On 18 February 2022, the Australia Consumer and Competition Commission (ACCC) announced that it had joined forces with its counterparts in the US, UK, Canada and New Zealand to form a new 'five eyes' working group to prevent anti-competitive conduct in the global supply chain. Soon after this announcement, the ACCC also listed the global and domestic supply chain sector as one of its enforcement priorities for 2022/23.

Both announcements come off the back of some intense criticism over the past 12-18 months of stevedores and shipping lines from shippers, importers and freight forwarding groups. They argue that stevedores and shipping lines are taking advantage of the rising demand for their services as a result of the COVID-19 pandemic by lifting freight rates beyond market dictated levels. The effect of this is said to be higher prices for consumers, another key concern for the ACCC. 

In this article, we look at the lead-up to these announcements by the ACCC and the focus of this new working group. We also provide those who may be concerned or otherwise wish to review their business operations in light of these announcements with suggestions on what should be done to avoid becoming the subject of competition enforcement action.

Background to the announcements

Since the commencement of the COVID-19 pandemic, the global container freight supply chain has been under enormous pressure. Pandemic-induced lockdowns, border closures and travel restrictions have seen a demand shift away from services such as recreation, hospitality and travel towards manufactured goods. This has led to a huge increase in demand for containerised cargo and caused extreme congestion in the global supply chain. Adding insult to injury, government-imposed health measures and intermittent COVID-19 outbreaks at port operations have caused ports to shut down and required infected workers to isolate for periods of time.

As a result of this disruption and imbalance in the demand and supply of shipping services, freight rates have risen and extensive delays have been experienced to levels never seen before. According to data from S&P Global Platts, freight rates in September last year were seven times higher than they were a little over a year ago. It is these surging freight rates that have caused controversy within the industry with shipper, importer and freight forwarding groups arguing that increased freight levels are evidence that stevedores and shipping lines are taking advantage of current demand levels beyond what should be allowable. This, they say, is also evidenced by large shipping lines' investments in vertical integration which are said to be pushing out third party freight forwarders and leaving exporters and importers at their mercy as 'price takers'. On the other hand, shipping line bodies consider that the increases in freight charges are a result of basic demand/supply economics and that competition in the market remains robust.

In response to the above, late last year the ACCC released its annual 'Container Stevedoring Monitoring Report' which was wider in scope than previous years, in order to deal with these raising concerns. In this report, the ACCC found that raising freight charges and stevedoring profits were "largely due [to] the COVID-19 pandemic driving a significant, and unexpected, surge in throughput" and that "at current level of landside charges, stevedores [did] not appear to be earning excessive returns."

The 'five eyes' working group

Notwithstanding its general findings, the ACCC will continue to keep an eye on domestic and global supply chains, as evidenced by these recent announcements. Globally speaking, the ACCC will work with its counterparts in the US Department of Justice and Federal Bureau of Investigation, the UK Competition and Markets Authority, the Canadian Competition Bureau and the New Zealand Commerce Commission, who, not surprisingly, have their own concerns around the competitiveness within the global supply chain and have even recently prosecuted operators in the industry. In New Zealand, for example, the  Commerce Commission recently took action for alleged cartel conduct against two international freight forwarding companies and four associated individuals.

The five eyes working group aims to detect similar anti-competitive behaviour in the market, such as collusion and exclusive arrangements, through information sharing and other means. In announcing the working group, ACCC Chairperson, Rod Sims said, "COVID-19 has caused the supply chain disruptions the world is currently experiencing, but the purpose of this working group is to detect any attempts by businesses to use these conditions as a cover to work together and fix prices." Given the nature of the global supply chain, global partnerships allow for better detection and enforcement of these practices.

Ways to prepare for the 'five eyes'?

So what can you do to prepare and avoid the eyes of 'the five'? Some of our suggestions include:

  • review your compliance policies  -  undertake an internal review of your business' competition compliance policies and sales team training programs in all relevant jurisdictions. This is to ensure that your policies and training are up to date and proactively deter or detect the kind of anti-competitive practices that the 'five eyes' will be looking for, in particular, price fixing, market sharing and overly inflated pricing
  • review local advice from the local authority  -  if your business operates across multiple jurisdictions, particularly one of the 'five eyes' jurisdictions, it is important that your practices are reviewed against the requirements of each such jurisdiction, as the requirements in one may vary from the requirements in another
  • make changes, if necessary  - following this review, make any changes to your business' compliance policies or training, as required
  • training  -  ensure you are conducting regular compliance training sessions on how to properly manage and identify anti-competitive behaviour across the jurisdictions in which you operate and sales training in compliant sales and pricing practices.

Final word

The recent announcements by the ACCC are an indication that it remains concerned that some businesses are using the COVID-19 pandemic as a cover to engage in anti-competitive behaviour. As a result, the global and domestic supply chain sector will be at the centre of the ACCC's attention for the year ahead and until global supply chains return to a 'new normal'.

Further, the ACCC and its counterparts' abilities to detect and enforce anti-competitive and illegal conduct has also become easier through the 'five eyes' working group.

So, if you are in any way concerned with what this might mean for your business or about any of your policies or procedures in any of these jurisdictions, now is the time to act.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.