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From Antitrust Law Daily, December 21, 2015

Indictment against five Puerto Rico bus company owners stands

By Jeffrey May, J.D.

Section 1 of the Sherman Act would apply to an alleged conspiracy to rig bids and allocate markets for school bus transportation contracts in the Commonwealth of Puerto Rico, the federal district court in San Juan has ruled. Five bus transportation company owners unsuccessfully contended that a federal antitrust indictment against them should be dismissed on the ground that the Sherman Act did not apply to local conduct in Puerto Rico (U.S. v. Rivera-Herrera, December 18, 2015, Gelpi, G.).

In order for Section 1 of the Sherman Act to apply, the alleged restraint of trade had to implicate the “several States” or “foreign nations.” According to the defendants, the Commonwealth of Puerto Rico was excepted by the plain language of the statute. However, under First Circuit precedent, Puerto Rico was treated as a State as a result of its Commonwealth status for purposes of the Sherman Act. Because the law was not ambiguous, the defendants could not successfully contend that the Rule of Lenity, which requires that ambiguous criminal laws be interpreted in favor of defendants, precluded a finding that Puerto Rico was a state under the Sherman Act.

Interstate commerce. The court also rejected the defendants’ contention that the indictment was defective because the challenged conduct did not involve interstate commerce. The interstate commerce element of the Sherman Act may be demonstrated where the offending activities take place in the flow of interstate commerce or have a substantial effect on interstate commerce. “This standard is not difficult to satisfy,” the court noted.

The seven-count indictment alleged that the defendants conspired to eliminate competition by rigging bids and allocating the market for school bus transportation contracts in Caguas, Puerto Rico, in 2013, the court explained. The contracts were supported by the Puerto Rico Department of Education and the U.S. Department of Education, with funds that were within the flow of interstate commerce. Moreover, the buses had been shipped in interstate commerce and had been fueled by gasoline that traveled in interstate commerce.

The court also noted that, at this stage, the government satisfied the interstate commerce requirement by simply arguing that the funds, which the defendants won via anticompetitive behavior, were rendered unavailable for use in another jurisdiction as a result. There was “a reasonable inference that the alleged conspiracy implicated materials and funds that were both in the flow of interstate commerce and had a substantial effect on interstate commerce,” in the court's view.

Ongoing investigation. The indictment was the first charge announced in what the government called an ongoing investigation into anticompetitive conduct in Puerto Rico’s school bus transportation services industry. Named in the indictment were Gavino Rivera-Herrera, Luciano Vega-Martínez, Alfonso Gonzales-Nevarez, José L. Arroyo-Quiñones, and René Garay-Rodríguez. To date, no additional charges have been announced.

This is Case No. 3:15-cr-00361-GAG.

Attorneys: Craig Y. Lee, U.S. Department of Justice. Jason Gonzalez-Delgado (Gonzalez & Gonzalez Law Office) for Gavino Rivera-Herrera.

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