On Dec. 1, 2023, the U.S. Court of Appeals for the Fourth Circuit reversed a bid-rigging conviction of a former aluminum products manufacturing company executive, holding that the alleged conspiracy should be analyzed under the more permissive rule of reason rather than the per se standard because of the supplier-customer relationship between the alleged conspiring bidders. The Fourth Circuit declined to reconsider its panel ruling on Feb. 16 despite the Department of Justice’s (DOJ) arguments that the court’s decision is inconsistent with long-standing Sherman Act precedent. Although the DOJ may still seek U.S. Supreme Court review of the Fourth Circuit’s decision, if upheld the decision represents a significant restriction on the DOJ’s prosecutions for alleged collusive conduct between parties when there is any type of vertical business relationship present.

Background

In October 2020, an aluminum manufacturing company (Contech) and its former executive (Brent Brewbaker) were indicted on six counts of alleged bid-rigging, conspiracy to commit fraud, and mail and wire fraud in connection with a decade-long conspiracy involving public works projects in North Carolina. According to the DOJ, Contech conspired with another aluminum manufacturer (Pomona Pipe) across numerous bids to ensure that Pomona always submitted a lower bid than Contech. And if Pomona was the winning bidder, Contech would supply Pomona with the aluminum needed for the public works contract. In a motion to dismiss the indictment, the defendants argued that this manufacturer-supplier relationship should control how the court should analyze the conduct, i.e., under the rule of reason rather than the per se standard. In its opposition, the DOJ argued that the manufacturer and supplier were holding themselves out to the world as competitors, and as such, this was classic bid-rigging conduct subject to per se analysis. On March 15, 2021, the court denied the defendants’ motion to dismiss and agreed with the DOJ that the alleged conduct would be considered under a per se, rather than rule of reason, analysis.