Global supply chains continue to reel from the impact of the COVID-19 pandemic. The Biden Administration has referred to bottlenecks in the supply chain as a national crisis.1 Recent remarks from antitrust regulators foreshadow increased scrutiny of perceived anticompetitive conduct arising out of supply chain disruption. Further, the Biden Administration’s aggressive strategy to combat global corruption coupled with the inherent risks of the same posed by supply chain congestion suggest that related FCPA enforcement may also be on the horizon.
Background: Disruption to Global Supply Chains from the COVID-19 Pandemic Is Ongoing
The supply chain refers to the movement of goods and commodities from origin to customer, which involves coordination between manufacturers, shippers, transportation carriers, logistics providers, and retailers. In the early stages of the pandemic, many factories across the world were forced to shut down or reduce production. At the same time, demand for consumer goods increased dramatically as many consumers spent less on services and more on goods for their homes. This surge of demand clogged the system. In North America, for example, ports have become congested due to a shortage of dock space, lack of warehouse space, and a significant increase in inbound ships.2 The supply chain disruption is ongoing — goods remain scarce and prices are high.3 There has been an active effort on the part of the Biden administration to identify, study, and remedy supply chain vulnerabilities.4 However, unlike other pandemic-related issues, white collar regulators have been slow to announce enforcement actions relating to the supply chain crisis. This may not be the case for much longer. Recent comments from regulators along with established enforcement priorities suggest that antitrust and anticorruption enforcement actions could arise in the near term.
Antitrust Watchdogs Vocalize Concerns for Anticompetitive Conduct Relating to Supply Chains
The clearest indicia of looming enforcement actions come from antitrust regulators. In late November, the Department of Justice (DOJ) announced it filed a civil antitrust suit to block the merger of U.S. Sugar and Imperial Sugar.5 Comments from Assistant Attorney General Jonathan Kanter suggest that supply chain concerns were a consideration in the DOJ’s decision to file suit: “This deal substantially lessens competition at a time when global supply chain challenges already threaten steady access to important commodities and goods,” and the lawsuit seeks to “protect the resiliency of American domestic sugar supply.”6
Another signal of potential enforcement action are Section 6(b) studies by the Federal Trade Commission (FTC).7 Less than a week after the DOJ filed suit to block the U.S. Sugar merger, the FTC announced its intention to study supply chain disruptions to the extent “these disruptions are causing ongoing hardships for consumers and harming competition in the U.S. economy.”8 Section 6(b) of the FTC Act authorizes the FTC to engage in investigative studies that need not have a law enforcement purpose.9 The FTC may order persons or entities to answer questions under oath and produce documents.10 In its 6(b) study relating to the supply chain, the FTC ordered several large retailers, wholesalers, and goods suppliers to respond to questions and to provide internal documents regarding supply chain disruptions. FTC Chair Lina Kahn stated: “I am hopeful the FTC’s new 6(b) study will shed light on market conditions and business practices that may have worsened these disruptions or led to asymmetric effects.”
Considering both this Section 6(b) study and the DOJ’s recent comments, it appears federal agencies are evaluating whether and how anticompetitive conduct has impacted supply chain disruptions.
Disruption to the Supply Chain Poses Sizeable Risk of Corruption and Regulators Are Already on High Alert
Although less overt than signals from antitrust regulators, there are likewise indications of potential supply chain-related anticorruption enforcement. Current supply chain conditions pose a significant risk for corruption. As consumer demand increases and supply chain disruptions persist, suppliers (among others) may feel pressure to secure an advantage in moving goods by any means necessary. In addition to making anti-corruption efforts a priority in general,11 the White House recommended in a June 2021 report that several departments, including DOJ, “develop a spend plan to (1) fully-resource and staff their activities to trace strategic and critical material supply chains, investigate money laundering, corruption, links to organized crime, and human rights abuses; and (2) implement the appropriate mix of civil, criminal, and administrative enforcement actions.”12
Given increased global risk and the Biden administration’s emphasis on combatting corruption, it is not difficult to imagine that supply chain-related enforcement actions under the Foreign Corrupt Practices Act’s (FCPA’s) anti-bribery provisions may be brought in the near-term.13 The global supply chain has been a traditional backdrop for FCPA enforcement actions in the past. For example, payments to customs agents to clear products through ports or to certify products for export have been the subject of multiple FCPA enforcement actions.14 Although there has not been any express indications from DOJ or the Securities and Exchange Commission that supply-chain-related FCPA enforcement actions are forthcoming, neither agency would have to reinvent the wheel to bring such actions.
Compliance Remains Key
The COVID-19 pandemic has created significant compliance risks for businesses. Early rumblings from the Biden administration and regulators suggest that pandemic-era risks related to the supply chain, especially in the antitrust and anticorruption spaces, should be taken seriously. It is important that companies take stock of compliance measures already in place. One key consideration would be whether and how existing compliance programs protect the internal operations or personnel that are under the most pressure vis-à-vis supply chain issues. Ultimately, companies should establish or maintain compliance programs to stay on the right side of the law while weathering supply chain disruptions.
1 President Joseph Biden, Remarks by President Biden on Efforts to Address Global Transportation Supply Chain Bottlenecks (Oct. 13, 2021).
2 Peter S. Goodman, How the Supply Chain Broke, and Why it Won’t Be Fixed Anytime Soon, N.Y. Times (Oct. 31, 2021).
3 Id.
4 Exec. Order No. 14,017, 86 Fed. Reg. 11849 (2021)
5 Press Release, Department of Justice, Justice Department Sues to Block U.S. Sugar’s Proposed Acquisition of Imperial Sugar (Nov. 23, 2021).
6 Id.
7 See Press Release, Fed. Trade Comm’n, FTC Staff to Present Past Acquisitions by Large Technology Companies (Feb. 11, 2020); Press Release, FTC Sues Facebook for Illegal Monopolization (Dec. 9, 2020).
8 Press Release, Fed. Trade Comm’n, FTC Launches Inquiry into Supply Chain Disruptions (Nov. 29, 2021).
9 15 U.S.C. § 46.
10 Id.
11 Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest (June 3, 2021).
12 Exec. Office of the President, Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth 203 (June 2021).
13 15 U.S.C. § 78dd-1.
14 See Mike Koehler, The Foreign Corrupt Practices Act in a New Era 53, 97 (2014)
