by rigging bids to the North Carolina Department of Transportation [NCDOT]. Three corporations bid on the solicitation. One competitor had historically bid high and was not part of the agreement. The other two bidders had a manufacturer [Contech]-distributor [Pomona] relationship for aluminum structures that are installed to prevent flooding near roads, bridges and overpasses. The NCDOT contract was not to just purchase the aluminum structures Contech manufactured, but also the transportation, installation and labor required to erect the structures on highways. For years, (2009-2018) defendant Brewbaker obtained Pomona’s bid number and submit a higher complementary bid on approximately 340 contracts, insuring Pomona would win while meeting NCDOT’s three bid requirement to insure adequate competition. Before 2009 Contech sometimes was the winning bidder. The scheme appeared to be a classic bid rigging conspiracy including submitting false certifications that the bids were “submitted competitively and without collusion.”

The district court rejected Brewbaker’s pretrial motion to try the case under the rule of reason. The defense sought to introduce testimony of a respected economist that bidding coordination between a manufacturer and its distributor can be procompetitive and is admissible evidence in a rule of reason case. The district court rejected this argument. The jury received a per se rule instruction. Under the per se rule, the judge, not the jury makes the finding that the alleged agreement is a restraint of trade. The jury’s role is to find whether there was an agreement as alleged in the indictment and whether the defendant participated in that agreement. The jury convicted Brewbaker of the Sherman Act violation. He was also convicted of several fraud counts relating to the submission of false non-collusion certifications.

The Fourth Circuit reversed Brewbaker’s Sherman Act conviction, holding that the district court should have dismissed the charge of conspiring to violate the Sherman Act because the agreement to submit rigged complementary bids between a manufacturer and a distributor constituted a “hybrid restraint” rather than a horizontal restraint. The Fourth Circuit held that that pe se rule only applied to horizontal restrains and declined to “apply the per se rule to [this] new category of restraint.” The possible procompetitive benefits flowing from the manufacturer/distributor relationship and took the case outside of established horizonal restraint per se category. United States v Brewbaker, 87 F. 4th 563 (4th Cir. 2023).

The question presented in the DOJ cert petition is “Whether the existence of a vertical relationship between the competing bidders precluded the application of the established per se rule against horizontal price fixing.”

The Risk to DOJ in Seeking Cert

The DOJ persuasively argues that Brewbaker participated in a run-of-the-mill public procurement bid rigging scheme. It is not unique for competing bidders to have some form of vertical relationship,. The DOJ cited US v. Socony-Vacuum Oil Co, Inc, 310 U.S. 150 (1940), among other examples. It is a classic bid rigging scenario for the winning bidder to “pay off” the losing bidder with a subcontract or to purchase materials in exchange for a complementary bid. There are a variety of vertical relationships between bidders, and there will be many more if the Fourth Circuit opinion takes hold, but these have never been held to negate a per se label for those who secretly collude on the submission of competitive request for bids. I made these arguments in an earlier blog post criticizing the Fourth Circuit’s opinion: You Are A Competitor If You Say So–My Disagreement with Fourth Circuit’s Brewbaker Opinion, Cartel Capers, December 13, 2023.

Supreme Court jurisprudence is near the top of things that I am not an expert in. But despite my agreement with the DOJ’s position, I think there are risks to DOJ in seeking cert. If there is a per se rule, and there is, what Brewbaker engaged in was per se conduct. What has bothered me about the per se rule, for as long as I thought about the per se rule enough to be bothered, is that the per se rule is nowhere to be found in the Sherman Act (textualism); the per se rule and the rule of reason were created by the Supreme Court (judicial legislation); and the per se rule takes away from the jury the crucial element of a Sherman Act violation, “Was the agreement a restraint of trade?” (various constitutional violations.) See, In The Clash Between The Venerable Per Se Rule And The Constitution, The Constitution Shall Prevail (In Time), Robert Connolly, COMPETITION: SPRING 2020, VOL 30, NO. 1.; The Rule of Lenity and the Per Se Rule, Cartel Capers, March 6, 2023.

Brewbaker is the latest attempt by courts to chip away at the per se rule. For example, in the DaVita no-poach collusion case, the court deviated from the per se rule jury instruction and charged the jury that the government’s burden was to prove the defendants entered into an agreement “with the purpose of allocating the market.” In other words, the government did not simply need to prove the defendants entered into a non-solicitation agreement [per se] but also that the defendants “intended to allocate the market as charged in the indictment.” [per se plus?] United States v. DaVita Inc., No. 1:21-CR-00229-RBJ, 2022 WL 266759, at *9 (D. Colo. Jan. 28, 2022); see also, “[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)

The DOJ is seeking review related to the application of the per se rule at a time when the Supreme Court has been very receptive to arguments from criminal defendants attacking their convictions. A recent LinkedIn post by Andrew Feldman reads: “Much has been written about the current Supreme Court, however, it is worth noting that, for criminal defense attorneys, especially white-collar defense attorneys, the Court has been knocking down innovative prosecution theories like duck pins at a Bowl America birthday party. Here are some of the big ones…. [listing six recent Supreme Court cases]. See also, Is It Time to File More Motions to Dismiss in Criminal Cases?, The Texas Lawbook, Bill Mateja and Kate Rumsey, April 29 2024 (“Ciminelli is the latest in a string of Supreme Court cases limiting the scope of federal criminal statutes and will not likely be the last.”) A similar opinion was voiced by Professor Mike Koehler: “Even though the current Supreme Court is often ideologically divided, the Court has shown remarkable consistency in recent years in rejecting (often times unanimously) overly expansive interpretations of a criminal statute by the Department of Justice.” The Supreme Court’s Consistency In Rejecting Expansive DOJ Interpretations, FCPA Professor Blog Post, June 28, 2024.

To be sure, the per se rule could hardly be called an “innovative prosecution theory,” having been established since at least United States v. Socony-Vacuum Oil Co., Inc., 310 U.S. 150 (1940). As the DOJ argues, it is common for Sherman Act coconspirators to have some sort of vertical relationship such as a buy-sell relationship. In Brewbaker, however, the vertical relationship was that of a manufacturer-distributor. Is applying the per se rule when that relationship exists an “expansive interpretation” of the per se rule properly rejected by the Fourth Circuit? While I don’t believe the manufacturer/distributor relationship precludes the application of the per se rule when as here, the contract was for much more than simply purchasing the product, it is a closer relationship than a simple buy-sell relationship competitors may have. But if the degree of the vertical relationship is determinative of whether the per se rule applies, the court, not the jury will be the fact-finder, which highlights the unconstitutionality of the per se rule. With defendants on such a hot streak in the Supreme Court, and the DOJ having convicted Brewbaker on various fraud courts (discussed below), it may have been best to take the win and try to limit the Fourth Circuit’s per se ruling as an odd outlier of a case.

Speaking of the Fraud Convictions…

In addition to the Sherman Act count, Brewbaker was convicted on five fraud counts related to his false certification that Contech bids were “submitted competitively and without collusion.” For mail or wire fraud, “a defendant must specifically intend to lie or cheat or misrepresent with the design of depriving the victim of something of value” or specifically intend “to deceive or cheat someone … for personal financial gain.” There was plenty of evidence from which the jury could find that Brewbaker submitted the false certifications to cheat NCDOT of funds. But because the case was tried under the per se rule, Brewbaker was not allowed to present evidence of his intent or any procompetitive (i.e.., non-cheating) benefits of the agreement. [“They [jury] didn’t hear evidence, however, as to the procompetitive intent or effects of Contech and Pomona’s particular setup.”]. I don’t believe any plausible defense existed to the fraud charges, but it seems Brewbaker should have been able to try. The per se rule in a case with a specific intent crime are at odds with each other.

Conclusion

The most likely outcome of this appeal is that the DOJ cert petition will be denied. But developments in this case could be very interesting and I look forward to reading Brewbaker’s reply to the DOJ cert petition.

A final note: I don’t think the DOJ would have had any trouble obtaining a conviction on the Sherman Act court even without the per se rule. As long as the DOJ sticks to so-called hard core price fixing [“the criminal cases we are charging are unmistakable fraud”],[1] juries are capable of determining whether the agreement was intend to restrain, suppress or eliminate competition.

Thanks for reading. Bob Connolly bob@reconnollylaw.com

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[1] 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. (here) Many senior Antitrust Division officials have made similar statements.

You Are A Competitor If You Say So–My Disagreement with Fourth Circuit’s Brewbaker Opinion

December 13, 2023 by Bob Connolly

I have not written a blog post in some time. Been busy, or perhaps a bit lazy, but the Fourth Circuit opinion in United States v. Brewbaker, __ F. 4^th __(4th Cir. 12/1/2023), 2023 Westlaw 8286490, caught my attention. The decision represents a surprising departure from black letter law that collusion between competing bidders is a criminal( i.e. per se) violation. The Brewbaker court overturned the bid rigging conviction of Brent Brewbaker, former executive of aluminum pipe maker, Contech, finding that his indictment did not allege a per se antitrust violation. For years, Contech and Pomona [Contech’s distributor] had bid against each other competitively for contracts with North Carolina’s Department of Transportation. When Brewbaker was put in charge of Contech’s bidding in 2009 he reached an agreement with Pomona to have Contech put in purposefully high (i.e. complementary bids) so that Pomona would win the contracts. To carry out the plan, Brewbaker would get Pomona’s bid number and then add a markup to inflate Contech’s bid and insure Contech would lose.

The Brewbaker indictment alleged:

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.

Despite this clear “per se” allegation, the indictment also stated that Contech (which pleaded guilty to the indictment) supplied aluminum pieces to its co-conspirator, putting the two competitors also in a vertical relationship. The aluminum pieces were one component of the lead bids to NCDOT. The Fourth Circuit held that because there was also a vertical relationship between the bidders (i.e. horizontal competitors), the “rule of reason” applied. Thus, “the factual allegations in the indictment did not state a per se violation of the Sherman Act.

The Fourth Circuit is wrong because the agreement alleged to be illegal here was the agreement to submit rigged complementary bids. That agreement was between two formerly competing horizontal competitors. They were competitors because they said so—they each submitted bids to the NC Department of Transportation. This agreement falls squarely within the definition of bid rigging set forth in cases the Fourth Circuit actually cited in its opinion. The Brewbaker court acknowledged that it is settled law that “per se unlawful bid rigging [is defined] as an agreement between competitors,” adding “that is precisely how the Supreme Court defines a horizontal restraint.” This is blackletter law and there is no basis in law and/or economics to find a bid rigging agreement between competitors is not subject to the per se rule if the bidders also have a vertical relationship.

The Fourth Circuit accurately stated: “For if the restraint is horizonal, then the per se rule will generally apply. And if the restraint is vertical, then the rule of reason will apply.” The restraint the government alleged was illegal was the horizontal restraint between competing bidders: Contech [Brewbaker] got the final bid price from Pomona and agreed to submit intentionally higher bids. The indictment did not allege that the agreement between Contech and Pomona (the vertical relationship) was illegal. Brewbaker and Pomona did not exchange the prices to be quoted simply for the material [aluminum pieces] component of the bid, but the final sealed bid which included transportation, installation, labor and profit. The vertical relationship between Contech and Pomona existed before 2009, when the two companies were actually competing, and was irrelevant to the per se nature of the agreement.

There is an irony flowing from the Fourth Circuit’s deviation from the per se rule based on the fact that Pomona purchased the aluminum pieces from Contech. One of the ways conspirators sometimes share the spoils of collusion is for the winning bidder to subcontract to the losing bidder. See e.g., “After the bid is awarded, the winning bidder may pay off the co-conspirators through cash payments or subcontracts.” FEDERAL ANTITRUST CRIME: A PRIMER FOR LAW ENFORCEMENT PERSONNEL p3. How odd it would be, and inviting to would-be colluders, if by establishing a vertical relationship, they took themselves out of the per se rule. It is not unusual for competing bidders to have some vertical relationship between them. In the olden days when I was bringing public procurement bid rigging cases on behalf of the Division, when the evidence showed competitors communicating with each other (particularly right before a bid) the excuses often had a flavor of vertical relationship: I wanted to rent some equipment; I wanted to sub out part of the contract; I wanted to purchase material.” These relationships are not of themselves illegal, but under Brewbaker, they could they take an agreement out of the per se rule.

From an economics point of view, the agreement between Contech and Pomona to submit complementary bids restrained trade just as an agreement between two bidders with no vertical relationship. By holding themselves as a competitors (as they once were):

The agreement was designed to and did satisfy the “three bid rule.” In public procurement there is often, as ther was here a three bid requirement before making the award. Without three bids, the buyer often switches to a “Cost plus” negotiation to insure it is getting a competitive price. Avoiding this is often the motivation for collusion and complementary bids in public procurement.
Even more than the three bid rule, competition is restrained because, had the buyer known there was no competition for the projects, it could have changed the specs, sought new bidders, or otherwise taken steps to create a competitive environment.
Similarly, because there were three bidders other potential bidders may have been discouraged from devoting the resources to bid.
Two companies which had been submitting competitive bids reached a secret agreement to submit complementary bids, eliminating competition and allowing the “winning” bidder to inflate its bid–the exact reason cartels are condemned as “the supreme evil of antitrust.”

In short, the complementary bidder agreement between Pomona and Contech created the same anticompetitive effects for the consumer (NCDOT) that courts have universally found worthy of per se treatment.

It is also revealing that the court acknowledged that Brewbaker went to some lengths to keep the complementary bidding scheme hidden. “Also during this time (of submitting complementary bids) Brewbaker tried to cover his tracks.” [by deleting conversations and making phone calls instead of emails]. Procompetitive agreements are measured by their potential benefits to the consumer and they not kept secret from those the agreement is supposedly intended to benefit.[1] The Contech/Pomona agreement was kept secret because it had no procompetitive effects for the consumer. Sure, the bid rigging agreement made Pomona and Contech happy and perhaps strengthened their relationship—splitting inflated spoils can do that.[2] The consciousness of guilt evidence shows the defendant knew he was engaged in a “restraint of trade” not an agreement reached for the benefit of the consumer who was kept in the dark.

The Brewbaker opinion opens a new defense to defeat the per se rule—the existence of a vertical relationship between bidders. The opinion could be defended on the basis that a supplier-distributor relationship is a significant vertical relationship but how extensive does that vertical relationship have to be in order for a defendant to escape the per se rule? Who knows? But conducting the inquiry would further embed the court as a fact-finder on an element of a Sherman Act criminal offense (because if the agreement is found by the court to be per se, it is no longer an issue for the jury.)[3]

Brewbaker Convicted on Five Fraud Counts

In addition to the Sherman Act count, Brewbaker was convicted on five fraud counts. I am probably missing something because I am puzzled that the Fourth Circuit upheld these convictions. The indictment alleged mail fraud violations in that Contech and Brewbaker misled NCDOT by submitting intentionally losing bids and by falsely certifying that the bids were submitted competitively and without collusion. But the district court’s per se ruling prevented Brewbaker from introducing evidence that his bids were “submitted competitively.” [“They [jury] didn’t hear evidence, however, as to the procompetitive intent or effects of Contech and Pomona’s particular setup.”]. The Fourth Circuit reversed the district court’s per se holding because it thought the vertical relationship between the bidders may have been procompetitive—or at least Brewbaker should have been able to argue that. Fraud crimes are specific intent crimes, and while it is sometimes attractive to prosecutors to add fraud counts to a bid rigging indictment to highlight the fraudulent nature of the Sherman Act violation, the down side is that it is a specific intent crime and opens the door to justifications (or so I thought when I was prosecuting cases). Bottom line, if the Fourth Circuit thought the Sherman Act count should have been “rule of reason,” with the defense allowed to advance procompetitive justifications, I think the fraud counts also should have opened the door to a procompetitive (i.e. not fraudulent) explanation.

When it comes to public procurement, I think the rule should be “When bidders say they are competing, believe them” or “When someone shows you who they are, believe them the first time.” Maya Angelou. I expect the DOJ will seek further review of the Brewbaker opinion so I’ll be curious to see if any of my musing “hold water.”

Thanks for reading.

Bob Connolly bob@reconnollylaw.com

[1] In McMullen v. Hoffman, 174 U.S. 639 (1899) the Court refused to enforce a contract when one conspirator sued for his portion of the profits from a successful collusive bidding scheme. The Court distinguished a secret agreement from a known joint venture, where “[t]he public may obtain at least the benefit of the joint responsibility. . . . The public agents know then all that there is in the transaction, and can more justly estimate the motives of the bidders, and weigh the merits of the bid.” Id. at 652.

[2] I worked on one cartel case where the collusion was so successful, all the “competitors” hosted a retirement dinner for the most active conspirator. I’m not sure if there was an MVP plaque was also awarded.

[3] And this is why I think the per se rule is unconstitutional.