Bob Connolly   bob@reconnollylaw.com

In the coming months there will be many proposals advanced to amend the Sherman Act.  My offering is to amend Section 1 with this text: “Price fixing, bid rigging and market/customer allocation are per se illegal.”  You may think the Sherman Act already says this.  It does not.  The text simply states “restraints of trade” are illegal.  The Supreme Court has held that these three words somehow created two distinct substantive rules of law: the per se rule and the rule of reason.  The Antitrust Division has argued successfully defended criminal antitrust convictions based on the per se rule arguing: “it is as if the Sherman Act reads price fixing and bid rigging are illegal.”[1]  But, the Sherman Act does not say that.  Because the statute does not set forth a per se rule, whether the agreement was a restraint of trade is an element of the offense.  There have been recent challenges to the constitutionality of the per se rule in criminal antitrust cases because the judge, not the jury, makes the finding of whether this element of the offense has been proven. The per se rule takes away from the jury the question of whether the agreement in question was a “restraint of trade.”  So far, the constitutional attacks on the per se rule have been rejected by trial and appellate courts based on clear precedent upholding the per se rule.  Two recent Supreme Court cases, however, have strengthened my view that a textualist reading of the Sherman Act will result in the Supreme Court finding that the Sherman Act does not create a per se rule.  It is for the jury to decide whether the alleged agreement (if proven) constitutes a restraint of trade.

There are three elements to Sherman Act Section 1 offense 1) an agreement, 2) in restraint of trade and 3) in interstate or foreign trade or commerce.  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, including whether the agreement restrained trade.[2] 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 violates the Constitution. I have made the argument more fully, if not to the readers’ mind successfully, in several articles:  The End is Near For the Per Se Rule in Criminal Sherman Act Cases, March 20, 2019 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3356731 and In the Clash Between the Venerable Per Se Rule and the Constitution, the Constitution Shall Prevail (in time), Robert E. Connolly, Competition, Spring 202, Vol 30, No. 1.  Two fairly recent Supreme Court cases that have nothing to do with the Sherman Act, however, further convince me that the Supreme Court will find the per se rule in criminal cases unconstitutional.  The Court will agree that the text of Section 1 of the Sherman Act does not set forth a per se rule and therefore, it is the jury that must decide whether the charged agreement restrained trade.

In Facebook v. Duguid, et al., No., 19-511, (April 1, 2021) the Court held that to qualify as an “automatic telephone dialing system” under the Telephone Consumer Protection Act of 1991, a device must have the capacity either to store, or to produce, a telephone number using a random or sequential number generator.  The ruling was a result of a textualist reading of the words of the statute.  Justice Sotomayor writing for a unanimous Court explained, “We begin with the text.”  After concluding that the text of the statute required the holding the Court reached, Justice Sotomayor concluded: “Duguid’s counterarguments cannot overcome the clear commands of §227(a)(1)(A)’s text and the statutory context.”

In Bostock v. Clayton County, 140 S. Ct. 1731 (2020) Justice Gorsuch prohibited anti-LGBTQ employment discrimination on a textualist reading of Title VII of the Civil Rights Act.  The holding, surprising to some, was clearly a result of a textualist approach to the statute.  Justice Gorsuch wrote: “When the express terms of a statute give us one answer and extratextual considerations suggest another, it’s no contest. Only the written word is the law, and all persons are entitled to its benefit.” Id. at 1737.  Duguid and Bostock are only two of numerous recent Supreme Court cases where the decision was based on the plain text of the statute, notwithstanding policy and/or legislative history arguments.

A little quiz makes the point that the text of the Sherman Act does not set forth a per se rule and a rule of reason.

Question 1:    What do the words “restraint of trade” mean to you?

  1. a reduction in competition
  2. a suppression of trade
  3. “1” and/or “2”
  4. the creation of two distinct substantive rules; a per se rule and a rule of reason

As mentioned, the Antitrust Division has successfully swatted back previous challenges to the Sherman Act Section 1 convictions by arguing “It is as if the statute read….”  The Supreme Court has endorsed this view, writing that Section 1 “prohibit[s] only unreasonable restraints of trade” and that a restraint is unreasonable if it violates either of two substantive rules of law—the rule of reason or the per se rule. Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723 (1988).  But these rules were established in cases where the constitutional question of the per se rule in a criminal Sherman Act case was not before the Court.  The cases were not argued to and decided by a textualist Supreme Court.  To defend the per se rule before the current Supreme Court arguing “it is as if the Sherman Act read…” would be like arguing as if the advocate had not read a Supreme Court case in the last decade or so.  It would be as if that advocate did not didn’t know, as Justice Kagan has said, “We are all textualists now.”[3]

The textualist problem would be solved by amending the Sherman Act, either as a stand-alone bill or as part of any amendment to the Sherman Act, to read, “Price Fixing, bid rigging and market/customer allocation are per se illegal.”  Even if you are not convinced there is a constitutional defect in the per se rule, it is not better to argue the Sherman Act does read this way rather than “as if” it did?  This amendment would have bi-partisan, and perhaps unanimous, support, so why not?

Thanks for reading

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[1] United States v. Brighton Building & Maintenance Co., 598 F.2d 1101, 1106 (7th Cir. 1979).

[2]  The per se rule is a wonderful tool for prosecutors, which I myself used in many criminal cases when I was a prosecutor with the Antitrust Division.  I feel confident, however, that very few cases would have turned out differently if the jury, not the Court, decided whether the price fixing or bid rigging agreement in question was a restraint of trade.  Criminal jury trials almost always involving the defendants denying there was an agreement.  Admitting there was an agreement (which is secret, not in writing, often spoken of in code words, etc.) and arguing the collusion was somehow not a restraint of trade would be a defense only in rare cases where the proof of the agreement was beyond dispute.  Still, amending the Sherman Act to state that price fixing and bid rigging is per se illegal is befitting cartels: “the supreme evil of antitrust.”

[3]   Jimmy Hoover, Law 360, September 13, 2016, Scalia Won Battle over Statutory Interpretation, Kagan Says, available at, https://www.law360.com/articles/839739/scalia-won-battle-over-statutory-interpretation-kagan-says.  Justice Elena Kagan explained at a discussion at George Washington University in 2016:

     “Almost all of the justices have moved 80 percent the way toward is position.  I think what he convinced most people was that text matters profoundly in statutory interpretation…. When we do statutory interpretation, it’s not the statute that we would have written.  What matters is the statute they wrote.  We’re and agent of Congress and we’re bound by the statute that they wrote.”

 

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