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UNITED STATES v. ANDREAS

September 17, 1998

UNITED STATES OF AMERICA
v.
MICHAEL D. ANDREAS; MARK E. WHITACRE; TERRANCE S. WILSON, and KAZUTOSHI YAMADA



The opinion of the court was delivered by: BLANCHE M. MANNING

MEMORANDUM AND ORDER

 Defendants Michael D. Andreas and Terrance S. Wilson now move for judgment of acquittal, pursuant to Fed. R. Crim. P. 29. First, they argue there is insufficient evidence to prove they committed an unreasonable restraint of trade in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, as to the sales volume allocation allegation. Next, they contend the court must acquit them since the government has proven, at best, that the defendants participated in smaller and distinct conspiracies instead of the broad lysine conspiracy alleged to exist from June 1992 (beginning with the Mexico City meeting) until June 27, 1995.

 Finally, they argue that they must be acquitted based on a variance or constructive amendment to the indictment, which they contend occurred when the government allegedly introduced evidence outside the scope of the indictment. For the reasons set forth below, the motion to acquit the defendants is denied in its entirety.

 DISCUSSION

 In deciding a motion for judgment of acquittal under Fed. R. Crim. P. 29, the court must construe all evidence in a light most favorable to the government and deny the motion if the court concludes that "any rational trier of fact could find the essential elements of the crime beyond a reasonable doubt." United States v. Cunningham, 108 F.3d 120 (7th Cir. 1997). With this standard in mind, the court addresses the individual arguments for acquittal.

 1. Sufficiency of Evidence for § 1 Violation

 The defendants contend that, as a matter of law, they cannot be convicted of effectuating an unreasonable restraint of trade in violation of the Sherman Act. The argument revolves around whether the alleged lysine price-fixing conspiracy is governed by the per se or "Rule of Reason" doctrines governing antitrust violations. The defendants contend that sales volume allocation has never been declared a per se violation of the antitrust laws and therefore is governed by the Rule of Reason. That is, sales volume allocation is not deemed illegal unless the government produces economic evidence that establishes that the alleged sale volume allocation amounts to an unreasonable restraint of the lysine market. See generally State Oil Co. v. Khan, U.S. , 118 S. Ct. 275, 139 L. Ed. 2d 199 (1997).

 The government opposes the motion, arguing that sales volume allocation alleged here constitutes a per se violation because it was committed in furtherance of the alleged price-fixing and therefore became inextricably intertwined. Thus, the government concludes that the two actions went hand-in-hand and should be analyzed as a single per se price-fixing violation. The court agrees and the motion to acquit as to sale volume allocation is denied.

 The Rule of Reason is generally applied to antitrust violations, State Oil Co. v. Khan, U.S. , 118 S. Ct. 275, 139 L. Ed. 2d 199 (1997), and requires the government to prove that a particular practice (such as price-fixing) places an unreasonable restraint on trade surmised by balancing the positive and negative effects the conduct has on the relevant market. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 81 L. Ed. 2d 628, 104 S. Ct. 2731 (1984). Per se violations are the narrow exception to the general rule, in which the alleged misconduct is so unreasonable that it is presumed to violate the Sherman Act and inquiry into its effect on trade is deemed unnecessary. Northwest Pacific R. Co. v. United States, 356 U.S. 1 (1958). A particular course of conduct is not deemed a per se violation unless the courts have had "considerable experience with that type of conduct and application of the rule of reason has inevitably resulted in a finding of anti-competitive effects." Bunko Ramo Corp., 713 F.2d at 1284 citing United States v. Topco Associates, Inc., 405 U.S. at 607-608 (emphasis added). Price-fixing has been deemed a per se violation of the Sherman Act. Khan v. State Oil Co., 93 F.3d 1358 (7th Cir. 1996) vacated and remanded on other grounds, U.S. , 118 S. Ct. 275, 139 L. Ed. 2d 199 (1997).

 The defendants claim that no court has ever addressed let alone held that sales volume allocation constitutes a per se violation and that since price-fixing and sales volume allocation are two separate and distinct violations, the Rule of Reason must govern sales volume allocation. That conclusion, however, is premised on a flawed interpretation of the indictment and a distorted interpretation of the government's theory of the case. The indictment alleges one conspiracy to fix lysine prices in which sales volumes were allocated in furtherance of the price-fixing objective. See Indictment PP2-4; see also Trial Tr. 703 -706. Thus, sales volume allocation merely supplemented the per se price-fixing goal and should be scrutinized under the same per se standard.

 Alternatively, the defendants contend that even if sales volume allocation constituted a per se violation, that this case somehow presents unique circumstances in which the Rule of Reason should be applied. Sometimes per se violations are scrutinized under the Rule of Reason, but only when a strict application of the antitrust laws would impede the very markets that the antitrust laws are intended to protect, or when competing public policy goals cannot harmoniously coexist without some compromise in the application of the Sherman Act.

 For instance, in Broadcast Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 19-20, 60 L. Ed. 2d 1, 99 S. Ct. 1551 (1978), the Supreme Court held that blanket licensing agreements that set uniform prices are not per se violations since the policy was not solely a "naked restraint on trade" but rather served the dual purpose of protecting the parties' rights under the federal copyright law. The Columbia Broadcasting Court reasoned that given the market structure and product involved, price-fixing was the only reliable method of ensuring distributors and music pirates did not infringe on the intellectual property rights of composers and musicians.

 Similarly, in National Collegiate Athletic Ass'n v. Bd. of Regents of the Univ. of Oklahoma, 468 U.S. 85, 82 L. Ed. 2d 70, 104 S. Ct. 2948 (1984), the Supreme Court permitted the NCAA to engage in a horizontal price-fixing/output plan which limited the number of college football games the respective universities could air in a given season. The plan was intended to protect the respective university's from declining attendance due to televised games. That is, absent fan attendance there would be no games thereby mooting television revenues. Apart from these limited instances where price-fixing is a crucial means of ensuring the continued existence of the means of production or the market itself, courts have found no reason to not apply the per se rule to horizontal price-fixing schemes like the one alleged here.

 Here, the defendants and their corporate competitors are hard-pressed to convince this court that it had to agree to prices in order to protect the market. To the contrary, the defendants' theory of the case has always been that they are fierce competitors who entered the market to spur competition. Nothing in the record remotely suggests that price-fixing is necessary to protect the lysine market. Nor have the defendants claimed that any supervening law or policy precludes applying the per se rule in ...


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