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Focus on Regulation

Individuals as Whistleblowers

Cartels are by their nature hard to uncover and regulators rely – to a large part – on appealing to companies’ wallets. Immunity and leniency policies, by which regulators offer to whistleblowing companies full immunity or discounts from fines, have been around for a long time. An increasing number of regulators have now added another instrument to their cartel enforcement toolkit: the offering of financial incentives to lure individual employees to come forward and whistleblow against their employers or former employers. By way of example, the Hungarian Competition Council provides a reward calculated as a percentage of the cartel fine imposed, with a maximum limit of HUF 50,000,000 (approximately EUR 155,000 or USD 175,000). Similarly, the Taiwan Fair Trade Commission also offers a financial reward of potentially up to 20% of the amount of fines that it recovers. The Korean Fair Trade Commission is reported to generously offer up to KRW 3 billion (approximately EUR 2.2 million or USD 2.5 million).

Financial rewards, however, can only go so far in encouraging individuals to come forward and some regulators have recognised the importance of countering the strong disincentives of whistleblowing on the individual, including distress and loss of career prospects, by offering other means of support, such as the promise of anonymity.

The UK Model

The UK Competition and Markets Authority (“CMA“) offers a reward of up to GBP 100,000 (approximately EUR 115,000 or USD 130,000) to individual whistleblowers. In addition to financial rewards, the CMA states that it makes available specially trained officers to deal with individuals coming forward so as to protect the individual’s identity from disclosure.

The financial reward offered by the CMA is arguably modest – a fact recognised by the CMA itself. Recently, there have been calls for the reward to be increased; in February of this year, Lord Tyrie (Chair of the CMA), wrote to the Secretary of State for Business, Energy, and Industrial Strategy, to advocate for offering even greater financial compensation, arguing that the current limits are unlikely to even cover the loss that a typical whistleblower would suffer as a result of losing their job.

There are also calls for stronger confidentiality safeguards. Currently anonymity in the UK is only protected by the CMA up to the moment the whistleblower becomes a witness, at which point their confidentiality is at the discretion of the UK Courts. This is an issue which may not be so easily fixed; the rights of the defence of the business under investigation may mean that the whistleblower’s identity must be revealed. However, the CMA has called for an explicit duty for the Courts to give due weight to the importance of anonymous whistleblowing for the enforcement of competition law. Whilst this would not guarantee anonymity in 100% of cases, the increased likelihood of protection combined with even greater financial compensation may well help individuals make the tough decision to blow the whistle.

The European Commission’s approach

The European Commission (“Commission“) offers the opportunity for individuals to come forward to report on cartels by email, telephone or by anonymous message. Crucially, however, the Commission does not offer a financial reward to individuals reporting on cartels.

There are no proposals to introduce financial rewards, but the Commission has proposed a Directive in April 2018 to strengthen the protection afforded to persons (both legal and natural) who report breaches of EU law. This includes breaches of EU competition law. The proposed Directive envisages minimum standards across the EU for confidentiality, protection from retaliation and sufficient reporting mechanisms, in an effort to entice individuals to come forward. The proposed Directive is still working its way through the EU legislative process and is currently being discussed in the Council of the EU.