To establish a criminal violation of Section 1 of the Sherman Act, the government must prove three essential elements:
- The charged conspiracy was knowingly formed and was in existence at or about the time alleged;
- The defendant knowingly joined the charged conspiracy; and
- The charged conspiracy either substantially affected interstate or foreign commerce or occurred within the flow of interstate or foreign commerce.
Conspiracy or Agreement: The conspiracy or agreement to fix prices or to rig bids is the key element of a Sherman Act criminal case. In effect, the conspiracy must comprise an agreement, understanding or meeting of the minds between at least two competitors or potential competitors, for the purpose or with the effect of unreasonably restraining trade. The agreement itself is what constitutes the offense; overt acts in furtherance of the conspiracy are not essential elements of the offense and need not be pleaded or proven in a Sherman Act case.
In a Sherman Act criminal action, general intent must be proven. Customarily, however, proof of the existence of a price-fixing or bid-rigging agreement is sufficient to establish intent to do what the defendants agreed among themselves to do.
The agreement need not be embodied in express or formal contractual statements. It must merely constitute some form of mutual understanding that the parties will combine their efforts for a common, unlawful purpose. The ultimate success of the venture is immaterial as long as the agreement is in fact formed.
Knowingly Joining the Conspiracy: To find the defendant acted knowingly, it must be shown that the defendant acted voluntarily and intentionally rather than because of a mistake, accident, or other innocent reason. The defendant must have joined the conspiracy with the intent to assist or advance the object or purpose of the conspiracy. The government need not show that the defendant knew all the details or members of the conspiracy nor that the defendant participated in all the conspiratorial acts. Also, it is not necessary for the defendant to have participated in the origination of the conspiracy. Of course, mere knowledge of the conspiracy without participation in the conspiracy does not make a defendant a member of the conspiracy. In addition, a defendant who knowingly directs another person to participate in the conspiracy is responsible for the conduct he directed just as if he directly participated in the conduct. If a defendant is shown to have joined a conspiracy, the defendant is presumed to remain a member of the conspiracy until the conspiracy has been completed or abandoned or until the defendant has withdrawn from the conspiracy.
Per Se Rule: Price fixing and bid rigging are among the group of antitrust offenses that are considered per se unreasonable restraints of trade. The courts have reasoned that these practices, which invariably have the effect of raising prices to consumers, have no legitimate justification and lack any redeeming competitive purpose and should, therefore, be considered unlawful without any further analysis of their reasonableness, economic justification, or other factors. For most other antitrust offenses, the courts have established an analytical approach labeled the "Rule of Reason." Under the Rule of Reason, the courts must undertake an extensive evidentiary study of (1) whether the practice in question in fact is likely to have a significant anticompetitive effect in a relevant market and (2) whether there are any procompetitive justifications relating to the restraint. Under the Rule of Reason, if any anticompetitive harm would be outweighed by the practice's procompetitive effects, the practice is not unlawful. Virtually all antitrust offenses likely to be prosecuted by a United States Attorney's office will be governed by the per se rule.
Interstate or Foreign Trade and Commerce: Finally, the restraint must be shown to be in the flow of, or to affect, interstate or foreign trade or commerce. For interstate commerce, this test is ordinarily satisfied by demonstrating that products involved in the case were shipped across state lines, that services involved interstate activities, or that significant federal funding was involved. For foreign commerce, this test can be satisfied by showing that the conduct involved import trade or import commerce or, if not, that the conduct had a direct, substantial and reasonably foreseeable effect on trade that is not export commerce or on a person engaged in export trade or export commerce in the United States.
Since there are situations in which the manner of proving interstate or foreign commerce can be difficult, if there is any doubt the theory of interstate or foreign commerce should be discussed with the Deputy Assistant Attorney General for Criminal Enforcement (or the Director or Deputy Director of Operations in a civil action) or the local Antitrust Division field office in advance of proposing a case.
Single Versus Multiple Conspiracies: In addition to proving the elements of the offense, it is always necessary to determine the scope of the conspiracy and the actors who participated in it. The most difficult issue in many of these cases involves the determination of what constitutes the conspiracy. In price-fixing and bid-rigging cases, it is especially important to determine whether a single, continuing conspiracy was in existence involving numerous price changes or bid awards, or whether certain isolated price changes or bid awards were the subjects of separate conspiracies. Consultation with the Deputy Assistant Attorney General for Criminal Enforcement or the local field office is usually helpful in analyzing these issues.
[updated October 2011]