On Dec. 23, 2020, the Criminal Antitrust Anti-Retaliation Act (the “Act”), finally became law. The legislation had passed in the Senate several times previously but until this last Congress, had never been brought up for a vote in the House. The Act prohibits employers from retaliating against certain individuals who report criminal antitrust violations. It allows an individual to file a retaliation complaint with the Secretary of Labor it they are retaliated against for reporting to the federal government information about what they believe to be criminal violation of the antitrust laws. The remedies include reinstatement, back pay and special damages including litigation costs, expert witness fees and reasonable attorney fees. This is a positive piece of legislation. As discussed below, however, without the potential of a financial reward for being a whistleblower, this legislation alone is unlikely to encourage anyone to come forward. But, the Act shows that Congress understands the power of whistleblowing, including on criminal antitrust violations, and further legislation will hopefully follow.
The picture facing a potential whistleblower for an antitrust violation is confusing. In the broad sense of “whistleblowing” anyone can make a complaint to the Antitrust Division about what they think might be anticompetitive conduct. The Antitrust Division has a “Report Violations” page on its website (“Your e-mails, letters and phone call could be our first alert to a possible violations of the antitrust laws and may provide the initial evidence need to begin an investigation.”). But when it comes to possible whistleblower rewards (i.e. a financial reward for a successful outcome resulting from the whistleblower’s information), there are several statutes at play. There is a serious hole in the law because whether a whistleblower can receive financial compensation for reporting a criminal antitrust violation) price fixing bid rigging, market allocation) depends upon whether the victim of the fraudulent scheme was a government entity (i.e. tax dollars) or private individuals.
There is no statute comparable to Dodd-Frank Wall Street Reform and Consumer Protection Act which allows whistleblowers who come forward to the SEC to share between 10 and 30 percent of the government’s total monetary recovery, if any. The results have exceeded expectations in terms a flood of new fraud cases brought to the SEC by individuals willing to stick there neck in return for the possibility of financial incentives offsetting the risks of being a whistleblower. See SEC Whistleblower Program Ends Record-Setting Fiscal Year With Four Additional Awards, SEC Press Release, September 30, 2020. The just passed Criminal Antirust Anti-Retaliation Act does not provide the possibility for the whistleblower to reap any monetary benefit if the Antitrust Division successfully brings criminal prosecution and fines are imposed. If, however, the federal government is the victim of a criminal antitrust violation, an individual (whistleblower) can file a False Claims Act case (qui tam) if false claims for payment are knowingly filed with the federal government. If the government recovers money as a result of this suit the whistleblower is entitled to a portion of that recovery. The Department of Justice has a primer that explains the False Claims Act in more detailed (here). Claims for payment made to the government on contracts that were rigged are “false claims” and accordingly if a whistleblower is aware of a bid rigging scheme against the federal government, she can file a False Claims Act case and potentially receive significant financial reward (15 to 30% of the government recovery). On the other hand, if the government is not the victim of the price fixing scheme (the auto parts cartel, for example) a potential whistleblower can of course still blow the whistle but she will not realize any financial reward for doing so.
This anomaly is best shown through the Antitrust Division’s criminal cases against South Korean fuel oil dealer who rigged bids on DOD contracts in South Korea. On November 19, 2018 the Antitrust Division announced that three South Korean oil refiners had agreed to plead guilty and to enter into civil settlements for rigging bids on United States Department of Defense Fuel Supply Contracts (here). The investigation was started by a whistleblower filing a False Claims Act case. The DOJ press release noted, “The United States’ False Claims Act civil investigation resulted from a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act. Those provisions allow for private parties to sue on behalf of the United States and to share in any recovery.” Bid rigging schemes, where the bids are let by the federal government, can be prosecuted as 18 U.S.C. §371, Conspiracy to Defraud the United States, and constitute the basis for a False Claims Act case. The government has entered into civil settlements of $205 million. DOJ Press Release April 8, 2020 DOJ Agrees to Civil Settlement with Additional Firm Involved in Bid Rigging and Fraud Targeting Defense Department Fuel Supply Contracts for U.S. Military Bases in South Korea. While the amount awarded to the whistleblower[s] who initiated the investigation is not known, at 15-25% of the total recovery, there was ample reward for coming forward and exposing the scheme.
Suppose, however, the fuel oil dealers fixed prices on contracts to commercial buildings in the United States. While this would be a criminal price fixing violation of the Sherman Act, there would beno ability for a whistleblower to collect a reward for coming forward. While we can’t be sure, being a whistleblower in many circumstances can be a career killing act of public service. The decision to be a whistleblower can be a life altering event–and not in a good way. See Cartel Capers, A Potential Whistleblower Story (Hypothetical), September 25, 2018. It is likely No Potential Reward = No Whistleblower.
The Criminal Antitrust Anti-Retaliation Act is a welcome start towards protecting criminal antitrust whistleblowers. Congress recognizes the value of whistleblowers. Further reform is needed to mirror the financial incentives provided by Dodd-Frank for securities violations and the False Claim Act where the government is the victim of fraudulent schemes.
Why should there be financial incentives for whistleblowing if the federal government is the victim of bid rigging, but not if private entities are the target? There shouldn’t be.
Most States have a False Claims Act that largely mirrors the federal statute. The California False Claims Act’s qui tam provision permits a whistleblower to file an action to enforce the Act. Such lawsuits have resulted in some of the most significant recoveries to date under the Act. Like the federal statute, the law is applicable when false claims are submitted to the government. California has a False Claims Unit website with further information.
Note: The topic of whistleblowing on criminal antitrust violations and the need for a criminal antitrust whistleblower statute that mirrors the SEC’s enforcement whistleblower incentives was covered more thoroughly the Section’s Competition Journal: Robert E. Connolly and Kimberly A. Justice, WHISTLEBLOWING AND CRIMINAL ANTITRUST CARTELS: A PRIMER AND CALL FOR REFORM, Competition: Fall 2019,Vol 29, No. 2.