The U.S. Department of Justice is now targeting a wider swath of transportation companies that it deems may be using supply chain disruption to gouge customers
The initiative, which DOJ announced Thursday, broadens the scope of the Biden administration’s heightened scrutiny of anticompetitive behavior in various industry segments, including transportation.
“The lingering challenge of supply chain disruptions from the COVID-19 pandemic has created an opportunity for criminals to fix prices and overcharge customers,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “The FBI and our law enforcement partners will continue to collaborate and investigate schemes that violate our antitrust laws and stifle our economic recovery.”
As part of the initiative, DOJ’s Antitrust Division is prioritizing existing investigations where competitors may be exploiting supply chain disruptions for profit and is “undertaking measures to proactively investigate collusion in industries particularly affected” by supply chain disruptions, the agency warned.
“For those who seek to exploit supply chain disruptions for their own illicit gain, the Antitrust Division, along with the FBI, will investigate and prosecute criminal violations of the antitrust laws, including agreements between individuals and businesses to fix prices or wages, rig bids or allocate markets.”
Up to now, DOJ’s stepped-up oversight of anticompetitive behavior in the transportation sector has focused on the maritime industry and railroads, where there has been evidence that the relatively few players have wielded their market power to raise rates.
In July, DOJ and the Federal Maritime Commission signed a first-time agreement to sharpen economic oversight of foreign ocean carriers serving in the U.S. international container trades. The agreement came days after President Joe Biden signed an executive order aimed at curbing potential anticompetitive behavior among 72 industries, including among ocean carriers and freight railroads.
But Thursday’s announcement should now put companies involved with trucking, warehousing, 3PLs and last-mile delivery on notice as well, according to one trade expert.
“Certainly the focus here is on other elements of the supply chain that haven’t gotten as much attention as ocean carriers and marine terminals but are needed to get cargo to and from inland destinations,” Gerald Morrissey, a partner with the law firm Holland & Knight, told FreightWaves.
“This is really saying that any company in the supply chain, particularly those that are not subject to some form of antitrust immunity [such as ocean carriers and marine terminals] could be in the crosshairs for potential complaints by customers or competitors with this increased focus from DOJ.”
As part of the initiative, the Antitrust Division has formed a working group with the Australian Competition and Consumer Commission, the Canadian Competition Bureau, the New Zealand Commerce Commission, and the United Kingdom Competition and Markets Authority, focusing on collusion in global supply chains.
“The working group is developing and sharing intelligence, utilizing existing international cooperation tools, to detect and combat collusive schemes,” DOJ stated.
kingspointer
The entities discussing the high freight rates conveniently ignore the reality of the economics in the shipping industry going back over the last couple of decades. The consolidation of shipping lines into the vessel sharing operating agreements primarily occurred due to the number of lines that went out of business and the need for approaches that would maintain reasonable business models for the remaining enterprises. The current array of beneficial cargo owners complaining about high freight rates has long forgotten the years in which they were able to ship a 20-foot container in the trans-pacific trade for less than $1,000 per unit. They have long forgotten their penchant for ignoring legally-binding volume and service contracts they entered into with the shipping lines because they could. The threat of retribution in the next contract cycles against lines that dared to take legal action was enough to prevent any efforts to collect money due. In those days, the beneficial cargo owners could care less that the lines were not able to pay their bills. I heard responses of “well, that’s business” far too often. Meanwhile, shipping lines went out of business and were snapped up for pennies on the dollar.
The shippers ignored the warnings that low rates, ship-building strategies of shipping lines driven by efforts to address burgeoning slot costs, and chasing market shares would eventually result in having less competition from which to choose. Growing demand and less supply equal upward cost. A great deal of attention by actions of all the stakeholders in the supply chain needs to come about in order to address the reasons for our current congestion issues. Attention by agencies such as the FMC, FBI, and DOJ need to go much farther than scrutiny on just the shipping lines. Collusion and unlawful price controls can be found in many corners.
John Bryden
Certainly hope the Canadian participants can learn how to prosecute this type of behavior from their American counterparts. Way too deferential to shady business practices in this country.
DS
Where was this division when brokers were paying carriers .50 cpm during COVID or for years back when carriers were struggling to make 1.50 a mile?
Jim Davis
That didn’t effect the economy as a whole and raise inflation and the cost of goods like these $5 per mile people are quoting.
Opal Lawrence
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