For many reasons, international cartels cases have all but disappeared. The increased collateral effects of seeking Leniency is a major reason. There are many potential whistleblowers in the cartel pond, yet rarely does an insider come forward (The DOJ has an Individual Leniency Policy that has rarely been used). To illustrate why an individual whistleblower is highly unlikely to come forward without any financial incentive, in a prior Cartel Capers post I’ve written a story about Hypothetical Whistleblower Bill. For years, I’ve advocated for a new cartel-busting tool—a criminal antitrust whistleblower statute. Given that we have new leadership at the Antitrust Division, I’m reposting the piece hoping to get a nibble of interest.
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Hypothetical Bill is the US sales rep for a Widget Company, a foreign manufacturer. There are five main players in the industry. As a sales rep, Bill had heard whispers of price fixing meetings. When Bill was promoted to VP of US sales he was directed to attend meetings with his competitors to discuss prices and output. Price targets were set by the senior “top” guys in each competing company, but the working group had the more detailed task of implementing the prices by region, accounting for exchange rates, maintaining relative allocations, and host of other issues that can derail a cartel. Bill understood that it was none too smart for him to be going to these meetings—especially as an American who will likely go to prison if caught. After attending a few such meetings where it was emphasized not to use emails, and to leave no trace of the meetings and discussions, Bill became very anxious. He confided in a lawyer friend who knows about criminal law but not antitrust specifically. The lawyer told Bill he can hire an attorney and go to the government and he will likely be able to negotiate an Individual Leniency immunity/cooperation agreement (but no guarantees). But a competent, experienced antitrust lawyer will be expensive [and an incompetent lawyer even more expensive]. Bill meets with a criminal antitrust defense lawyer for a consultation and learns that negotiations with the DOJ will take time and likely require multiple trips by Bill and his lawyer to visit the prosecutors for interviews–all at Bill’s expense. Widget Company will not be paying for Bill’s travel, lawyer fees and travel, etc. If Bill can secure a non-prosecution/cooperation agreement, it will last for the duration of the investigation and any possible trials; in other words, his cooperation obligation will be slightly shorter than the Hundred Years War. The Antitrust Division will ask Bill for documents to corroborate his story—travel records, emails, etc. The government may even ask him to stay on with the company and record cartel meetings. Bill may eventually be called upon by foreign competition commissions to appear for interviews. Besides the time and expense of cooperation, Bill understands he will likely be fired by his company (if he hasn’t already left) when they learn of his cooperation. After all, he is a confessed criminal and they are shocked that Bill was talking to competitors. Under new DOJ policy, Bill’s company may even get a fine reduction if they sue him and claw back his salary. The consultation was honest and sobering: “Bill, going to the government will likely keep you out of jail, but it will also be likely to bankrupt you, make you forever non-employable in your industry and drag you and your family through hell for many years. What would you like to do?”
Unless Bill is nuts (not a good quality in a witness), Bill will almost certainly not expose the cartel. He will remain quiet. He could go to the company’s compliance counsel but since the CEO is involved in the illegal activity he’s fearful that he, not the CEO, will regret his internal reporting. At best, Bill will leave his job, get out the situation and keep quiet. But maybe Bill will think of how he needs the job and the money the new promotion brought (kids/college etc.), and stay in the job and keep quiet. After all, even if the cartel gets exposed, isn’t there a chance he could get immunity then? Whatever Bill decides, it is unlikely he will choose to go to the DOJ and expose the cartel.
Now, imagine this scenario with a criminal antitrust whistleblower statute. In his consultation Bill learns that he has the option of being a whistleblower. Being a whistleblower also has significant challenges, but they are tempered by the potential of escaping prosecution, and of not having to pay his lawyer who will work on a contingency fee basis. Bill may also possibly recover a substantial “bounty” if Bill cooperates in successful prosecutions that result in corporate fines. Bill’s first step is to authorize an attorney proffer to see if the government will grant Bill non-prosectution protection in return for his full cooperation. If these negotiations bear fruit, the DOJ will start a cartel investigation with an insider, and Bill will have a non-prosecution/ cooperation agreement, no attorney fees and a possible whistleblower settlement down the road.
In this hypothetical, Bill gives the Antitrust Division all they need to obtain search warrants. The prosecutors will have many options. One option is to reach out, search warrant in hand, to Widget Company’s US counsel. Government lawyers explain that Widget Company has 48 hours to get a Leniency Marker before the investigation goes public and search warrants (and perhaps dawn raids in other parts of the world) are executed. Widget Company folds and starts the leniency process. With the ball rolling, in all likelihood there will never be a trial as cartel members plead out. Even if a holdout goes to trial, however, Bill will likely not be a witness if other cartel members have cooperated. A cartel that may never have been exposed, now falls like dominos (or auto parts, LCDS, graphite electrodes, vitamins and any number of successful cartel cases that have seemed to have disappeared).
In most cartels there are many low culpability fish in the whistleblower pond. Details would have to be worked out in the new legislation for a number of issues including preventing high culpability individuals from cashing in. If a criminal whistleblower statute is passed but produces no whistleblowers, nothing is lost. But I believe a whistleblower statute could reinvigorate criminal antitrust enforcement the way the 1993 revised Corporate Leniency Policy did.
Note: Where the government is a victim of bid-rigging/price fixing, a whistleblower can currently bring a suit under the False Claims Act, but whistleblower legislation will cover private sector cartels and also make being a whistleblower more attractive when the government is the victim.
Thanks for reading. Bob Connolly [email protected]