Member Article

The Idea of Using Whistleblowers to Uncover and Combat Anticompetitive Arrangements is Spreading Ever Wider. Recently the European Commission Announced Introduction of Such a Tool.

In a press release issued on 16 March 2017, the European Commission announced that it has launched a new tool of antitrust policy. It is an anonymous channel through which individuals can notify the Commission of cartels and other anticompetitive practices. The Commission stressed that the main goal is to fight cartels, whose practices include agreeing on prices or procurement bids, keeping products off the market or unfairly excluding rivals from the market.

As Margrethe Vestager, European Commissioner for Competition, pointed out, "If people are concerned by business practices that they think are wrong, they can help put things right. Inside knowledge can be a powerful tool to help the Commission uncover cartels and other anticompetitive practices."

For some time now, potential whistleblowers have been able to call the Commission or send an email to an unencrypted address. But if they seek to protect their anonymity, they can use a new tool, following the instructions on the Commission website.

The new tool protects whistleblowers' anonymity through a specially designed encrypted messaging system that allows two-way communications. The service is run by an external service provider as an intermediary that relays only the content of the messages without forwarding any metadata (such as IP addresses or passwords) that could be used to identify the individual providing the information.

With the two-way function, the Commission can respond to messages and request clarification and details. But the whistleblower must consent to two-way communications. The user will then receive a password to log onto the system and read and respond to messages from the Commission.

The Commission primarily hopes to receive information about illegal arrangements, the circumstances and the persons involved, with respect to past, present and future planned anticompetitive practices. It cites the experiences of such jurisdictions of Denmark and Germany using the same tool.

So far the main method for uncovering prohibited arrangements has been the Commission's leniency programme and informal complaints. Anonymous whistleblowers are supposed to reinforce the Commission's effectiveness. Based on our experience, the Commission has not been very eager to follow up on anonymous tips, particularly given the time and effort required to clarify the information provided in such reports and commence actual proceedings. This has particularly been the case where the information was incomplete or unclear. There was also a lack of internal procedures for dealing with such complaints. The change may thus be regarded as a major one, but without internal procedures at the Commission for effective processing of anonymous notifications, there is no guarantee that the new tool will be truly effective. A revolutionary factor that could significantly improve the effectiveness is the use of two-way communications to supplement the information in the notification. If the whistleblower consents, the Commission will have a much easier path from notification to commencement of proceedings.

It might also be considered whether it would be worthwhile to introduce other means of protection for whistleblowers, besides anonymity. Perhaps, following other countries, a system of incentives or rewards could be considered a concept recently floated by the head of Poland's competition authority.

Marek Niechcial, president of the Office of Competition and Consumer Protection (UOKiK), returned recently to the idea of introducing whistleblowers into Polish competition law, as we reported in November 2016. At a construction industry conference, Niechcial said that UOKiK was still working on the launch of such an institution. He said that the risk to businesses entering anticompetitive agreements would rise if insiders were willing to provide such information to the regulator. He also stressed that whistleblowers must be well-protected against repercussions, and pointed to the major role of incentives, mainly monetary ones, apparently for the effectiveness of this institution.

The UK's Competition and Markets Authority recently drew attention to the existence of its own social programme for whistleblowers, which had a low level of public awareness, by launching a broad informational campaign aimed at cartels. The CMA says that it offers whistleblowers not only anonymity, but also a reward for information of up to GBP 100,000.

Many other issues related to the use of whistleblowers by competition authorities remain to be resolved in practice, such as the right of undertakings and managers to defend themselves, attorney-client privilege, conflicts with leniency programmes, and groundless reports and their consequences for regulators and businesses. In a broader perspective, Izabella Sosnowska recently discussed the issue of protection of whistleblowers, particularly under Polish law, in Rzeczpospolita daily.

We will watch with great interest how this tool functions in the practice of the European Commission. It will also be an important experiment from the perspective of the project of Poland's competition authority.