OFT rewards for information regarding cartel activities

27 May 2008

Richard Eccles

The Office of Fair Trading (‘OFT’) announced on 29 February 2008 a new policy under which it is prepared to pay financial incentives of up to £100,000 in exchange for information which would help the OFT to identify and take action against illegal cartel activities.

The OFT considers that cartel activities, in particular agreements which include hardcore restrictions such as price-fixing and market sharing, have substantial anti-competitive effects and cause serious harm to businesses, consumers and the economy in general. As a result, cartels are subject to both criminal and civil penalties.

However, cartels are difficult to uncover due to their secretive nature. In order to detect cartels more easily, competition authorities such as the OFT have traditionally relied on leniency policies to encourage cartel participants to disclose information about cartel activities. Under the OFT’s leniency policy, individuals may be issued ‘no action’ letters which provide immunity from criminal prosecution and companies may be granted a reduction in fines or even complete immunity from fines.

Building on its leniency policy, the OFT has developed a financial reward policy to give people who have valuable ‘inside’ information about the existence of a cartel an added incentive to come forward. The OFT will ensure that any information given will be carefully safeguarded and that the identity of informants will be protected from disclosure. The new policy will be applied for an initial period of 18 months, after which the OFT will decide whether the policy should be maintained and used permanently.

Financial rewards will be granted at the OFT’s discretion and will only be paid if the information provided is accurate, verifiable and useful. The information must help detecting and investigating cartels and, in appropriate cases, lead to the criminal prosecution of individuals and to the fining of companies involved. The amount of the reward will depend on various factors:

  • the value of the information in terms of what the OFT has been able to achieve from it;

  • the amount of harm to the economy and consumers which the OFT believes the information given has helped to put a stop to and/or has helped to disclose;

  • the effort the individual has had to invest in order to give the OFT the information, and

  • the risk the individual has had to take in order to give the OFT the information.

A reward of £100,000 will only be justified in exceptional circumstances.

The OFT’s guidance clarifies that rewards will be calculated and paid at the end of the investigation. The amount of the reward will depend on the ‘ultimate value’ of the information, which can only be determined at the end of the investigation. The OFT will not be bound by any award estimate which may be given at the outset. The OFT recommends approaching them early on as old information relating to cartels operating a long time ago will be less valuable than information about recent or ongoing cartels.

The OFT’s guidance states that financial rewards will not be available to:

  • individuals who have been directly involved in the cartel that they wish to report, as they are already able to benefit from the OFT’s leniency policy. An exception however would be where the individual has a ‘relatively peripheral role’ in the cartel (this would include the situation where an employee has occasionally been asked to attend a cartel meeting but has not taken an active part in the cartel decision-making process);

  • complainants who simply report their general concerns about possible cartel activity by competing businesses, even if those concerns are supported by evidence (the policy is intended to apply exclusively to individuals with significant inside information).

Encouraging distrust amongst cartel participants can destabilise cartels as well as deter potential cartels from forming. It will therefore be interesting to see whether the prospect of financial rewards for whistleblowers, coupled with the existing leniency policy, will enable the OFT to detect cartels more effectively and whether other EU Member States will follow suit.

Source: OFT pres release 31/08 ‘OFT offers financial incentives for information regarding cartel activity’ and OFT Guidance on ‘Rewards for information about cartels’ found at www.oft.gov.uk

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