Appeals judge reached a precedent-setting decision in this antitrust case.
Retained by Smith Gambrell & Russell
In October 2020, the U.S. Department of Justice’s Antitrust Division indicted Brent Brewbaker and his employer, Contech Engineered Solutions LLC. The DOJ alleged that Contech’s communications with Pomona Pipe Products regarding their respective bids on certain roadway construction projects for the North Carolina Department of Transport (NCDOT) constituted a per se violation of Section 1 of the Sherman Act (i.e., that it “always or almost always” impairs competition).
Contech’s counsel retained Cornerstone Research and Ken Elzinga of the University of Virginia to provide an economic analysis of the relationship between Contech and Pomona. In his analysis, Professor Elzinga found that, given their hybrid (both vertical and horizontal) relationship, there were potential procompetitive benefits to the agreements between Contech and Pomona.
Appeals victory in United States v. Brewbaker may lead to narrower application of per se rule going forward.
In February 2022, the Eastern District of North Carolina denied defendants’ motion to dismiss. However, in December 2023, the U.S. Court of Appeals for the Fourth Circuit reversed the district court’s denial. The appellate decision cited Professor Elzinga’s report, adopting his economic framework characterizing the hybrid relationship between Contech and Pomona. When discussing the conduct’s competitive effects, the court determined that “economic analysis—including that provided by Dr. Elzinga, academic literature, and Supreme Court opinions—shows that this type of restraint has possible procompetitive effects.” Since “the category of restraint alleged in the indictment would not invariably lead to anticompetitive effects,” the court determined that the conduct did not meet the legal test for the per se rule.
Following the December 2023 decision, several commentators have noted that it may set an important precedent for how courts will apply the per se rule going forward and make it challenging to extend the per se rule beyond coordination among purely horizontal competitors. Plaintiffs will need to consider the relationship between the parties to an agreement as a whole and demonstrate that there is no plausible procompetitive effect from the agreement. This precedent could have considerable impact in labor-related cases where the Antitrust Division has called for per se treatment of agreements between firms competing for employees, even in cases where those firms have broader business relationships (e.g., because they are franchisees of the same franchise chain). The decision in United States v. Brewbaker may be a significant roadblock to such an approach.