Global supply chains continue to suffer from the impact of the COVID-19 pandemic. The Biden administration has called supply chain bottlenecks a national crisis.¹ Recent remarks from antitrust regulators point to increased scrutiny of perceived anti-competitive behavior resulting from supply chain disruption. In addition, the Biden administration’s aggressive strategy to tackle global corruption, coupled with the inherent risks posed by supply chain congestion, suggests that the application of the FCPA may also be in the business. horizon.

Background: The disruption of global supply chains due to the COVID-19 pandemic is ongoing

Supply chain refers to the movement of goods and goods from origin to customer, which involves coordination between manufacturers, shippers, carriers, logistics providers and retailers. In the early stages of the pandemic, many factories around the world were forced to shut down or scale back production. At the same time, the demand for consumer goods has increased dramatically as many consumers have spent less on services and more on goods for their homes. This surge in demand has blocked the system. In North America, for example, ports have become congested due to a lack of dock space, a lack of warehouse space, and a significant increase in the number of incoming ships.² The disruption of the supply chain continues – commodities remain scarce and prices high.³ The Biden administration has made active efforts to identify, investigate, and address vulnerabilities in the supply chain.⁴ However, unlike other pandemic-related issues, white-collar regulators were slow to announce enforcement actions related 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 anti-trust and anti-corruption enforcement actions may arise in the near term.

Antitrust watchdogs voice concerns over anti-competitive behavior in supply chains

The clearest clues of impending enforcement action come from antitrust regulators. At the end of November, the Ministry of Justice (DOJ) announcement he filed a civil antitrust complaint to block the merger of US Sugar and Imperial Sugar.⁵ Comments from the Deputy Attorney General Jonathan kanter suggest that supply chain issues were factored into DOJ’s decision to take action: “This deal dramatically reduces competition at a time when global supply chain challenges already threaten stable access to important commodities and goods ”and the lawsuit seeks to“ protect the resilience of America’s domestic sugar supply.⁶

The Federal Trade Commission (FTC) Section 6 (b) studies are another sign of potential enforcement action.^seven Less than a week after the DOJ filed a complaint to block the merger with US Sugar, the FTC announcement its intention to study supply chain disruptions to the extent that “these disruptions cause permanent hardship to consumers and hurt competition in the US economy.”⁸ Section 6 (b) of the FTC Act authorizes the FTC to undertake investigative studies that do not need to have a law enforcement objective.⁹ The FTC can order individuals or entities to answer questions under oath and produce documents.^ten In its 6 (b) Supply Chain Study, the FTC ordered several large retailers, wholesalers and goods suppliers to answer questions and provide internal documents regarding supply chain disruptions. President of the FTC Lina kahn said, “I hope the new FTC 6 (b) study sheds light on the market conditions and business practices that may have aggravated these disruptions or led to asymmetric effects.” “

Given both this study of Article 6 (b) and recent comments from the Department of Justice, it appears that federal agencies are assessing whether and how anti-competitive behavior has had an impact on disruption in the supply chain. ‘supply.

Supply chain disruption poses significant corruption risk and regulators are already on high alert

While less obvious than signals from antitrust regulators, there are also indications of a potential application of anti-corruption in the supply chain. Current supply chain conditions present a significant risk of corruption. As consumer demand increases and supply chain disruptions persist, suppliers (among others) may feel pressure to gain an advantage in moving goods by whatever means necessary. In addition to making anti-corruption efforts a general priority,¹¹ the White House recommended in a June 2021 report that several departments, including the DOJ, “develop a spending plan to (1) fully staff their businesses with resources and personnel to trace supply chains in strategic materials and critics, investigate money laundering, corruption, links with organizations, crime and human rights violations; and (2) implement the appropriate mix of civil, criminal and administrative enforcement measures.¹²

Given the heightened global risk and the Biden administration’s focus on anti-corruption, it is not difficult to imagine that supply chain-related enforcement actions under the provisions anti-corruption laws of the Foreign Corrupt Practices Act (FCPA) can be initiated in the short term.¹³ The global supply chain has been a traditional backdrop for FCPA enforcement actions in the past. For example, payments to customs officers for clearing products at ports or for certifying products for export have been the subject of multiple FCPA enforcement actions.¹⁴ While there has been no express indication from the DOJ or the Securities and Exchange Commission that FCPA supply chain enforcement actions are forthcoming, neither agency would have to reinvent the wheel to bring such actions.

Compliance remains the key

The COVID-19 pandemic has created significant compliance risks for companies. Early rumbles from the Biden administration and regulators suggest that supply chain pandemic risks, especially in antitrust and anti-corruption spaces, should be taken seriously. It is important for companies to take stock of the compliance measures already in place. A key consideration would be whether and how existing compliance programs protect internal operations or personnel who are most under pressure from supply chain issues. Ultimately, companies should establish or maintain compliance programs to stay on the right side of the law while resisting supply chain disruptions.

¹ President Joseph Biden, President Biden’s remarks on efforts to address bottlenecks in the global transportation supply chain (October 13, 2021).

² Peter S. Goodman, How the supply chain broke and why it won’t be fixed anytime soon, NY Times (October 31, 2021).

³ Identifier.

⁴ Exec. Order No. 14 017, 86 Fed. Reg. 11849 (2021)

⁵ Press release, Department of Justice, Department of Justice suing to block the proposed acquisition of Imperial Sugar by US Sugar (November 23, 2021).

⁶ Identifier.

^seven See Press release, Fed. Trade Comm’n, FTC Staff To Showcase Past Acquisitions Of Major Tech Companies (February 11, 2020); Press release, FTC sues Facebook for illegal monopolization (December 9, 2020).

⁸ Press release, Fed. Trade Comm’n, FTC Launches Investigation into Supply Chain Disruption (November 29, 2021).

⁹ 15 USC § 46.

^ten Identifier.

¹¹ Memorandum on Establishing the Fight Against Corruption as a Fundamental Interest of the National Security of the United States (June 3, 2021).

¹² Exec. President’s Office, Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth 203 (June 2021).

¹³ 15 USC § 78dd-1.

¹⁴ See Mike Koehler, The Foreign Corrupt Practices Act in a New Era 53, 97 (2014)