With consumer prices increasing across the economy, the U.S. Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI) announced on February 17, 2022, a new joint initiative designed to identify and prosecute companies and executives who try to exploit the global supply chain disruptions caused by the COVID-19 pandemic in order to fix prices and harm consumers. The announcement by DOJ and FBI was made in coordination with a new global working group of competition enforcers from the United Kingdom, Canada, Australia and New Zealand, designed to put companies on notice that using legitimate supply chain challenges as a cover for illegal collusion will “face the full force of the law.”
The new DOJ and FBI supply chain initiative comes at a time when DOJ has sought a significant increase in funding for corporate criminal enforcement efforts. On March 3, 2022, in a speech at the ABA White Collar Conference, Attorney General Merrick Garland announced that DOJ is seeking funding to hire 120 additional attorneys and 900 FBI agents to support white collar criminal investigations and prosecutions such as antitrust crimes. This significant increase in enforcement resources signals, AG Garland noted, that “enforcement activity will only accelerate as we come out of the pandemic.” Accordingly, companies considering price increases to counter the effects of supply chain disruptions, especially firms with multinational sales and operations, should plan for enhanced antitrust scrutiny and focus on antitrust law compliance.
The “Great Supply Chain Disruption”
The COVID-19 pandemic has taken a huge toll on the international supply chain for goods and materials. Throughout the world and at every point in the supply chain — including manufacturing plants, air and sea freight, trucking, warehouses, wholesalers and retailers — companies have seen significant new constraints and increasing costs in the movement of goods and materials. In part because of severe shortages of goods and labor in the supply chain (coupled with booming consumer demand), consumer prices have surged recently.
The DOJ Warns Companies About Collusion
In this context of extraordinary price inflation, the Antitrust Division has put companies on notice that it intends to focus on bad actors who exploit the supply chain issues faced by economies across the globe in order to violate the antitrust laws. DOJ notes that it will focus on a variety of industries “particularly affected” by “transportation constraints, disruptions to routine business operations and difficulty in obtaining raw materials… ranging from agriculture to health care.”
Preparing for Extra Antitrust Scrutiny
With the new global initiative, DOJ and FBI have clearly set out their intent to “investigate schemes that violate our antitrust laws and stifle our economic recovery.” The enforcement agencies acknowledge, however, that “many individuals and businesses across various sectors in the economy have responded and will continue to respond to supply chain disruptions caused by the pandemic with laudable ingenuity — bringing goods to communities in need, expanding existing capacity and developing products and services to meet new needs.” Indeed, the antitrust laws are not intended to limit a suppliers’ unilateral response to market forces like scarcity.
But companies that pass through increased overhead costs because of genuine supply chain disruptions may still be swept up in the new initiative in an enforcement environment where U.S. antitrust enforcers have been encouraged to investigate whether antitrust violations are causing increased inflation across the economy.
For companies contemplating price increases (especially in markets across the globe), DOJ’s initiative places a premium on carefully documenting the nature and effect of supply chain disruptions and attendant cost increases, as well as heightened emphasis on antitrust risk assessment and robust antitrust compliance programs.
The antitrust laws are nuanced and complex, and their application to particular business situations is a fact-specific inquiry. Businesses concerned about how recent developments will impact their risk of violating the antitrust laws are strongly advised to consult with legal counsel.