Antitrust Whistleblowers Could Receive Payoffs

Employees who report their companies for price-fixing should be rewarded with large cash payments, a current and a former antitrust official proposed on Tuesday.

Under current law, both United States and the European Union give companies amnesty from fines or prosecution if they are the first participant in a cartel to blow the whistle. Officials say it has been an effective tool to win companies' cooperation because they fear other participants in the cartel might talk first.

Price-fixing companies face fines that in recent years have run into hundred of millions of euros, and in the United States they can also face long prison terms.

Vivek Ghosal, an economics professor at the George Institute of Technology who was once an economist at the U.S. Justice Department, said governments should go further.

"If companies are colluding, you want to offer as many incentives for somebody to defect and squeal as possible. This is taking it a step further by saying: just pay the guy for information," Ghosal said at an antitrust conference celebrating 50 years of the European Union's founding Treaty of Rome.

He said that individual whistle-blowers could get a percentage of the fines. He said that the policy would have to be widely publicised with clear rules.

U.S. Federal Trade Commissioner William Kovacic publicly endorsed the approach, which had written about before joining the government.

"I think it would be a good idea to do this," he said. Although he did not expect the U.S. to adopt it soon, Kovacic predicted that with around 100 competition agencies around the world "sooner or later someone is going to try this."

And if it works, Kovacic said other jurisdictions would likely follow suit as they have with amnesties.

Ghosal said that the rewards would have to be large for the plan to work.

"Typically, whistleblowers can never go back and work for the same company. This guarantees they can have a nice financial reward."

Another former Justice Department official, William Kolasky, said his law firm, WilmerHale, is pursuing a closely related approach. One of his firm's clients, Richard Miller, blew the whistle on bid rigging by a firm constructing a waste water treatment plant in Egypt, which was paid for by the U.S. Agency for International Development.

The case was prosecuted criminally by the Justice Department antitrust division, with no reward to the whistleblower. The Justice civil division brought a separate non-criminal suit and earlier this year won a damages award worth $103 million.

Kolasky said that under the law Miller may be entitled to a bounty of up to 25 percent of the government's recovery, plus attorneys' fees. The whistleblower is also supposed to be protected from retaliation, but Ghosal said the reality can be different.

Ghosal said a reward of that magnitude "is a nice retirement for someone who cannot find another job."