What’s Really Behind Those High Prices – Supply Shortage or Unlawful Collusion? DOJ Launches New Probe into Collusion in Supply Chain

At a time when everyone -- from automotive OEMs trying to obtain critical computer chips to consumers purchasing new appliances -- is frustrated by supply chain disruptions, the Justice Department is the latest federal partner to step into the fray to address those problems. Yesterday the Antitrust Division and the Federal Bureau of Investigation announced the formation of a joint initiative to deter, detect, and prosecute illegal collusion under the guise of global supply chain disruptions.

While noting that this unprecedented time of resource constraints has brought out ingenuity and expansion by many individuals and businesses, the announcement took aim at those who may exploit the supply chain crisis and collude to overcharge consumers, rig bids, or allocate markets or workers. The Antitrust Division is prioritizing existing investigations where “competitors may be exploiting supply chain disruptions for illicit profit.”

Promising collaboration between the agencies, the announcement stated that the Division will investigate potential antitrust crimes in those industries that are “particularly affected by supply disruptions” without identifying specific ones. And this initiative is not limited to the U.S. The Antitrust Division established a working group with the competition agencies in Canada, Australia, New Zealand, and the UK to share information and better detect anticompetitive activity. It also invited any member of the public who suspects illegal activity to contact the government.

It is important to bear in mind that shortages (e.g., of key components or transportation services) can lead to higher prices based on legitimate market forces. It is not illegal for a company to unilaterally raise rates in the face of increasing demand. Nor in many cases should companies be deterred from collaborating with competitors to more efficiently utilize existing resources, or to pool their purchasing needs to obtain better prices or more timely service, all with appropriate antitrust advice and guardrails. The recent announcement is not aimed at such procompetitive activities, but focuses on those who seek to use current turmoil in the marketplace to conceal illegal collusion. However, given the additional scrutiny, companies should ensure that they document the unilateral decision-making process whenever adjusting business practices and pricing in light of supply chain disruptions.

This is not the Antitrust Division’s first initiative implicating interagency and cross-border collaboration. After launching the Procurement Collusion Strike Force in November 2019 with four other federal agencies, the strike force aimed at investigating, prosecuting, and deterring antitrust crimes in public procurements eventually expanded its footprint to six agency partners, more than 20 U.S. Attorneys’ Offices, and international competition authorities.