The US Department of Justice (DOJ) announced an initiative on February 17, 2022 to investigate and prosecute individuals and companies engaged in collusion related to supply chain disruptions. To protect American consumers from a potential spate of illegal prices, the DOJ’s Antitrust Division and the FBI will prosecute “those who attempt to exploit the supply chain disruption for their own illicit gain.”
Highlights and background of the initiative
According to the initiative, companies in a wide range of supply chain-related industries are aware that their behavior is being investigated for anti-competitive activities. Several examples of criminal cartel offenses were identified: price fixing, bid rigging, market sharing agreements and other anti-competitive behavior.
The announcement of the law enforcement initiative represents an acknowledgment that the global economic devastation of the COVID-19 pandemic — labor shortages, transportation restrictions, business disruption, challenges in securing raw materials and equipment — is expected to continue for a number of years across industries and expose consumers to illegal overcharges “under the guise of supply chain disruptions“.
To underscore the seriousness of its mission, the DOJ announces that it is “prioritize[e]any existing investigations where competitors may be exploiting supply chain disruptions for illicit profit.” Industries particularly hard hit by supply disruptions are said to come under the watchful eye of Justice Department investigators, who are expected to proactively investigate collusion. Given the far-reaching nature of the disruption, a working group was formed by the Antitrust Division to “focus on global supply chain collusion” with its global partners in Australia, Canada, New Zealand and the United Kingdom.
The initiative is the federal government’s latest project aimed at counteracting supply chain disruptions caused by the pandemic. In June 2021, the Biden administration formed a White House task force to “address supply and demand imbalances that have emerged in multiple sectors.” In addition, the Antitrust Division entered into a Memorandum of Understanding (MOU) with the Federal Maritime Commission to work together and increase their efforts to enforce the antitrust laws and marine law protections that apply to the maritime industry. (See previous Holland & Knight warnings, “New Presidential Decree Targets Maritime Industry and Sea Freight Companies,” July 12, 2021 and “The Federal Maritime Commission continues to grapple with issues of detention and demurrage,”, February 7, 2022.)
Takeaways and reflections
The press release does not single out specific supply chain industries. This is an indication that the envisaged areas of audit are likely to be broad. They will continue to include cooperation on maritime activities governed by the Shipping Act and are also expected to extend to segments across the supply chain, including inland trucking, warehousing and the provision of intermodal equipment.
With its latest salvo, the DOJ has made it clear that it will not hesitate to use all the weapons in its law enforcement arsenal to hold accountable those conspiring to illegally profit from the pandemic. By casting a broad net across the entire supply chain and signaling a willingness to work with the FMC and foreign partners, the DOJ underscores that no business entity is immune to government scrutiny for antitrust violations — or civil or criminal enforcement. Under the circumstances, and with a clear warning from the FBI, companies would be wise to review their antitrust compliance protocols, exercise caution, and seek legal counsel before entering into discussions or agreements with marketplace counterparties.