DOJ Filed Cert Petition in United States v. Brewbaker

By: Robert Connolly (Cartel Capers)

The Department of Justice has submitted a cert petition to the Supreme Court seeking to overturn a Fourth Circuit decision that found a bid-rigging scheme was not a per se violation due to a vertical relationship between competing bidders. In United States v. Brewbaker, 87 F. 4th 563 (4th Cir. 2023), the Fourth Circuit reversed the conviction of an executive, Brewbaker, for conspiring to violate Section 1 of the Sherman Act, 15 U.S.C. 1, by manipulating bids to the North Carolina Department of Transportation (NCDOT). Three corporations participated in the solicitation: one consistently bid high and was not involved in the agreement, while the other two had a manufacturer-distributor relationship (Contech and Pomona) for aluminum structures used to prevent flooding near roads, bridges, and overpasses. The NCDOT contract included not only the purchase of Contech’s aluminum structures but also transportation, installation, and labor for highway erection. From 2009 to 2018, Brewbaker obtained Pomona’s bid number and submitted higher complementary bids for approximately 340 contracts, ensuring Pomona’s win while satisfying NCDOT’s three-bid requirement to ensure competition. Before 2009, Contech occasionally won bids. This scheme resembled a classic bid-rigging conspiracy, including false certifications that bids were “submitted competitively and without collusion.”

The district court denied Brewbaker’s pretrial motion to apply the rule of reason, rejecting the defense’s attempt to present testimony from a respected economist about the potential procompetitive benefits of bidding coordination between a manufacturer and its distributor. The jury was instructed under the per se rule, where the judge determines if the alleged agreement restrains trade and the jury decides if there was an agreement and if the defendant participated. Brewbaker was convicted of violating the Sherman Act and multiple fraud counts related to false non-collusion certifications.

The Fourth Circuit reversed Brewbaker’s Sherman Act conviction, stating the district court should have dismissed the charge because the agreement to submit rigged complementary bids between a manufacturer and a distributor was a “hybrid restraint,” not a horizontal restraint. The court held that the per se rule only applies to horizontal restraints and declined to extend it to this new category of restraint, acknowledging potential procompetitive benefits from the manufacturer-distributor relationship.

The DOJ’s cert petition poses the question: “Whether the existence of a vertical relationship between the competing bidders precludes the application of the established per se rule against horizontal price fixing.”

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