Money talks… - Whistleblower Reward Programs in Public Enforcement of Competition Law

Efforts to enforce the cartel prohibition have been intensified considerably in recent years, employing mechanisms such as leniency programs, dramatically increased fines and private actions for damages. As a new entrant to the field, whistleblower-reward programs have recently been receiving considerable attention. These programs, run by competition authorities, seek to obtain inside information from individuals who have become aware of cartel activity without being more than marginally involved. First implemented in South-Korea, these programs are currently operating in other countries, including the UK and Hungary, with similar measures expected for Central and Eastern Europe, and an introduction thoroughly contemplated in the U.S.A. in 2011.

The presentation is based on a paper that examines the merits and disadvantages of whistleblower reward programs. After a brief overview of the current role of whistleblowing in the public enforcement of competition law, we review current legal and economic research about reward programs as well as international experiences to develop preliminary recommendations for a suitable design. We show that reward programs are becoming increasingly important in the public enforcement of competition law and indeed provide a promising tool for destabilising and deterring cartels. In particular, these programs can contribute to the detection of conspiracies by complementing the incentives to report under leniency programs. They should however not be viewed as a substitute for proactive detection and prevention methods, and benefits must also be offset against potential costs such as overdeterrence or reduced efficiency, particularly for companies not involved in infringements. Current evidence suggests however that these costs can generally be managed if a reward program is structured appropriately.