So far, the DOJ’s attempt to expand over a century of criminal prosecution of traditional per se conduct by vigorously prosecuting “labor market” cases has failed. Looking more closely at the DaVita case, in particular, the judge’s pre-verdict rulings set the stage for the defense verdict and provide guidance and powerful precedent for defendants in similar cases.
Before going further, some background may be helpful. Courts have deemed certain violations of the Sherman Act “per se” illegal. Conduct such as price fixing and market allocation fall into this category. When an antitrust violation is deemed per se unlawful, that means the conduct is so clearly anti-competitive and a violation of the Act that the parties’ criminal intent is presumed. In other words, in these cases, the government need only prove that the defendants entered into the anti-competitive agreement, not why. In cases subject to “rule of reason” treatment, where the alleged conduct is not per se unlawful, defendants are permitted to argue to the jury and introduce evidence that the agreement was justified because, e.g., it had pro-competitive effects or was motivated by legitimate business reasons. Defendants accused of committing per se offenses typically are not permitted to make those arguments; in a per se case, where the agreement is presumptively unreasonable, they are not relevant.
Although the court found that the government had sufficiently alleged facts that could constitute a per se violation (and denied defendants’ motion to dismiss for that reason), it stopped short of declaring all non-solicitation agreements presumptively illegal. This mirrors a rule of reason-style defense, which is permitted in cases where the alleged antitrust violation is not a per se offense. The attentive jury clearly took note.
The trial losses in Jindal and DaVita follow a seismic policy shift at the Division that has been brewing since 2016.Jindal, the first wage-fixing prosecution, was indicted in Texas in 2020, paving the way for the two recent jury verdicts flatly rejecting this new approach.
— to explain to a very skeptical judge why the Division insisted on trying the case a third time after two hung juries. While not a labor market case, the Division’s zeal to try five defendants for a third time, after two jury trials ending in hung jury mistrials, shows the Division’s resolve. Kanter’s aggressive statements, coupled with his willingness to publicly justify trying the same case three times, signals that the Antitrust Division will not be deterred by back-to-back losses and will continue criminally prosecuting labor market cases even if judges and juries alike reject their approach.
Further Legal Developments
The law governing per se criminal antitrust offenses is fairly limited. Questions about what constitutes per se illegal conduct under the Sherman Act and when a rule of reason or similar defense is appropriate abound, as was evident in the DaVita pre-verdict rulings discussed above. In a recent opinion in a case called United States v. Aiyer, the Second Circuit weighed in. Although not a labor market case, the Court directly addressed the per se standard in criminal antitrust cases. The Court held that defendants are not entitled to a pretrial ruling on whether the conduct alleged is subject to per se or rule of reason treatment.In other words, the defendant was still entitled to introduce evidence that the alleged restraint was ancillary to a pro-competitive agreement and/or that the agreement was part of an efficient joint venture, even though the government was pursuing the case as a per se offense and criminal intent is presumed.
These rulings and acquittals underscore the complexity of criminal antitrust cases, particularly those prosecuting labor-focused conduct that has traditionally been treated civilly and analyzed under a rule of reason analysis. The Division’s aggressive attempts to criminally prosecute corporations and individuals for no-poach and wage-fixing conduct seems to be resulting in judicial rulings regarding admissible evidence, including expert testimony, jury instruction and the elements of Sherman Act crimes, that may undermine its efforts to prosecute even traditional per se conduct. Unfortunately for businesses, executives, and the counsel advising them, particularly those in the healthcare industry, which has been a recent focus of no-poach and wage-fixing cases, these trial losses do little to help define the types of conduct that constitute antitrust crimes and those that are sufficiently pro-competitive to withstand antitrust civil scrutiny.