Supreme Court Lets Stand Ruling Curbing Bid-Rigging Prosecutions

The US Supreme Court left intact a ruling that curbs the Justice Department’s ability to use federal antitrust law to prosecute people and companies for bid-rigging, price-fixing and other collusion.

The justices, without comment, turned away a Biden administration appeal aimed at reinstating the bid-rigging conviction of a former sales manager at a North Carolina construction company.

At issue was the standard prosecutors must meet to prove illegal collusion occurred among companies that are both competitors and partners. A federal appeals court said companies with those types of arrangements can sometimes reach bidding agreements without running afoul of federal antitrust law.

The ruling from the 4th US Circuit Court of Appeals will limit the tools available to prosecutors in five mid-Atlantic states. The Justice Department said the 4th Circuit decision marked a sharp departure from the longstanding understanding that bid-rigging among competitors is “per se” — that is, inherently — illegal under the 1890 Sherman Act.

Under the per se standard, prosecutors must prove only that an agreement between competitors was reached. Defense lawyers are barred from arguing that the agreement was beneficial in some way.

The case stems from construction contracts awarded by the North Carolina Department of Transportation to install aluminum structures that prevent flooding. Two of the three companies that generally bid for the contracts also had a supply relationship, with Pomona Pipe Products buying aluminum from Contech Engineered Solutions for use in the projects.

Prosecutors alleged that from 2009 to 2018, Contech sales manager Brent Brewbaker coordinated bids with his counterparts at Pomona. Under the alleged arrangement, Pomona would submit the lowest bid and then purchase the necessary aluminum from Contech. Pomona won about 340 aluminum-structure contracts, worth more than $23.9 million, the Justice Department said.

A federal jury convicted Brewbaker of fraud and bid-rigging, and he was sentenced to 18 months in prison. The 4th Circuit upheld his conviction on five fraud counts but tossed out his bid-rigging conviction on a 3-0 vote.

The 4th Circuit said the prosecution was subject to the “rule of reason,” an antitrust doctrine that assesses whether restraints on trade are legal by looking at the impact on competition. The panel said the Contech-Pomona arrangement had “possible procompetitive effects.”

The Justice Department generally pursues criminal charges under the Sherman Act’s Section 1 only when the “per se” standard applies, not when prosecutors would have to meet the “rule of reason” test.

The case is United States v. Brewbaker, 23-1365.

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