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International competition authorities from the US, UK, Canada, Australia and New Zealand have formed a new working group to tackle suspected collusion in global supply chains, as concerns mount over rising inflation.

In recent months, a range of supply chain issues and rising commodity prices have helped push inflation to levels not seen in decades across developed countries, including the UK, US and Canada.

In December, the price of goods and services leapt to 7% in the US, 4.8% in Canada and 5.5% in the UK, where it reached a 30-year high.

Transportation constraints, disruptions to business operations and difficulty in obtaining raw materials have all bumped up costs for production and shipment, which in turn have resulted in higher prices for consumers, the US Department of Justice (DOJ) says in a February 17 statement.

But the DOJ adds companies may, in certain instances, be using these disruptions as a cover for “collusive schemes”.

In a bid to tackle this potential threat, the DOJ’s antitrust division says it has created a working group alongside the UK Competition and Markets Authority (CMA), the Australian Competition and Consumer Commission, the Canadian Competition Bureau and the New Zealand Commerce Commission.

They are expected to meet regularly to develop and share intelligence, as they work to detect and investigate suspected anti-competitive behaviour and collusion.

“ While price rises can be legitimate, the CMA would be concerned if collusive anti-competitive practices are contributing to these rises or preventing prices from coming down,” says UK Competition and Markets Authority (CMA), Michael Grenfell, executive director of enforcement at the UK’s competition regulator.

Kathryn Hellings, a Washington DC-based partner at law firm Hogan Lovells – who spent more than a decade as a prosecutor on international criminal investigations at the DOJ – says the remit of the US government’s anti-collusion push will likely be “broad” covering all industries.

“That being said, critical consumer areas are likely to see greater enforcement activity. For example, food has been a major issue in US: whether it be meat packers, or grocery stores, there have been a lot of complaints about inflation and pricing,” she tells GTR.

She says the DOJ may also take a close look at activities in the shipping industry.

“I imagine they will take a deeper dive in sectors where they see a huge, steep increase in inflation. There are industries that are integral to the supply chain which they will keep an eye on, as well as ones which have faced scrutiny in the past. The shipping industry is, of course, a good example of that.”

As reported by GTR in September, regulators in the US and Australia have indicated they are monitoring price surges in the shipping sector.

Meanwhile, counterparties from the US, Europe and China also met at a summit in September to discuss competition issues related to the shipping industry.

“The performance of ocean carriers in meeting historic demand for their services and the unusually high costs to move ocean containers are of interest and concern to regulators, legislators, and the public globally,” said Federal Maritime Commission chairman Daniel Maffei, speaking at the event.

 

Penalties?

For now, the UK’s competition regulator says it is yet to open an investigation into any business.

The CMA requires evidence that companies are breaching competition law before it can launch an inquiry, and to date, it is yet to obtain evidence of any potential violation.

Nonetheless, for any firm found guilty of colluding to drive up prices, the penalties could prove costly.

In the UK, such illicit conduct could lead to fines of up to 10% of global turnover, disqualification of directors and in some cases criminal prosecution.

Hellings says the bar to open an investigation in the US is “frankly quite low” – and while proving collusion can be difficult, investigators at the DOJ have a range of methods they can use to root out illicit actors, including the use of economic data or pricing trends in various industries.

In other instances, they might rely on information provided by whistleblowers, or buying companies in related supply chains who feel they have been sold products at an artificially inflated price.

US companies found guilty can face “steep penalties”, Hellings tells GTR. Corporate fines can sometimes exceed US$100mn, while prison sentences of up to 10 years are possible.

The new working group builds on a pre-existing alliance between the five countries agreed in late 2020, when their competition authorities signed a framework agreement aimed at tackling cross border anti-competitive activity.