Whistleblowing reports on UK cartels up 18% last year

The number of whistleblowing reports to the UK’s competition regulator last year rose to its highest ever level, indicating that new protections — and financial rewards for co-operation — are driving people to call out wrongdoing.

Calls to the Competition and Markets Authority’s cartels hotline rose 18 per cent in 2018 to 556, up from 471 the previous year, according to data obtained by Thomson Reuters.

That is more than two and a half times the number reported in 2014, the year the CMA began operating after the merger of the Competition Commission and the Office of Fair Trading.

Cartels occur when businesses strike illegal deals not to compete with each other, such as by fixing prices and discounts, agreeing on which customers and areas to supply, limiting the production or supply of a product to drive up prices, or rigging contract bids.

Nicole Kar, a competition partner at the law firm Linklaters, said investigating alleged cartel activity was a “key component” of the CMA’s antitrust enforcement.

“Price fixing, bid rigging, market sharing and market allocation is all considered hardcore conduct with the biggest negative impact on consumers and typically [leads to] the largest fines or individual sanctions — most recently, director disqualification terms of two to five years — and, at least in theory, criminal consequences,” said Ms Kar.

Individuals found guilty of cartel activity can be jailed for up to five years and businesses can be fined up to 10 per cent of global turnover.

If a member of a cartel breaks ranks and reports to the CMA, he or she can escape some or all of any fines imposed, while the cartel’s past and present employees can receive immunity from prosecution or disqualification if they co-operate with the regulator.

Last year’s rise in whistleblower reports, defined as “unique contacts to the CMA’s cartels hotline”, follows the launch of the regulator’s “Cracking down on Cartels” digital campaign in 2017, which was designed to encourage witnesses to report cartel conduct.

It is not known if any whistleblowers made multiple approaches to the CMA, but the data point to a steady rise in such reports over the past five years.

Whistleblowers can be rewarded up to £100,000 for reporting cartels, with any payment depending on the value of the information and the harm done to consumers by the cartel’s existence.

Andrew Tyrie, the CMA’s chairman, said this year that he wanted greater incentives and protections for whistleblowers, arguing they are at present “inadequately compensated for the risks they incur to their livelihoods and careers, and insufficiently protected from having their identities disclosed”.

Andrew Tyrie, chairman of the Competition and Markets Authority, wants more incentives and protections for whistleblowers © Charlie Bibby/FT

Relatively few whistleblower reports lead to a formal investigation. In the 2017-18 financial year, only 15 prompted “further investigation”, according to CMA statistics, and at present it has only six live cartel cases, with one that has just concluded.

Nonetheless, competition lawyers say the CMA’s cartel work is vital to the interests of consumers on a local and national level.

In 2016 the CMA fined three water tank companies £2.7m for price fixing, rigging contract bids and dividing up customers, while in 2017 it fined six estate agents a total of £370,000 for colluding on commission rates.

Despite the CMA’s awareness campaign, many businesses remain ignorant of competition law. A 2018 survey showed that 57 per cent of respondents thought it was acceptable for competitors to agree prices to avoid losing money, while 52 per cent per cent believed it was acceptable to discuss prospective bids with rival companies so that contracts could be “shared out” over time.

Only 18 per cent realised they could get immunity from fines if they reported cartel activity, while just 17 per cent were aware that whistleblowers could be eligible for a reward.


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