Supply chains and antitrust

Last week, five competition authorities announced to launch a new working group focussed on sharing information to identify and prevent potentially anticompetitive conduct in the global supply and distribution of goods. In this post, we will elaborate why these five cartel authorities in particular are working together (and who is not participating this time). We will also try to show where potential antitrust issues are hidden in supply chains.

English native speakers only?

Members of the working group are the U.S. Department of Justice, the Australian Competition and Consumer Commission, the New Zealand Commerce Commission, the Canadian Competition Bureau and the U.K. Competition and Markets Authority.

It is apparent that all members of the group are native English speakers. But even if someone might smell discrimination here, it is not. All members of the working group established the “Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities” already in September 2020. The goal of the signatories was to improve cooperation and exchange experiences cross-border. In the associated Memorandum of Understanding it was explicitly stated that the existing and ongoing International Competition Network and OECD work was rather complemented than replaced by the new agreement. Only a guess at this point, but the fact that all members are common law jurisdictions (and run the “Five Eyes” intelligence alliance) may have helped bringing the group together in this constellation.

With regard to the current initiative, the German Bundeskartellamt and the French Autorité de la Concurrence both said that they were no part of any “formal” initiatives, but that they also had supply chains on their radar.  

So, are there problems?

The global COVID-19 pandemic has caused massive disruptions in supply chains. In a globalised world where global supply chains and just-in-time delivery play a significant role, production bottlenecks, rising freight costs and pressure from old and new trade conflicts quickly lead to supply chain disruptions. The Covid-19 pandemic has radically exposed these weaknesses. An example is the global chips crisis (also mentioned here), which led to a significant production crisis across industries and around the world.

What has this to do with antitrust?

Nothing and everything. Scarce resources and rising costs are a normal phenomenon in the economy. But they can also be the starting point for contacts between competitors. A notorious topic would be, for example, the discussion whether rising transportation costs should be passed on to the next market level. Another way to engage in anticompetitive coordination is to react jointly to price increases that are perceived as unfair. This may particularly affect those companies that are generally perceived to have profited from the Covid crisis (no, I don’t mean your local wine shop), as it gives many market participants the impression that it is necessary to fight back against these companies.

Furthermore, companies agreeing to save costs by lowering (or not raising) wage levels is also problematic from an antitrust perspective. The fact that many feared that the pandemic would lead to a very generous interpretation violation of antitrust rules is also shown by the numerous papers from competition authorities all over the world in which it was made clear that antitrust law continues to apply (cf. the DOJ and FTC paper and the ECN paper).

What can be expected?

Many countries have recently complained about rising prices and high inflation (see our post on rising gas prices here) but also disruptions in the supply chain. So, on the one hand, some ask the question whether the high prices are (at least partly) due to collusion along the supply chains in violation of antitrust law. There are reasons to doubt this.

On the other hand, it might not harm to take a closer look at some industry-wide price increases. It may be possible to derive initial findings from the US FTC’s Inquiry into supply chain disruptions. At the end of 2021 the FTC announced that it was about to issue information requests to nine large retailers, wholesalers and consumer good suppliers, inter alia Walmart and Amazon. According to the FTC, the orders “require the companies to detail the primary factors disrupting their ability to obtain, transport and distribute their products; the impact these disruptions are having in terms of delayed and cancelled orders, increased costs and prices; […] and how they allocate products among their stores when they are in short supply.”

It might take some time to learn about the results, but there is hope that any fundamental findings will also, inter alia, be shared with the European regulators despite the countries not being native English speakers 😉. Meanwhile, the European Commission is inter alia dealing with alleged antitrust violations in the shipping sector. Last week, CLECAT (the European Association for Forwarding, Transport, Logistics and Customs Services) sent a letter to the Commission’s Executive Vice President Vestager urgently calling for a “Sector Inquiry in the container shipping sector to remove unfair and discriminatory rules”. This followed a complaint last year by shipper and forwarder organisations over an alleged abuse of dominance in the liner shipping market.

So, while the supply chain focus of the new working group of antitrust regulators appears to be broad, the shipping sector will likely remain a key part of the discussion.

One thought on “Supply chains and antitrust

Comments are closed.