In the Clash Between the Venerable Per Se Rule and the Constitution, the Constitution Shall Prevail (in Time)
| Publication year | 2020 |
| Author | By Robert E. Connolly |
By Robert E. Connolly1
"A long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defense of custom. But, the tumult soon subsides. Time makes more converts than reason." Thomas Paine: Common Sense (1776).
A challenge to the per se rule stalled recently when the Supreme Court denied certiorari in a petition to find the per se rule unconstitutional in criminal antitrust cases.2 The appeal pitted one of the longest standing principles in antitrust law, the per se rule, against the constitutional rights of a criminal defendant to have a jury find the defendant guilty of every element of the offense beyond a reasonable doubt. The per se rule has long dictated that certain agreements (price fixing, bid rigging, and market allocation) are presumed to be an illegal restraint of trade and, even in a criminal case, the jury cannot consider whether the alleged agreement was reasonable.3 More recent Supreme Court decisions interpreting the 5th and 6th amendment,4 however, hold that conclusive presumptions deprive the defendant of his right to have the jury find every element of an offense beyond a reasonable doubt.5 The per se rule is one of those principles that has so long been accepted, the mind balks at thinking it wrong. But a constitutional protection trumps the storied history of the per se rule and one day, but not just yet, the per se rule will fall.
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The first problem with the per se rule is that it cannot be found in Section One of the Sherman Act. Section One condemns agreements in "restraint of trade." From a textualist point of view, the very same words cannot create the per se rule and the rule of reason. The Supreme Court has created, and later reversed, most per se violations while the operative language of the Sherman Act, "restraint of trade," has not changed.6 The per se rule against horizontal price fixing is the last per se rule standing. The Antitrust Division argues that the per se rule is not an evidentiary presumption but an interpretation of the statute: "it is as if the Sherman Act reads price fixing and bid rigging are illegal."7 But, it doesn't. Textualism will prevail over the "it is as if the Sherman Act read" rule of statutory construction.
The second problem with the per se rule is that it clashes with constitutional protections enjoyed by a defendant in a criminal case. The Sixth Amendment provides that those "accused" of a "crime" have the right to a trial "by an impartial jury." This right, in conjunction with the Due Process Clause, requires that each element of a crime be proved to the jury beyond a reasonable doubt.8 Under the per se rule, however, once the court makes the factual determination that the per se rule applies, the jury is instructed that the government has proven a restraint of trade beyond a reasonable doubt because price fixing is per se illegal.
This article further explains that elimination of the per se rule is not the end of criminal antitrust prosecutions for price fixing and bid rigging ("the supreme evil of antitrust"). The mantra of the Antitrust Division with respect to enforcement of its criminal enforcement program is, "price-fixing is flat out fraud . . . nothing more than theft by well-dressed thieves."9 The most difficult part of criminal antitrust prosecutions is almost always proving the existence of the agreement and that the particular defendant joined the conspiracy. When a conspiracy involves holding meetings with phony agendas, using code words, shredding documents, and lying to customers about the reasons behind price increases, few defendants are going to admit they joined the conspiracy. It will be rare for a cartel member to argue that their secret agreement was actually procompetitive. In limited criminal cases proving, beyond a reasonable doubt, that an agreement restrained trade may be difficult for the prosecution, but with a maximum 10-year jail sentence, the per se rule cannot be justified because it makes the government's case easier to prove.
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The nutshell argument for why the per se rule is unconstitutional in criminal cases is as follows. There are three elements to a Section One Sherman Act offense: 1) an agreement; 2) in restraint of trade; and 3) that affects interstate or foreign trade or commerce. The statutory text is identical for all Section One cases: an agreement "in restraint of trade . . . . is declared to be illegal." But, in a criminal price fixing case, the jury is instructed by the court that the agreement [if proven] is a restraint of trade and the jury's function is only to find whether the defendant knowingly joined the agreement. The criminal defendant does not get to offer evidence and ask the jury to decide whether the agreement was "in restraint of trade." Ironically, one would expect that the defendant would have more leeway, not less, in a criminal case to prove he did not violate the Sherman Act. The per se rule, however, forecloses any argument that the agreement was not a restraint of trade.
In the most recent Supreme Court Sherman Act case, Ohio v. American Express Co.10 the Court explained the basis for the per se rule: "A small group of restraints are unreasonable per se because 'they always or almost always tend to restrict competition and decrease output.'"11 This is perhaps reasonable streamlining/efficiency in a civil case,12 but in a criminal case, the government does not get to prove the defendants are almost always guilty; the prosecution needs to prove that this defendant's agreement was, in fact, a restraint of trade. Below is a "quick look" at recent and ongoing challenges to the per se rule.
A. Sanchez, et al. v. United States13In a recent opinion, the Ninth Circuit found the per se rule applied to auction bid rigging.14 United States v. Joyce15 was an appeal by an individual who conspired to rig bids at real estate foreclosure auctions. The Joyce court explained, "If a business arrangement is a type conclusively presumed to be unreasonable, the government is relieved of any obligation to prove the unreasonableness of the specific scheme at issue and any business justification for the defendant's conduct is neither relevant nor admissible."16 In a similar auction collusion appeal that followed shortly thereafter, United States v. Sanchez,17 the Ninth Circuit again found the per se rule constitutional.18 At oral argument in Sanchez, however, one Ninth Circuit panel judge was sympathetic to the 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."19
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The Sanchez defendants appealed to the Supreme Court.20 In their opening brief, petitioners stated: "The question presented is whether the operation of the per se rule in criminal antitrust cases violates the constitutional prohibition—grounded in the Fifth and Sixth Amendments—against instructing juries that certain facts, presumptively, establish an element of a crime."21 The Fifth and Sixth Amendment require that the jury be the fact-finder in a criminal case of every essential element of the crime. Because the jury was not allowed to decide whether the agreement was a restraint of trade, the defense was barred from proffering procompetitive evidence. Two amicus briefs were filed in support of the Supreme Court taking the case; one by National Association of Criminal Defense Lawyers,22 and another by the Due Process Institute.23
The United States urged the Supreme Court not to take the case, arguing that "the per se rule is an interpretation of the Sherman Act, not an evidentiary presumption, and that it can be constitutionally applied in a criminal antitrust protection."24 The government's brief recounts the history of major Supreme Court per se rule cases and concludes:
As those decisions illustrate, the per se rule is an interpretation of the Sherman Act; it provides that certain anticompetitive conduct falls "within the purview of Section One as a matter of law because it categorically constitutes an unreasonable restraint of trade." Standard Oil, 221 U.S. at 65; see id. at 59-60 (interpreting the "language of" Section One in light of the common law).25
The Supreme Court denied certiorari on January 13, 2020, ending this challenge to the per se rule.26
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B. Heir LocatorsIn another recent criminal antitrust case, commonly known as Heir Locators,27 Utah federal district court Judge Sam initially ruled that an indictment alleging a customer allocation scheme would be tried as a rule of reason case.28 The Antitrust Division appealed this ruling and, at the strong urging of the Tenth Circuit,29 the district court reversed his position. Upon reconsideration the "court finds that the agreement in question, known as the 'Guidelines,' is a horizontal customer allocation agreement and thus subject to the Per Se approach."30 The defendants subsequently pled guilty.31 The government requested a sentence of 21 months for the individual defendant. The judge declined jail time and sentenced him to one-year probation.32
The judge's wrestling with whether the per se rule would apply in Heir Locators is a clear example of how the court is the fact-finder in a per se case. In reversing himself, Judge Sam noted: "There certainly may have been other additional reasons for entering into the agreement, as laid out by Defendants; but as laid out in Kemp [the Tenth Circuit decision], if the Per Se approach applies, there is no need to weigh the benefits that could come from such an agreement."33 Judge Sam noted the implications of the per se rule for the defendant: "This [the per se rule] provides an...
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