International competition law regulators send warning to supply chains against collusion

Introduction

Five international competition authorities have formed a working group to put shipping lines and logistics businesses on notice against participating in illegal collusion. The competition authorities come from the “Five Eyes” nations, which share the concern that firms may exploit supply chain disruptions as a cover for illegal anti-competitive conduct, including collusion.

Five Eyes

The Five Eyes nations are composed of the following competition authorities: the UK Competition and Markets Authority (CMA), the United States Department of Justice, the Australian Competition and Consumer Commission, the Canadian Competition Bureau and the New Zealand Commerce Commission.

The Five Eyes intelligence network is not new, with its roots stemming as far back as World War II, but co-operation in connection with competition issues is more recent, with the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (MMAC) being signed by each nation in September 2020, aimed at addressing cross-border anti-competitive activity in an increasingly global economy.

Concerns about collusion

The competition laws in each of the Five Eyes nations vary slightly, but they are underpinned by the principle that firms are prohibited from colluding in anti-competitive activities or abusing their market power, including:

• price fixing, bid rigging and other ways of agreeing not to compete or to limit competition (known as ‘cartels’); and
• abuse of a dominant market position (for example, where a business has a strong market presence and abuses that, such as by discriminating between its customers without good cause).

Global events such as the Covid-19 pandemic have led to higher freight rates and more expensive goods for consumers as a consequence. The Five Eyes nations are concerned that businesses may take advantage of higher prices and shortages to engage in anti-competitive collusion and practices that lead to other businesses and eventually consumers paying artificially higher prices for goods. It is for this reason that the five competition authorities have made co-ordinated statements aimed at deterring those attempting to use supply chain disruptions as a cover for illegal anti-competitive conduct.

Michael Grenfell, Executive Director of Enforcement at the CMA, said:

People and businesses across the world have been facing higher prices for goods and for transporting them. 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.

Consequences of collusion and anti-competitive behaviour

The warning of the Five Eyes group is that those engaging in illegal anti-competitive conduct will face the full force of the law. The UK’s sanctions for businesses found to breach competition law are extensive and include:

• fines for the businesses involved of up to 10% of their annual worldwide turnover;
• up to five years imprisonment and/or unlimited fines for individuals involved in setting up or implementing anti-competitive agreements with competitors; and
• disqualification from acting as a company director for up to 15 years.

These sanctions are in addition to any damages claims which may be brought by third parties affected by the anti-competitive behaviour and the reputational damage which is likely to be suffered by firms investigated or fined by the CMA.

It is the hope of the Five Eyes regulators that further collaboration between the competition authorities will deter businesses aiming illegally to prosper from supply chain disruption and result in more successful enforcement action against those who do.