H. LEE SAROKIN, UNITED STATES DISTRICT JUDGE.
The defendants in this criminal antitrust case move for dismissal of the indictment. The motion is denied.
On September 10, 1987, a grand jury indicted nineteen corporate and seventeen individual defendants
for violating federal antitrust law and for conspiring to defraud the United States. The court has accepted guilty pleas from, and sentenced, a number of the defendants. The remaining defendants now move to dismiss the indictment for legal insufficiency. Because defendants contend that the facts alleged in the indictment, even if proved beyond a reasonable doubt, do not charge a violation of federal law, the court must review the allegations.
On December 2, 1985, a company called S & S Corrugated was declared bankrupt under Chapter 7 of the bankruptcy code. The United States Bankruptcy Court for the Southern District of New York entered an order on February 12, 1986 authorizing the trustee to hold an auction of S & S Corrugated's commercial equipment. That auction, administered by the Daley-Hodking Corporation under the trustee's supervision, occurred on March 11, 1986. The bankruptcy court entered an order on March 14 confirming and approving the auction and authorizing the trustee to execute documents consummating the sale.
According to the indictment, the defendants agreed before the public auction not to bid against one another, and implemented their plan at the auction. Then, immediately after the auction, the defendants held their own private auction of the equipment they had just purchased. Once all items were resold at the private auction, the defendants divided up and shared the difference between the higher prices paid at the private auction and the lower prices paid at the public bankruptcy auction. That difference was in excess of $ 75,000.
Count One of the indictment charges a violation of the Sherman Act, 15 U.S.C. § 1. The defendants' plan, according to the indictment, was a "combination and conspiracy in unreasonable restraint of interstate trade and commerce." It had the effects of restraining and eliminating competition among the defendants, enabling the defendants to pay artificially low prices for equipment at the public auction, and depriving S & S Corrugated and its creditors of full compensation and the benefits of free competition.
Count Two charges a violation of 18 U.S.C. § 371, which forbids conspiracies to defraud the United States. The theory of the indictment is that the defendants defrauded the United States "by impeding, impairing, obstructing and defeating the lawful government function of the Bankruptcy Court in the due administration and enforcement of the Bankruptcy Code," and by deceiving the bankruptcy court into believing that the bids submitted at the auction were products of full and fair competition. The indictment charges the commission of a large number of overt acts in furtherance of the conspiracy, including defendants' attendance at the auction, agreement not to bid competitively, agreement to rebid privately any item bought at the public auction, attendance at the private auction, bidding at the private auction, payment for items, and sharing of the second auction's profits.
Moving to dismiss the indictment in its entirety, the defendants now argue that the indictment fails to charge a violation of 15 U.S.C. § 1 or of 18 U.S.C. § 371, that the counts of the indictment are multiplicitous, and that the indictment represents an impermissibly selective prosecution. The court considers each contention in turn.
I. The Sherman Act
A. Bid Rigging as a Per Se Violation
Under 15 U.S.C. § 1, "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." As written, the Sherman Act is of extraordinary breadth. Indeed, it would appear to render illegal even the simplest commercial contract, since the contracting parties' agreement to trade with one another entails, for the purposes of their transaction, an implicit agreement to trade with no other. Despite the Act's breadth, the Supreme Court has upheld the Sherman Act over the objection that it is unconstitutionally vague. See Nash v. United States, 229 U.S. 373, 57 L. Ed. 1232, 33 S. Ct. 780 (1913).
The Court, however, has also narrowed the reach of the Sherman Act to restraints of trade which are unreasonable:
[Section 1 of the Act] necessarily called for the exercise of judgment which required that some standard should be resorted to for the purpose of determining whether the prohibition contained in the statute had or had not in any given case been violated. Thus not specifying, but indubitably contemplating and requiring a standard, it follows that it was intended that the standard of reason which had been applied at the common law and in this country in dealing with subjects of the character embraced by the statute was intended to be the measure used for the purpose of determining whether in a given case a particular act had or had not brought about the wrong against which the statute provided.
Standard Oil Co. v. United States, 221 U.S. 1, 60, 55 L. Ed. 619, 31 S. Ct. 502 (1911) (emphasis added). Applying this "rule of reason" over the years, the courts became so familiar with certain patterns of anticompetitive business conduct that they began to apply to those patterns conclusive presumptions of unreasonableness. See Northern Pacific Railway v. United States, 356 U.S. 1, 5, 2 L. Ed. 2d 545, 78 S. Ct. 514 (1958) ("there are certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use"). Application of this conclusive presumption of unreasonableness to certain anticompetitive behavior has become known as the " per se doctrine." See also United States v. Trenton Potteries, 273 U.S. 392, 71 L. Ed. 700, 47 S. Ct. 377 (1927).
It is beyond question that bid rigging is a per se violation of the Sherman Act. See, e.g., United States v. H & M, Inc., 565 F. Supp. 1, 2 (M.D.Pa. 1982) (bid rigging is a " per se violation which go[es] to the heart of the Sherman Act"); United States v. Koppers Co., 652 F.2d 290, 294 (2d Cir. 1981), cert. denied, 454 U.S. 1083, 70 L. Ed. 2d 617, 102 S. Ct. 639 (1981); United States v. Brighton Building and Maintenance Co., 598 F.2d 1101, 1106 (7th Cir. 1979), cert. denied, 444 U.S. 840, 62 L. Ed. 2d 52, 100 S. Ct. 79 (1979); United States v. Portsmouth Paving, 694 F.2d 312, 317 (4th Cir. 1983); United States v. Rubbish Removal, Inc., 602 F. Supp. 595, 602 (N.D.N.Y. 1984). Indeed, "in cases involving behavior such as bid rigging, which has been classified by courts as a per se violation, the Sherman Act will be read as simply saying: 'An agreement among competitors to rig bids is illegal.'" United States v. Koppers Co., 652 F.2d at 294 (quoting United States v. Brighton Building, 598 F.2d at 1106).
Defendants attempt to distinguish their alleged behavior from classic bid rigging on the grounds that their alleged scheme involved no pre-auction fixing of prices and allowed for unfettered competition at the second, private auction. However, neither of these features, even if true, removes the alleged scheme from the domain of the per se violation. In the first place, courts have repeatedly held that a simple agreement not to bid is itself a per se antitrust violation, even in the absence of prior price fixing. "Where two or more persons agree that one will submit a bid for a project higher or lower than the others or that one will not submit a bid at all, then there has been an unreasonable restraint of trade which violates the Sherman Antitrust Act." United States v. W.F. Brinkley and Son, 783 F.2d 1157, 1161 (4th Cir. 1986) (emphasis added). See also United States v. Portsmouth Paving, 694 F.2d 312, 325 (4th Cir. 1982) ("any agreement between competitors pursuant to which contract offers are to be submitted to or withheld from a third party constitutes bid rigging per se violative of 15 U.S.C. § 1" (emphasis added)); Swift & Co. v. United States, 196 U.S. 375, 400, 49 L. Ed. 518, 25 S. Ct. 276 (1905) ("the defendants cannot be ordered to compete, but they properly can be forbidden to give directions or to make agreements not to compete").
More importantly, the alleged scheme of the defendants is indistinguishable from schemes which courts have held per se violative of the Sherman Act. In Addyston Pipe & Steel Co v. United States, 175 U.S. 211, 44 L. Ed. 136, 20 S. Ct. 96 (1899), six manufacturers of cast-iron pipe formed an "association" to protect themselves from the adverse effects of the competition that normally existed between them. The association first divided their sales region into "pay" territory, in which each association member had to pay a bonus to the other members for his sales, and "free" territory, in which the members could sell freely without paying a bonus. However,
the system of bonuses, as a means of restricting competition and maintaining prices, was not successful. A change was therefore made by which prices were to be fixed for each contract by the association, and, except in reserved cities, the bidder was determined by competitive bidding of the members, the one agreeing to the highest bonus for division among the others getting the contract.