“Five Eyes” antitrust agencies turn their attention to the supply chain

U.S. Department of Justice is one of five international agencies probing supply chain collusion

Back in November, the White House sent a clear signal that the nine carriers and three alliances that dominate the global container shipping market were going to face increasing U.S. scrutiny.

At that time, the White House briefing noting that the three global alliances control about 80% of the global shipping market and 95% on the critical East-West trade lanes. Alliances only controlled 29% of the market as recently as 2011.

The White House noted that while the alliances between the carriers receive statutory immunity from antitrust laws, “the FMC can challenge those agreements if they ‘produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost or … substantially lessen competition.”

As of yet, the FMC has taken no such drastic. Now, though, supply chain players—including, of course, the container shipping alliances—face more scrutiny.

“FIVE EYES”

The Antitrust Division of the U.S. Department of Justice last week announced an initiative with the FBI that will prioritize any existing investigations and prioritize measures to proactively investigate collusion in industries particularly affected by supply disruptions.

The Antitrust Division will also be part of a working group set up by the competition authorities of the “Five Eyes” nations (the U.K . the U.S., Canada, Australia and New Zealand). The group will meet regularly to develop and share intelligence to detect and investigate suspected supply-chain anti-competitive behavior and collusion, using existing international cooperation tools.

The five agencies—the Antitrust Division of the U.S. Department of Justice, the U.S. Department of Justice, the Australian Competition and Consumer Commission, the Canadian Competition Bureau, the New Zealand Commerce Commission and the United Kingdom Competition and Markets Authority , the Canadian Competition Bureau, the New Zealand Commerce Commission and the United Kingdom Competition and Markets Authority—issued coordinated statements putting companies on notice that those attempting to use supply chain disruptions as a cover for illegal anti-competitive conduct, including collusion, will face the full force of the law.

None of them specifically mention the container alliances and the U.K. Competition and Markets Authority notes that to open an investigation against any business, it requires evidence that businesses may be breaching competition law.

“While the CMA has received multiple complaints from businesses about supply chains, it has yet to obtain or find evidence of potential breaches of the law,” says the agency.

TAKE AWAY

In an analysis of the DOJ statement, law firm Holland & Knight concludes: “In casting a broad net over the entire supply chain, and indicating its willingness to work with the FMC and foreign partners, the DOJ is highlighting that no business enterprise is immune from governmental scrutiny for antitrust violations—or from civil or criminal enforcement.

Under the circumstances and with a clear warning from the FBI, businesses would be well advised to review their antitrust compliance protocols, proceed cautiously and engage legal counsel before initiating discussions or entering into agreements with marketplace counter parties.”

EUROPEAN COMMISSION ASKED TO ACT

Meantime in Europe, CLECAT ( the European Association for Forwarding, Transport, Logistics and Customs Services) has asked the European Commission “to use its powers of investigation urgently to establish the degree of concentration, consolidation, coordination, and cartelization in the upstream container liner shipping services markets serving the EU, and the downstream markets for freight forwarding services.”

“In particular,” says CLECAT, “the Commission must investigate the skyrocketing rates which have led to the alliances’ forecast profits of over $200 billion during the COVID crisis despite the absence of any increase in their costs or any reason that can be attributed to the pandemic.”

CLECAT says that “the combination of these factors has enabled the carriers to cherry pick the highest volume shippers for longer term contracts and relegate the others to the spot market where they will pay multiples of the rates offered to the favored few. Linked to this discriminatory strategy, freight forwarders are being ‘disintermediated’ in the process. In the meantime, the access to container capacity, carrier schedule performance and service reliability has further dropped.”