Brewbaker Strikes Back: The DOJ’s Per Se “Death Star” Attacked

August 13, 2024 by Bob Connolly

No jail sentences were imposed on individual defendants convicted in the 1940 Supreme Court case of United States v. Socony Vacuum Oil Co. The individuals were each fined $1,000. 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.[1] 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.” [2]

This is no longer your grandfather’s “gentleman’s crime” with a slap on the wrist (wallet).[3]

The law has also developed since Socony Vacuum. Today’s textualist Supreme Court is unlikely to agree that three words “restraint of trade” gives rise to two distinct rules: the per se rule and the rule of reason. If the Sherman Act truly could not possibly mean what it says, [because it would outlaw all commercial contracts], this Court would likely say the remedy is with Congress. As Justice Gorsuch wrote in his dissent in Perry v. Merit Systems Protection Board: “If a statute needs repair, there’s a constitutionally prescribed way to do it. It’s called legislation.”[4] Finally, the Supreme Court has been vigilant to protect defendant’s constitutional rights, including proving every element of the offense. The Supreme Court may well find that the per se rule which allows the trial court, not the jury, to make the factual finding that an agreement restrains trade, is unconstitutional.

Is It Time for the Supreme Court to Review the Constitutionality of the Per Se Rule?

Brent Brewbaker thinks so; that is if the Supreme Court accepts the Department of Justice’s cert petition. Cartel Capers, DOJ Filed Cert Petition in US v. Brewbaker, July 15, 2024. The DOJ presented the question: “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 presenting 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.

Justice Gorsuch has recently argued that the United States has too many laws. “Americans are ‘getting whacked’ by too many laws and regulations: Justice Gorsuch”, Mark Sherman, ABC News, August 4, 2024. In all these laws is there any criminal statute where the court, after having considerable experience with a type of scheme, can instruct the jury, “Don’t worry about that element of the offense, I’ve seen this one before.” Even if a certain type of restraint always or almost always restrains trade, doesn’t the constitution require that the defense be allowed to argue: “Your Honor, the defendant understands that this agreement looks like the type that restrains trade but, nonetheless, we’d like to dispense with the per se short cut and assert our conditional right that the government prove beyond a reasonable that this agreement restrained trade.” See The End Is Near For the Per Se Rule in Criminal Antitrust Prosecutions, Cartel Capers, March 21, 2019.[5] This is not an exaggeration (well, maybe a little) but the per se rule “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….”[6] But juries in criminal cases are constitutionally charged with making the determination of whether an agreement restrained trade even if it slows trials down or seems futile. The Federal Rules of Evidence, not conclusive presumptions, can limit the scope of the evidence. Per se rules have a place in civil litigation where the court is a fact finder (i.e. summary judgment), but not in criminal prosecutions

Another point made in Brewbaker’s cross petition is that Section One of the Sherman Act lacks objective standards and impermissibly allows the courts to define the contours of prohibited conduct. It’s hard to argue with that since, without a single vote by Congress, the Supreme Court has a history of creating and then dismantling per se rules:

Restraint Per Se Born Per Se Deceased

Vertical Minimum Price Fixing 1911[7] 2007[8]

Vertical Non-Price Restraints 1967[9] 1977[10]

Vertical Maximum Price-fixing Agreements 1968[11] 1997[12]

Group Boycotts 1959[13] 1985[14] (life support)

Tying 1947[15] 1992[16] (life support)

The DOJ took a chance in petitioning for cert in this case arguing that the 4^th Circuit was in error for not applying the per se rule to the indictment. The DOJ must have seen this possibility and was willing to take the chance. The argument against the per se rule is evident in the DOJ’s cert petition where it describes the factual finding the trial court, not the jury, should have made and then used to apply the per se rule. The DOJ describes the ancillary restraints doctrine: “Under that approach, 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.” DOJ cert petition at 16. That’s a lot of judicial fact finding on a crucial element of a criminal Sherman Act prosecution.

The Per Se Rule May Be Unconstitutional but Not Criminal Sherman Act Prosecutions

The Brewbaker cert petition challenges the constitutionality of the criminal application of Section One of the Sherman Act. I believe that is going too far. The per se rule, not the Sherman Act itself, is unconstitutional. It would take more space than this already long blog post, and more brain power than I have at the moment, for me to flesh out this argument.Further, while the lack of a per se rule would hamper the Antitrust Division in certain criminal prosecution (heir locators and the labor market collusion cases come to mind), “hard core” cartel prosecutions would still be winnable and constitutional. And marginal cases (yes, that is in the eye of the beholder) could still be prosecutable as civil offenses. I believe that the Sherman Act can mean what it says and that a conspiracy to restrain trade can be a criminal violation. The problem with the per se rule is that the courts have never made a sufficient distinction between a civil case and a criminal case (more to come).

Brewbaker’s defense team and the DOJ are more than capable adversaries to present the per se issue, though there is no pressing reason to for the Supreme Court accept cert in this case. The Court has denied cert in two previous criminal matters challenging the per se rule. Cartel Capers, February 1, 2022 “Will the Supreme Court Grant Certiorari and Review the Per Se Rule?”[17] It may well deny cert again.

That’s it for now. Thanks for reading. Any feedback is always greatly appreciated.

Bob Connolly [email protected]

[1] 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,

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

[3] Fines have also dramatically increased. The largest corporate fine in Socony Vacuum was $5,000. The largest corporate fine today stands at $925 million![3] 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.

[4] 137 S. Ct 1975, 1990 (2017) (Gorsuch dissenting).

[5] This blog post is an abbreviated version of a longer article of the same title. The full article can be found at https://ssrn.com/abstract=3356731.

[6] Northern Pac. Ry. v. United States, 356 U.S. 1, 5 (1958).

[7] Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373 (1911).

[8] Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).

[9] United States v. Arnold, Schwinn & Co., 388 U. S. 365 (1967).

[10] Continental T.V., Inc., v. GTE Sylvania Inc., 433 U. S. 36 (1977).

[11] Albrecht v. Herald Co., 390 U.S. 145 (1968).

[12] State Oil Co., v. Khan, 522 U.S. 3 (1997).

[13] Klor’s Inc. v. Broadway-Hale Stores., Inc., 359 U.S. 207 (1959).

[14] Northwest Wholesale Stationers, Inc. v. Pacific Statioanery & Printing Co. 472 U.S. 284 (1985).

[15] International Salt. Co. Inc v. United States, 332 U.S. 392 (1947).

[16] Eastman Kodak Co. v. Image Tech. Serv. Inc. 504 U.S. 451 (1992).

[17] The blog post discusses the cert petition of Christopher Lischewski, [the tuna guy] which the Supreme Court later turned down.

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 [email protected]

********

[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 [email protected]

[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.