Dear Readers,
Until recently, global supply chain issues have not typically penetrated the popular consciousness. This has changed in recent years and months. Remarkably, supply chains and logistics have become a hot-button topic in media and political circles.
Prominent examples include the hampered launch of Sony’s PlayStation 5; the global chip shortage hindering everything from electronics to automobile production; shipping to and from the UK being frustrated by Brexit-related frictions; labor instability in road, rail and shipping; traffic backlogs at transportation choke points such as the Suez canal; shutdowns due to COVID-19 outbreaks in key outsourced manufacturing facilities in Asia; the fallout from the conflict in Ukraine; and countless interrelated issues. These disruptions to the supply chain are blamed for rampant inflation, reduced economic output, and wealth disparity worldwide.
To state the obvious, supply chains have become a burning political, economic and social question. The relevant problems derive, ultimately, from a combination of evolving global trade patterns, the movement from physical sales to e-commerce, and the shifting tectonic plates of geopolitics and public health. Against this complex backdrop, the enforcement of antirust rules is but one of many tools that public authorities (and private parties) can leverage to alleviate the perceived economic pain. Yet it is a key part of the puzzle. Indeed, the genesis of antitrust lies in transportation, specifically the enforcement of the Sherman Antitrust Act of 1890 against the railway “trusts” that gave the Act its name. European competition law and rules in various other jurisdictions followed a similar pattern.
In light of this history, the pieces in this Chronicle address the potential for antitrust enforcement to alleviate these pressing issues, while also being cognizant of the inherent limitations of a single policy tool (such as antitrust) to act as a panacea for what is ultimately an infinitely complex problem. The authors tackle it from a variety of perspectives, each of which offers a unique insight.
As Adam L. Hudes points out, competition authorities across the world have publicly expressed concerns that certain businesses are taking advantage of supply chain disruptions to engage in collusion and other forms of anticompetitive behavior. This builds on a relatively rich history of enforcement (in sectors such as freight forwarding, air cargo, ocean shipping, and other related areas). This will continue, perhaps with greater vigor in the current context. Yet the same enforcement dilemma remains: what is the role of antitrust? Specifically, how can authorities distinguish between price increases due to epistemic macroeconomic shocks and those due to collusion and/or abuses of dominance?
Another perceptive piece by Ramsi A. Woodcock acknowledges that supply chains are fundamental to antitrust because no firm should be permitted to exclude competitors by denying them access to inputs. But it does not follow that antitrust can effectively be used to reduce inflation or redistribute wealth between different levels in a supply chain. It is impossible to introduce competitive pricing to every link in a given supply chain: supply chains can be endlessly subdivided, and a firm’s decision not to source every component of its final offer separately would shut down markets for separate components. The piece concludes that policymakers would be better off using other instruments such as price controls and taxation to address inflation and wealth inequality.
In antitrust parlance, supply chain-related issues have typically been dealt with under the rubric of “Vertical Restraints” (i.e. agreements between economic actors at different levels of the economy, typically input producers, manufacturers, distributors and retailers). Charlotte Breuvart & Henry de la Barre address recent proposed reforms by the European Commission in its draft revised Vertical Block Exemption Regulation and accompanying Guidelines on Vertical Restraints, issued in July 2021. In light of public feedback, which was largely critical of the proposals, the Commission returned to the drawing board. This timely article compares the existing rules with the European Commission’s new proposals, which are expected to enter into force this June.
As noted, the automotive industry is one of the sectors that has been most affected by supply chain friction in recent years. Drawing on his experience, Sheldon Klein elucidates how the automotive supply chain is particularly complex, distinctive and susceptible to allegations of bid-rigging conspiracies. To mitigate risk, U.S, auto manufacturers have added antitrust specific provisions to their purchasing terms and conditions to better protect themselves against such conspiracies. Different companies have adopted distinct approaches, each which may be imperfect, but provide buyers with meaningful advantages vis-à-vis their suppliers.
Then, there is the elephant in the room: Supply chain shocks were in the offing even before the pandemic. But as Zach Terwilliger, Craig Seebald & Evan Seeder note, this looming threat was catalyzed by COVID-19. There is much speculation as to exactly when and under what theory of harm regulators and private parties will seek to use antitrust remedies for alleged misconduct in this new context. As the authors note, antitrust cases alleging conspiracies to restrict supply and increase prices have become increasingly common in this new backdrop. All is to play for.
In sum, revolutionary changes in the functioning of supply chains at the local, regional and global levels are afoot. Antitrust enforcement is one of the key levers (among many) that will be used by both public and private actors to remedy perceived problems as the global economy undergoes several fundamental evolutions simultaneously. This set of articles represents the reflections of key thinkers and practitioners dealing with these issues in real time.
As always, thank you to our great panel of authors.
Sincerely,
CPI Team
