Antitrust Losses Risk Undermining Per Se Rule

The Antitrust Division at the DOJ has historically received wide deference from courts in criminal prosecutions. The clearest example of this is the per se rule, which is among the strongest tools in all of criminal law. However, recent efforts by the DOJ to bring novel prosecutions run the risk of stretching the per se presumption beyond its limit. In this year alone, a district court concerned about application of the per se rule to a novel no-poach prosecution required that the DOJ actually show that the agreement entered into by defendants had the effect of a market allocation in order to secure a conviction. And in October 2022, in the chickens prosecution, a district court in Colorado suggested that the constitutionality of the criminal per se rule may be in question and issued a ruling excluding so much of the government's case-in-chief that the DOJ voluntarily dismissed its own indictment. (Case cite below.)These rulings seem likely to be cited by defendants for years to come, and unhelpful precedent on the books stays there without review when it forces the DOJ to dismiss its indictment or a jury to acquit as a result. As the DOJ continues to stretch its enforcement powers, the force of these decisions risks spreading from novel theories to the DOJ's core cartel prosecutions.

THE PER SE RULE IN CRIMINAL PROSECUTIONS

Section 1 of the Sherman Act proscribes only "unreasonable" restraints of trade. The presumptive analysis under Section 1 - the rule of reason - requires that a plaintiff prevail on a multi-prong balancing test weighing anticompetitive effects and procompetitive rationes for restraint in a given market. In contrast, the per se presumption reflects a judgment that agreements among competitors to fix prices, rig bids, or allocate markets are so pernicious that they violate Section 1 as a matter of law. When two competitors conspire to commit a per se violation, the DOJ has historically only needed to prove the existence of the conspiracy itself to prevail at trial.

The per se rule has some logical force when applied to hardcore cartel conduct. The Supreme Court has condemned cartels for generations and, long ago, made clear that competitors could not conspire to set prices, even if the prices set had purported salutary benefits. Inquiry into those purported benefits is thus often legally irrelevant, and the per se rule has traditionally allowed the DOJ to secure convictions without worrying about precise market definitions or the relative weight of economic harms. In recent years, however, the DOJ has taken increasingly aggressive positions to court while hiding behind the protection that the per se presumption offers the DOJ in most cases. This has recently led to backlash from the judiciary.

DAVITA JURY INSTRUCTIONS OPEN THE DOOR FOR PURPOSE EVIDENCE.

In early 2021, the DOJ unsealed indictments against Surgical Care Affiliates in Texas and DaVita and its former CEO in Colorado for allegedly conspiring to "allocate [certain] employees by not soliciting each other's senior-level employees across the United States." Indictment ¶10, United States v. DaVita, 21-cr-00229 (D. Colo.) (Dkt. No. 1). These cases were the DOJ's first ever criminal prosecutions for so-called employee "no-poach" agreements between companies as per se illegal market allocations. Defendants in the DaVita case tested the indictment on a motion to dismiss, and in January 2022, the district court denied their motion. United States v. DaVita, 2022 WL 266759 (D. Colo. Jan. 28, 2022). However, the district court made clear that, contrary to the government's claims, not all no-poach agreements were market allocation agreements. Id. at *8. The indictment survived because the government had sufficiently alleged that "purpose and effect of the agreement was to allocate the market." Id. at *4. The court permitted the case to proceed to trial but made it clear that the government would have to "prove beyond a reasonable doubt that defendants entered into an agreement with the purpose of allocating the market." Id. at *9.

The court then extended its reasoning on motions in limine and the jury instructions, reaffirming that the government had to prove at trial that defendants intended to allocate employees to be guilty under Section 1. In March 2022, the court refused to exclude evidence showing that defendants entered into agreements for the "purpose of promoting competition," finding it probative of whether the agreement itself was a per se illegal market allocation made with "no purpose except stifling competition." Order on Pending Motions at 11, United States v. DaVita¸ 1:21-cr-229 (D. Colo. Mar. 21, 2022) (Dkt. No. 210). That same month, the court adopted a two-part mens rea instruction that required both "intent to join an agreement" and "intent to further the conspiracy's ends." Order Resolving Disputes on Proposed Jury Instructions at 8-9, United States v. DaVita¸ 1:21-cr-229 (D. Colo. Mar. 21, 2022) (Dkt. No. 214).

When the jury was charged, the court suggested that a "lack of harm or procompetitive benefits might be relevant to determining whether defendants entered into an agreement with the purpose of allocating the market." Instruction No. 16 at 21-22, United States v. DaVita¸ 1:21-cr-229 (D. Colo. Mar. 21, 2022) (Dkt. No. 254). DaVita and its former CEO were each acquitted at trial.

CHICKENS CASES END IN DISMISSAL AND ACQUITTAL.

In the chickens prosecutions earlier this year, the DOJ retried five of the ten defendants for a third time following two mistrials. United States v. Penn, 1:20-cr-152 (D. Colo.). The case was based on an aggressive theory of bid-rigging and price-fixing primarily reliant on evidence of information exchange (which is not itself necessarily illegal). The DOJ's third trial resulted in an acquittal in July 2022.

These acquittals received widespread press coverage, and the losses colored the view of at least one other district court judge overseeing the criminal prosecution of other defendants to the same purported conspiracy. In October 2022, the court overseeing a related prosecution issued a series of orders that ultimately convinced the DOJ to dismiss its case in full before trial. The court rejected the DOJ's request to admit statements by purported co-conspirators because it found that the DOJ had failed to prove that the conspiracy at the heart of the indictment was more likely than not to exist. Id. at 2. The court explained that the facts shown "are at least as consistent with innocent, independent price-sharing behavior as they are with conspiratorial price fixing and bid rigging," concluding that the government did not meet the preponderance standard, effectively ending the case. Id. In a separate opinion issued the same day, the court denied defendants' motion to dismiss, but warned the DOJ that the defendants' argument that the per se rule violates the U.S. Constitution in criminal cases "is not without some merit." The court admonished the DOJ that it "runs the risk" that its conviction will be overturned on appeal if it proceeds. Order Denying Motions to Dismiss at 8-9, United States v. McGuire, 1:21-cr-00246 (D. Colo. Oct. 16, 2022) (Dkt. No. 272). The DOJ dismissed its case days later, expressly criticizing the evidentiary order for excluding most of the DOJ's evidence. United States' Unopposed Motion to Dismiss, United States v. McGuire, 1:21-cr-00246 (D. Colo. Oct. 16, 2022) (Dkt. No. 272).

THE DOJ IS PUTTING ITS CORE MISSION OF PROSECUTING HARDCORE CARTELS AT RISK

Recent precedent shows that judges confronted with novel fact patterns issue unpredictable decisions. For years, the DOJ focused on agreements between true horizontal competitors that had cognizable harms. As the DOJ brings more novel conspiracies to court, it provides defense-friendly conditions for courts to re-consider whether the DOJ has perhaps been provided too much latitude.