The Effect of United States v. Brewbaker on Criminal Antitrust Trial Procedure

The U.S. Court of Appeals for the Fourth Circuit handed criminal prosecutors at the Antitrust Division of the Department of Justice (“DOJ”) a rare Rule 12 loss on appeal in United States v. Brewbaker—a bid-rigging prosecution—and the DOJ failed to persuade the Supreme Court to review that decision. The Brewbaker court held that hybrid restraints— restraints with both horizontal and vertical elements—are subject to the rule of reason, not the per se rule. While Brewbaker only controls in the Fourth Circuit, it may cause the DOJ to make changes in the cases it indicts and the way it indicts them. First, Brewbaker could cause the DOJ to fashion indictments that include facts pointing to a horizontal relationship between defendants but exclude facts that suggest verticality. Since courts must accept the facts in an indictment at face value when ruling on a motion to dismiss, criminal defendants cannot put on any evidence, let alone evidence that the conduct arises out of a hybrid relationship. Second, Brewbaker may cause the DOJ to think harder about indicting cases in which defendants can make plausible arguments about the “hybrid” character of their relationships with their alleged co-conspirators. Even if DOJ can overcome a pleading-stage challenge based on Brewbaker in most if not all cases, Brewbaker will likely make its task more difficult at later stages of litigation. The upshot is that Brewbaker and cases like it may push DOJ officials to reconsider indicting cases that do not target heartland per se unreasonable restraints like horizontal price-fixing and market allocations.

Brewbaker: Encouraging an End Run Around Rule 12?

After a jury convicted Brewbaker for rigging bids in violation of Section 1 of the Sherman Act, the Fourth Circuit held on appeal that the district court should have dismissed the Sherman Act count in the indictment for failure to state a per se offense. In November 2024, the United States Supreme Court denied the DOJ’s petition for certiorari, leaving undisturbed the Fourth Circuit’s holding that the per se rule does not apply to “hybrid” restraints (i.e. restraints involving both horizontal and vertical elements).

The Fourth Circuit first held that the Brewbaker indictment “alleged a hybrid restraint that hasn’t been held to be per se unlawful.” The DOJ charged Contech Engineered Solutions LLC, an aluminum pipe manufacturer, and its former employee Brett Brewbaker with rigging bids for North Carolina Department of Transportation (“NCDOT”) contracts. The indictment alleged that Contech and Brewbaker coordinated bids with Pomona, Contech’s distributor and exclusive dealer in the region, and then intentionally submitted losing bids to NCDOT, guaranteeing that Pomona would win the contract. The Fourth Circuit acknowledged that the coordination on bids “suggest[ed that] the[] agreement was a horizontal restraint.” But the indictment also alleged that “Pomona ‘served as a dealer’ for Contech, with Contech supplying Pomona aluminum that Pomona then used to compete against ‘others’ in NCDOT aluminum-structure projects.” This “dual-distribution arrangement,” the Fourth Circuit concluded, indicated a vertical aspect to Pomona’s and Contech’s relationship as well.

But suppose the DOJ never alleged the facts that the Fourth Circuit later characterized as evidence of verticality. The indictment could merely charge Contech and Pomona with engineering a bid-rigging scheme for NCDOT contracts (and the facts to support that allegation). That indictment would state a Sherman Act Section 1 offense and contain a “plain, concise, and definite written statement of the essential facts constituting the charged offense,” as Federal Rules of Criminal Procedure 12(b)(3)(B)(v) and 7(c)(1) require. And a defendant attempting to challenge that indictment would not be able to submit extrinsic factual evidence of its vertical relationship with the alleged co-conspirator in a Rule 12 motion.

So the lesson that government enforcers may take away from Brewbaker is that they simply alleged too many facts. As the Fourth Circuit itself explained, “When the government indicted Brewbaker, it decided to include detailed factual allegations. It wasn't required to.” Brewbaker and cases like it will incentivize prosecutors to strip down indictments to their essentials, and include only those facts necessary to demonstrate a horizontal restraint. As noted, criminal defendants have very few mechanisms to effectively contest that practice at the pleading stage.

Running into Rule 29 Trouble?

Even if the DOJ can easily avoid a Rule 12 dismissal in hybrid-restraint cases, Brewbaker will likely make it more difficult for the DOJ to overcome a Rule 29 motion for acquittal. Courts have long indicated a willingness to grant Rule 29 motions in hybrid-restraints cases before the Fourth Circuit handed down Brewbaker, and they are likely going to be even more willing to do so now. Evidence of a “hybrid” relationship is likely to add another arrow to criminal defendants’ quiver when it comes to persuading courts not to apply the per se rule. Criminal defendants can already argue that any horizontal restraint is “ancillary” to a broader procompetitive agreement. Under the ancillary-restraints doctrine, otherwise unlawful per se agreements may qualify for rule-of-reason analysis rather than per se treatment if they are “ancillary” or necessary to a legitimate arrangement that promotes competition. Brewbaker makes that task even easier—if there is evidence of a hybrid relationship between the alleged co-conspirators, the per se rule does not apply.

Conclusion

Brewbaker forces the DOJ into an awkward position. It can easily overcome Brewbaker challenges at the Rule 12 stage by pleading around a hybrid-restraint problem. But it will have to confront the Brewbaker problem eventually at the Rule 29 stage, often after piling resources into investigating, indicting, and prosecuting the case (and disrupting the defendants’ lives in the process). If the DOJ elects to continue indicting hybrid-restraint cases like Brewbaker, it’s likely that it will prosecute them outside the Fourth Circuit, curate its indictments to contain only horizontal elements, and carefully choose defendants whose claim to a vertical relationship is not obvious.