Five Eyes competition watchdogs to combine efforts against supply chain price hikes

The new Five Eyes initiative comes after ACCC chair Rod Sims conceded that his agency's powers are quite limited when it comes to preventing price hikes for tech products and beyond.

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The competition regulators of Five Eye countries -- Australia, Canada, New Zealand, the UK, and the US -- have joined together to create a new working group focused on stopping collusion that has arisen in global supply chains from pandemic-induced disruptions.

Six competition watchdogs from the Five Eyes countries will form the working group, with two coming from the US. They are the Australian Competition and Consumer Commission (ACCC), Canadian Competition Bureau, NZ Commerce Commission, UK Competition and Markets Authority (CMA), and US Department of Justice and Federal Bureau of Investigation.  

The intelligence-sharing initiative comes in response to freight rates on major global trade routes being around seven times higher than prior to the pandemic, the ACCC said. Beyond the working group's concerns, industry analysts have also stated that semiconductor prices are expected to continue being high for 2022 with both the chip shortage and pandemic still ongoing.

The working group members will conduct intelligence sharing as part of efforts to detect behaviour that restricts or distorts competition, such as exclusionary arrangements by firms with market power.

"The global freight supply chain is a complex network involving many jurisdictions, so naturally detecting anti-competitive conduct requires strong international partnerships," ACCC Chair 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."

In the UK, illegal supply chain conduct found by the working group could lead to fines of up to 10% of global turnover, disqualification of directors, and in some cases criminal prosecution, the CMA said.

The initiative's announcement follows Sims telling Australian senators yesterday that his agency's scope of powers, at the domestic level, are quite limited at least when it comes to stopping the price hikes of products.

"Our role is pretty much exclusively 'are companies explaining price rises based on misleading information?' So the essence of [Australian] consumer law is don't mislead. We have no generalised power if people are pricing excessively," Sims told Senate estimates.

He explained that the ACCC can only intervene when an entity provides a misleading explanation for why certain products have price increases.

Sims added that so long as he remained at the ACCC's helm, the agency would be hesitant to push for divestment laws and excess profit taxes to address competition and consumer issues.

"Once you've got [divestment] law, people are going to call on you to use it all the time, in numerous sectors, and it's such a big stick. I just have general philosophical concern about really, really big sticks and what that opens up," the ACCC chair said, when responding to senator questions about the high concentration of power held by a small handful of tech giants.

"[For] tax systems that in some part would target excess profits -- it is a lot easier in the resource industry because you've got a different philosophical approach to the limited resources in the ground. Once you do it for companies that just have worked their way to success, it is a fairly big stick again," Sim added.

While Sims has been hesitant to call for companies like Meta, formerly Facebook, to divest subsidiaries, regulators in the US have taken a different view. The US Federal Trade Commission (FTC) last year attempted to slap Meta with anti-trust penalties, including forcing the social networking giant to divest Instagram and WhatsApp, although that effort was eventually struck down by federal courts.

Instead of calling for divestiture or more taxes, Sims said the ACCC wants more "upfront rules" dealing with the extreme concentration of power in the digital platforms industry as the current laws are not sufficient.

"We probably need upfront rules to deal with some of that, just like we have upfront rules in telecommunications. We have it in energy, and as I understand it, although it's not my sector, we have a bit in financial markets," Sims said.

"I think the level of concentration there is so strong that you won't be able to deal with it via existing laws, you'll be chasing your tail forever."

Sims, who has held the ACCC chair mantle for over a decade, is set to leave the post next month. He will be replaced by Gina Cass-Gottlieb, a litigator who currently heads Gilbert + Tobin's competition and regulation practice. 

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