The (in)effectiveness of leniency: Will Poland start paying whistleblowers?
The Polish competition authority openly admits that its resources, particularly its people, are inadequate to achieve satisfactory results at uncovering cartels, and the leniency programme has not generated the hoped-for effects. The proposed solution is to reward whistleblowers.
One of the tools most heavily hyped by the Office of Competition and Consumer Protection (UOKiK) for uncovering prohibited anti-competitive arrangements is the leniency programme, in which the competition authority mitigates penalties for self-reporting participants in illegal agreements. Under the leniency programme, UOKiK can waive or reduce the punishment imposed on a business participating in illegal arrangements in exchange for providing information about the arrangement or evidence enabling the participants to be punished.
Ever since Marek Niechciał was appointed in May 2016 as president of UOKiK, he has stressed the detection rate for illegal arrangements, particularly cartels. He has also called for help in achieving these aims, including increasing the maximum punishments, criminalising of cartels, and increasing the benefits from leniency, as well as encouragement and protection of whistleblowers.
During a workshop entitled “Cartels: Exchange of information and the leniency procedure,” held at UOKiK on 25 October 2016, Agata Zawłocka-Turno, who was then the acting director of the Department of Competition Protection at UOKiK, admitted that the authority’s effectiveness at uncovering and punishing anti-competitive arrangements is unsatisfactory. She also confirmed the perception of most competition practitioners today that the leniency programme is generating only marginal results. According to figures presented by Zawłocka-Turno, in 2004–2015 there were 61 leniency applications filed with the office, but only two of those were filed in 2015 (and it can be anticipated that the statistics for 2016 will be comparable). The number of decisions issued by the office in cases of anti-competitive arrangements has also fallen (20 in 2013, 18 in 2014, and 10 in 2015). The director admitted that the Department of Competition Protection does not have the means at its disposal to reinforce its staff to a degree enabling effective investigation and punishment of such practices.
The effectiveness of the antitrust authority’s efforts is bound up with the effectiveness of the leniency programme. On one hand, the programme is a tool for uncovering cartels, and using the information and evidence obtained to eliminate and punish them. On the other hand, a programme based on waiver or reduction of antitrust penalties cannot function properly if detection of cartels generally remains at a level that raises doubts about the certainty of punishment (regardless of the severity). It was stressed repeatedly at the workshop that the key to the leniency programme is the initiative and effectiveness of the antitrust authorities, including cases commenced at the authority’s own instigation. Businesses that do not sense that punishment is unavoidable have no motivation to report to the authority, as was pointed out among others by Sarah Cannevel from Germany’s antitrust authority, the Bundeskartellamt. Zawłocka-Turno said that one of the reasons for the low effectiveness of the Polish leniency programme is “the low probability of discovery of cartels.” It should also be pointed out that the lack of motivation applies not only to companies, but also to managers. Although the possibility has existed since January 2015 to impose fines on a manager responsible for violation of the prohibition against anti-competitive agreements by the enterprise, to date not a single such punishment has been ordered.
In this context, a recurring notion on the part of the president of UOKiK to raise the regulator’s effectiveness is to introduce whistleblower rules in Polish antitrust law, with a developed system of incentives and protections for individuals who decide to inform the office of illegal arrangements. During the workshop in October, Marek Niechciał announced that UOKiK was studying similar solutions in other countries, such as Germany.
A whistleblower is someone such as a sales rep, buyer, office worker or assistant who goes to great personal and professional risk to provide information to the competition authorities about active cartels. The UOKiK president had stressed before his full awareness of the risk such a person assumes. In his public comments, he thus calls for introduction of financial incentives for informers. It seems that a one-off cash payment or ongoing “salary” for whistleblowers is primarily under consideration. Here Niechciał cites the examples of Hungary and Slovakia.
This solution seems debatable. During the discussion at the workshop, Zawłocka-Turno pointed out that one of the numerous factors contributing to the ineffectiveness of the leniency programme in its present form is the reluctance noticeable in post-communist countries of Central & Eastern Europe to cooperate with organs of state authority. The doubt must therefore be raised whether adding a cash incentive to cooperate with the authorities will in this light be counterproductive, or entirely disqualifying for the planned institution of whistleblower protection. In this part of the world, paid cooperation with the authorities is perceived especially negatively.
According to publically available information, the notion of introducing rules in Polish antitrust law concerning whistleblowers and rewarding them have not yet been reduced to a specific legislative proposal or even the outline of a bill. We will continue to monitor the work of UOKiK in this respect.
We should stress in this regard that whenever the relevant conditions are fulfilled, we always recommend that companies, including our own clients, take advantage of the leniency programme and other forms of cooperation and amicable resolution of matters before the president of the Office of Competition and Consumer Protection.
Marcin Kulesza, Competition practice, Wardyński & Partners