DOJ to Collusive Price Gougers Exploiting Supply Disruptions: We Will Prosecute You

The U.S. Department of Justice (DOJ) announced an initiative on Feb. 17, 2022, to investigate and prosecute individuals and businesses that engage in collusive schemes relating to supply chain disruptions. Seeking to protect American consumers from a potential spate of illegal pricing, the DOJ's Antitrust Division and the FBI will be targeting for prosecution "those who seek to exploit supply chain disruption for their own illicit gain."

Initiative Highlights and Background

According to the initiative, businesses in a wide swath of supply chain-related industries are on notice that their conduct will be scrutinized for anticompetitive activities. Several examples of criminal antitrust offenses were identified: price fixing, bid rigging, market allocation agreements and other anticompetitive behavior.

The announcement of the criminal enforcement initiative constitutes an acknowledgment that the global economic ravages of the COVID-19 pandemic – labor shortages, limitations in transportation, disruption of business operations, challenges in securing raw materials and equipment – are expected to continue across a range of industries and may subject consumers to illegal overcharges "under the guise of supply chain disruptions."

To underscore the seriousness of its mission, the DOJ is making known that it will "prioritiz[e] any existing investigations where competitors may be exploiting supply chain disruptions for illicit profit." Industries particularly affected by supply disruptions are to fall under the watchful eye of DOJ investigators, who are expected to investigate collusion proactively. In light of the expansive reach of the disruption, a working group has been formed by the Antitrust Division to "focus[] on global supply chain collusion" with its global partners in Australia, Canada, New Zealand and the United Kingdom.

The initiative is the most recent undertaking by the federal government directed at supply chain disruptions caused by the pandemic. In June 2021, the Biden Administration formed a White House task force to "address supply and demand mismatches that emerged in several sectors." In addition, the Antitrust Division entered into an memorandum of understanding (MOU) with the Federal Maritime Commission to collaborate and redouble their efforts to enforce antitrust laws and Shipping Act protections applicable to the maritime industry. (See Holland & Knight's previous alerts, "New Presidential Executive Order Targets Maritime Industry and Ocean Carriers," July 12, 2021, and "Federal Maritime Commission Continues to Grapple with Detention and Demurrage Issues," Feb. 7, 2022.)

Takeaways and Considerations

The press release does not single out specific supply chain industries. That is an indication that the areas of intended scrutiny are expected to be far-reaching. They will continue to include cooperating on ocean shipping activities subject to the Shipping Act, and are expected to also extend to segments across the supply chain, such as inland trucking, warehousing and the provision of intermodal equipment, among others.

With its latest salvo, the DOJ has made clear that it will not hesitate to use all the weapons in its enforcement arsenal to hold accountable those who would collude to illegally profit from the pandemic. 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 counterparties.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.