Introduction

Antitrust law prohibits any arrangements or agreements that harm competition, consumer welfare, and innovation. Cartels such as bid rigging, market-sharing or price-fixing, violate antitrust law. Due to the cartel’s harmful impact on price and product accessibility, cartel detection has become a global priority. To detect and dismantle cartels, many countries have offered leniency programmes that incentivises the cartel members and other individuals to self-report and assist in investigations. These programmes balance the interests of leniency applicants and antitrust regulators.

On 20th February 2024, the Competition Commission of India (CCI) introduced the ‘Lesser Penalty Plus’ regime, through the Competition Commission of India (Lesser Penalty) Regulations, 2024. Lesser Penalty Plus incentivises existing lesser penalty applicants to disclose information about their involvement in other cartels, resulting in reduced penalties for both the second and first cartels.

The article compares whistleblower protection in India, the EU and the US, underscoring the need for a stronger whistleblower protection framework to spur more cartel reporting and increase global cartel detection.

Lesser Penalty Plus Programme and Whistleblowers: A Winning Combination?

The new leniency regime provides an increased incentive for leniency applicants in an ongoing investigation to reveal information about unrelated cartels. If that enables the CCI to identify a new cartel, the applicants can receive a penalty reduction of up to 100% for the divulged cartel and additional 30% reduction for the ongoing investigation. Leniency programme is a tool that assists antitrust regulators detect secret cartels and deter firms from engaging in cartels. This tool is developed based on the prisoner’s dilemma, by creating mistrust among cartel members as there always exists a risk that one member might report to the regulators.

To create an effective leniency programme, it is essential to instil a genuine fear of detection, impose severe sanctions for non-cooperation, and maintain transparency. If the potential profits from cartels outweigh the fear of being caught and penalised, leniency programmes alone may not be enough to deter cartels. Thus, a strong cartel detection mechanism can be established by offering attractive financial incentives and ensuring confidentiality of the identity of whistleblowers, protecting against subsequent prosecutions. This will also allow regulators to have access to valuable insider information, armouring enforcement measures against cartels.

Whistleblower Protection in Global Antitrust Laws

Whistleblower protection is a matter of growing concern surrounding both the European Union (EU)and the United States (US). The EU and the US strive to ensure sufficient whistleblower protection, strengthening their leniency programme as a powerful deterrence against potential anti-competitive conduct, particularly cartels.

European Union (EU)

The EU prohibits cartels under Article 101 of the Treaty on the Functioning of the European Union (TFEU). It published its first Leniency Notice on non-imposition or reduction of fines in cartel cases, which later was replaced by the 2006 Leniency Notice. The Notice provided the criteria for the grant of immunity, which included submitting a corporate statement, ceasing involvement, not coercing others to participate in the cartel. Currently, in the EU, the primary protection to whistleblowers is offered by the Directive (EU) 2019/1937 (also referred as the ‘Whistleblower Protection Directive’) of the European Parliament and of the Council, which was entered into force in 2019. The Directive aims at protecting whistleblowers who report any wrongdoings within the private or public sectors. It provides minimum standards for the EU Member States’ internal regulations to protect whistleblowers. The Directive includes prohibition on different forms of retaliation, obligations of legal entities in the private and public sectors, having more than 50 workers to incorporate specific internal reporting channels and ensuring confidentiality of the whistleblowers’ identity, and responsibility of the competent authorities to handle external reporting and follow-up.

The broad definition of whistleblower, and the burden of proof placed on the person who takes detrimental measures against whistleblowers, significantly expand the scope of whistleblower protection. Further, the EC in 2017 had launched a noteworthy Anonymous Whistleblower Tool to burst secret cartels, maintaining the whistleblowers’ anonymity. The tool ensures anonymity with a secure encrypted messaging system.

Despite the initial success of the leniency programme, there was a significant drop in leniency applications since 2015. Reportedly, there were only six cartel investigations since 2020. While, there is no direct correlation between leniency programme reports and number of cartel investigations, the decline in leniency applications may indicate a broader trend of cartel behaviour or a shift in the effectiveness of antitrust enforcement. The decline can be attributed to two key factors, the 2014 Damage Directive and Leniency Inflation. The 2014 Directive intended to facilitate private actions by cartel victims, but its insufficient protection for the first leniency applicant from subsequent damage claims inadvertently discouraged leniency applications. In addition, the leniency inflation, with its increased number and magnitude of reductions granted to cartel members, even those who apply later in investigations, diminished the incentives for firms to rush to apply or report first.

To enhance whistleblower protection, the European Commission (EC) in 2022 published a guidance on the leniency policy and practice to revitalise the leniency programme, bringing more clarity and encouraging applicants to come forward and report. The guidance through FAQs intends to bring transparency and predictability regarding enhancement of existing protection for applicants, also involving protection from follow-on damage claims, discussion on potential application on an anonymity basis (without providing any identifying details), and fine-reduction assessment.

Moreover in 2021-22, the European Committee on Legal Co-operating (CDCJ) conducted an evaluation of the impact of the Recommendation CM/Rec(2014) of the Committee of Ministers to Member States on the protection of whistleblowers. Through its report, the CDCJ analysed the progress made in whistleblower protection frameworks, identified good practices, reviewed relevant jurisprudence, and proposed reforms.

OECD Competition Trends 2024 Report highlighted an increasing trend of leniency applications across all the regions, including the EU, for the first time since 2015. This resurgence began in the EU in 2021, continuing into 2022.

United States (US)

The US Department of Justice (DOJ) pioneered the concept of leniency in 1978 to combat cartels. The original policy had several limitations including its strict seven-point qualification requirements of qualifying for leniency as it required strict compliance with seven requirements and leniency was only available in case the DOJ had not yet initiated an investigation.

Nevertheless, the criminal penalties under the Sherman Act of 1890 are severe, including a maximum jail term of 10 years and a fine of up to $ 100 million. This, combined with a robust enforcement environment, makes it increasingly difficult for cartels to go undetected.

The US Antitrust Division (Division) offers two types of leniency programme: Type A for pre-investigation defection, and Type B for post-investigation defection by cartel members. Since 2019, the Division has emphasised compliance programmes and prompt self-reporting. Effective compliance can now influence the kind of resolution mechanism that a firm receives. This encourages firms to invest in compliance and self-report promptly, even when they do not win leniency. The Division requires prompt self-reporting when an authoritative representative of the applicant for legal matters is informed of the misconduct, but does not require immediate withdrawal from the conspiracy. This seeks to incentivise defection from ongoing conspiracies, while allowing the Division to gather evidence.

Cartel members risk defection by fellow cartel members seeking leniency, as well as by current or former employees and other individuals. The Division’s Individual Leniency Programme, while less known than the Corporate Leniency Programme, offers the same extensive protections to eligible individuals against prosecutions. This enables witnesses or participants in an antitrust violation, to report without any fear of criminal charges, provided they meet certain conditions.

The newly introduced Criminal Antitrust Anti-Retaliation Act (CAARA),2019, which was signed into law in 2020, provides substantial protections for whistleblowers by prohibiting employers’ retaliation against those who assist in criminal antitrust investigations. Its scope of protection is broad and extends to various individuals, employees, agents, contractors and subcontractors. The DOJ, through its FAQs, further encourages individuals having knowledge but no personal involvement to come forward and report wrongdoings. In case the whistleblowers are targeted, they can file a complaint with the Occupational Safety and Health Administration followed by subsequent legal action.

Furthermore, the Antitrust Criminal Penalty Enhancement and Reform Permanent Extension Act, in 2020, made the provisions under the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA), providing greater incentives for firms to self-report and cooperate with the DOJ permanent. The ACPERA reinforces the policy of granting amnesty to the first firm or individual reporting a criminal antitrust conspiracy by limiting follow-on civil liabilities. Once the defendants meet the reporting and cooperation requirements, the ACPERA limits their liability to ‘actual damages’. This mitigates the fear of civil liability that deters cooperation.

In sum, the Individual Leniency Programme, CAARA and ACPERA collectively safeguard potential whistleblowers from their employers’ retaliation and prosecution by the Division. Even though there is no financial incentive being offered to antitrust whistleblowers under the Sherman Act, the federal government can recover damages under the Clayton Act and the Federal Claims Act as a victim of an antitrust conspiracy.

A Dive into the Current Whistleblower Protection Framework in India

India has established a framework for the protection of whistleblowers, primarily through the Whistle Blowers Protection Act, 2011. This legislation aims to facilitate the reporting of corruption and misuse of power by public servants while safeguarding whistleblowers from retaliation. The Act defines a whistleblower in Section 2(c) defines ‘complainant’ as, “any person who makes a complaint relating to disclosure under this Act.” To report such misconduct, whistleblowers can submit disclosures in writing to the Central Vigilance Commission (as the appropriate authority), as outlined in Section 4.

A significant feature of the Act is its provisions for protection against retaliation. Section 7 explicitly prohibits any form of harassment or adverse action against a whistleblower, including dismissal or disciplinary measures. The CVC is empowered to take necessary steps to ensure the safety and anonymity of whistleblowers, allowing for anonymous disclosures under Section 8. This is crucial in encouraging individuals to come forward without fear of retribution.

Sections 19 and 45 of the Competition Act, 2002 permits the CCI to receive information and conduct inquiries based on information received from any person. Penalty for furnishing false information is also provided for. Although this does not explicitly protect whistleblowers, it provides a mechanism for individuals to report misconduct anonymously.

Besides, when filing the information before the commission, the legal interpretation should be consistent. The CCI, as a regulatory authority does provide an option to the informant for disclosure of name. This is because ‘loss of reputation’ is the constant fear amongst the entities. Some other autonomous bodies also exercise this ‘Power of Anonymity’. For instance, the Securities and Exchange Board of India (SEBI) welcomes any and every information and thereafter, has the discretion whether to proceed further with it or not. Not only this, the Directorate of Civil Aviation (DGCA) also provides for a similar criterion because it was seen that companies were not willing to address pressing concerns due to that, leading to disrepute in the society. This signify the importance of Whistle Blower protection in India.

The Way Forward

Although India has a comprehensive framework for Whistle Blower Protection, still in order to build a more stringent framework in the Indian Competitive regime, it is pertinent to establish a comprehensive legal framework, wherein special focus must be given to the self-reporting mechanism. Taking reference from the Whistle Blower Protection Act, 2011 and provisions of the Competition Act; specific provisions pertaining to the cartelisation cases is the need of the hour to regulate the existing competition law mechanism in India. Furthermore, in reporting mechanism, ensuring confidentiality in the procedure as well as ensure stricter penalties in furnishing false information must also be looked at for Whistleblowers’ protection. In addition to this, giving financial incentives as are also provided in the US and EU could help motivate good Samaritans to come forward and report to the authorities in creating a robust antitrust environment.

Another significant recommendation could be enhancing awareness, which can be done in consonance with Section 49 of the Competition Act which is also considered as one of the pillars of the act. Further, training about protection of Whistleblowers’ can help a great deal in this initiatives. Such measures can include carrying out outreach programmes to educate the people about their rights and protections under the Indian law as well as the importance creating a level-playing field in competitive environment. This will help reduce the fear of reporting within citizens.

Lastly, international collaborations and aligning with the best practices across globe will harmonise India’s protection standards. Entering into collaborative agreements and Memorandums’ of Understanding can enhance effectiveness of leniency programmes worldwide.

Conclusion

It can be concluded from the aforementioned discussion that there exists an indispensable need to have a robust mechanism for Whistle Blower Protection in place, particularly because of the easy detection in cartel cases, which serves as the most heinous violation of the Competition Act. Creating such a strong mechanism in place will ensure that there is an efficient reporting of illegal activities, which will assist the antitrust regulators to gather information that may otherwise remain hidden for long. This entire process will ensure that there is a deterrence of anti-competitive behaviour by entities, finally leading to creation of a level-playing field for both the large and the small businesses alike.

It becomes pertinent to mention that India has taken giant leaps in Whistle Blower protection considering the subject-specific legislation in place as well as provisions in the Competition Act; however, this scheme can be further enhanced if a tailored framework pertaining to antitrust provisions are introduced. Another approach could be reference from International best practices which will ensure that our nation can play a more significant role in fighting cartels, thereby contributing to a more competitive marketplace.

As Linda Sherry, Consumer Action (Washington, DC) rightly said “Whistleblowers are knights in shining armour! Those who step up to expose violations of the public trust, often at great personal risk, deserve robust protections, safe reporting channels and legal indemnification because of their crucial role in protecting the public.”

Soujanya Boxy and Khushi Bansal are 5th year student at NLU Odisha and 4th year student at SLS, Noida, respectively.