The time has come to reward Competition Act whistleblowers
- Subtitle: Competing Interests
To tackle potential procurement-related competition law violations, the federal Competition Bureau has increased its efforts to educate government bodies on how to detect and deter anti-competitive practices. The bureau has also enhanced its efforts to enforce the criminal provisions of the Competition Act.
Some of the bureau’s recent criminal enforcement initiatives include anti-bid-rigging presentations to public procurement officials, a new hotline for tipsters to report fraud and bid rigging and working to develop and adopt data-screening mechanisms (algorithms) to help procurement agencies detect competitors that have illegally co-ordinated bid submissions.
The bureau has also been working on increasing awareness of the whistleblower provisions of the Competition Act, including launching a “Whistleblowing Initiative” several years ago and highlighting whistleblower protections in its enforcement policy announcements.
The whistleblower sections of the Competition Act (s. 66.1 and 66.2) protect the identities of people who report competition law offences to the bureau and prohibit employers from retaliating against employees who, in good faith and on reasonable belief, report potential competition law offences. Section 425.1 of the Criminal Code provides similar protections to employees who report federal or provincial offences.
The whistleblower sections of the act are not new. They were enacted in 1999 after some political wrangling and opposition from the bar to help the bureau fight criminal competition law violations, particularly deceptive telemarketing (which was high on legislators’ minds at the time) and price fixing.
Interestingly, when they were being passed, key concerns included the burden they might place on employers, ensuring they did not dampen potentially pro-competitive activities and ensuring that the penalty for violation was appropriate. But no financial rewards for whistleblowers were raised during debates for the passing of the sections.
The whistleblower provisions, however, received relatively little attention until recently. This may be because the Competition Bureau has tended to rely much more heavily on its Immunity and Leniency Programs — which offer applicants who may have violated the Competition Act potentially full immunity from prosecution or leniency in sentencing — than whistleblowers to detect competition law violations.
One practical explanation for the lack of attention or apparent actual reliance on the whistleblower provisions, however, is a key legislative defect: There are no financial rewards. That is, whistleblowers have no monetary incentive for taking significant risk in informing the bureau about possible criminal competition law violations. Innocent parties who are aware of criminal competition law violations are encouraged to come forward, and are protected if they do, but there are no financial rewards for doing so.
This is unlike the Whistleblower Program launched by the Ontario Securities Commission in 2016, which offers up to $5 million for reporting potential securities law violations. According to the OSC’s chairwoman, Maureen Jensen, last fall, its new Whistleblower Office had received more than 30 credible tips in the first several months after the launch of its new program. This included several tips the regulator “really wanted” relating to potentially serious securities law violations.
Similarly, last November, U.S. Securities and Exchange Commission chairwoman Mary Jo White called its whistleblower program a “game changer” for generating high-quality tips and helping the SEC successfully prosecute cases. Like its Canadian counterpart, the SEC’s whistleblower program also offers whistleblowers monetary awards — under the U.S. program, between 10 per cent and 30 per cent of penalties.
In contrast, while the bureau received more than 10,000 complaints and information requests last year, it is not clear that whistleblowers led to any significant information about potential competition law violations or investigations. Whistleblower statistics are not reported in the bureau’s annual reports and whistleblowers do not appear to have factored significantly, or perhaps at all, in recent criminal competition law investigations based on the bureau’s public announcements.
Given the Competition Bureau’s ongoing focus on criminal competition law enforcement, and the heightened potential risk of violations in light of increased government infrastructure spending, it may now be time for the government to consider amendments to the whistleblower provisions of the Competition Act to add financial incentives.
This would have several potential benefits, including increasing information about potential violations provided to the bureau, helping the bureau with its enforcement mandate and reducing criminal competition law violations in Canada, particularly price fixing and bid rigging related to competitive tendering.
At the same time as potentially reducing bid rigging and other competition law violations, enhancements to the whistleblower provisions to encourage their greater use and effectiveness might also lead to increased revenues for the government through more fines.
Potential downsides include questions about whistleblower credibility, whether enhancing the whistleblower sections may undercut the bureau’s already successful immunity and leniency programs or if financial incentives might in some cases reduce internal compliance reporting.
At a minimum, however, strengthening the whistleblower provisions of the Competition Act would give the bureau, like Canadian and American securities regulators, another important enforcement tool.
Steve Szentesi is a competition and advertising lawyer based in Toronto. He is a former adjunct professor of competition law at the University of British Columbia, Faculty of Law, author of a number of competition law publications and is lawyer-editor for Practical Law Canada Competition. He writes regularly with particular interest in competition policy and innovation and law. He can be reached at firstname.lastname@example.org.
Column: Competing Interests