For whom the whistle blows

Published On 21/03/2017 | By Sam Goldsmith | Enforcement, Reform

The ACCC’s submission to the current parliamentary inquiry into whistleblower protections (“Submission”) takes the firm view that persons who report breaches of the Competition and Consumer Act 2010 (Cth) (“CCA”) should be afforded greater statutory protection. In this post, we look at what is driving this position, and the main options for reform.

What protection is currently available to whistleblowers in relation to breaches of the CCA?

The Submission observes that there are three broad categories of persons who come forward to report potential breaches of the CCA:

  • immunity applicants: cartel participants (both individual and corporate) may be granted protection from civil action or criminal prosecution in relation to cartel conduct where they are the first party to approach the ACCC with respect to the relevant cartel;
  • informants: third parties with knowledge of cartel or other anti-competitive conduct;
  • complainants: parties affected by the conduct.

Immunity applicants are already protected by the ACCC’s immunity & co-operation policy for cartel conduct. This policy provides that the ACCC will grant immunity in relation to civil proceedings to applicants who meet the relevant criteria. Immunity is only available to the ‘first in’ (that is, the first party to apply for immunity in respect of the cartel), but parties not eligible for immunity may cooperate with the ACCC to seek more lenient treatment. The Commonwealth Director of Public Prosecutions has a similar policy in respect of criminal matters.

Notably, the ACCC’s policy does not provide for immunity from enforcement action for other civil breaches of the CCA (such as misuse of market power) – only for cartel conduct. The CCA does, however:

  • contain a number of provisions dealing with “protected cartel information” – information given to the ACCC in confidence that relates to an actual or potential breach of the cartel provisions. The ACCC has the power to refuse to comply with requests by third parties for access to such information, and will only be required to produce protected cartel information with leave of a court or tribunal; and
  • protect informants and complainants from threats, intimidation, and coercion relating to their co-operation with the ACCC (section 162A). A breach of this provision is punishable by a fine of up to $3,600 and/or imprisonment for 12 months.

Where are the gaps, and why do they matter?

Even for immunity applicants, the CCA does not protect against the exercise of contractual rights against a whistleblower in relation to the relevant disclosure (including, for example, termination of an employment contract), or other measures that may impact the whistleblower’s livelihood.

In addition to immunity applicants, the ACCC also places heavy reliance on information provided by third party whistleblowers, as anti-competitive conduct often takes place behind closed doors, making it difficult to detect and difficult to prove once detected. However, the CCA does not provide for a formal third party whistleblower regime.

The Submission explains the significance of this exposure:

“In the ACCC’s experience, the lack of whistleblower protections under the CCA has led to cases being directly impacted, with witnesses unwilling to provide information (or cooperate fully) with the ACCC due to a range of commercial and safety concerns.”

Chairman Rod Sims echoed this sentiment in recent public comments, as he confirmed that a lack of protection for whistleblowers has hindered investigations in the past.

Where greater protection is available to individuals making disclosures, the ACCC anticipates a greater volume and higher quality of material to assist its investigations and enforcement activities. With the introduction of criminal cartel prohibitions, and the ACCC/CDPP now pursuing criminal cartel prosecutions, the stakes are higher than ever – but the protections for whistleblowers have not been similarly strengthened.

Other whistleblower protection regimes: Corporations Act and the EU

Unlike the CCA, the Corporations Act contains significant protections for third party whistleblowers who disclose information about an actual or potential contravention of the corporations legislation. These include:

  • statutory immunity from civil or criminal liability for making the disclosure (but not from liability for any conduct revealed by the disclosure);
  • constraints on the rights of employers to exercise a contractual or other remedy against the whistleblower on the basis of the disclosure;
  • prohibition of victimisation of the whistleblower, and a right to compensation for any damage suffered as a result of any victimisation (though any action to recover compensation must be brought by the whistleblower personally, as opposed to ASIC);
  • confidentiality requirements around the whistleblower’s identity and the information they disclose, with limited exceptions.

In international developments, the European Commission’s Directorate-General for Competition recently introduced an anonymous tip-off service for individuals to report antitrust violations. The service is operated by an external provider that preserves whistleblowers’ anonymity through an encrypted messaging system. Only the content of a tip-off message is provided to the regulator, without any of the metadata that could be used to identify its sender. The system is intended to strengthen and support the effectiveness of the Commission’s existing leniency programme. Regulators in Germany, Denmark, and Romania have similar tools in place.

Proposals for further CCA protections

The ACCC has called for formal protection for third party whistleblowers under the CCA. Beyond the measures contained in the Corporations Act regime described above, the ACCC suggests the inclusion of:

  • specific protection for information or documents that disclose the identity of whistleblowers, in order to expand the existing protections based on public interest grounds; and
  • the ability for the ACCC to bring a claim on behalf of a witness who suffers loss or damage as a result of assisting the ACCC, in order to further deter intimidation and victimisation.

The ACCC also supports an increase in the penalties that apply to contraventions of s 162A.

Broader reforms

The parliamentary inquiry is considering a number of areas of reform to corporate whistleblowing laws, including:

  • extending the reach of the regime to serious breaches of any law (including the CCA);
  • broadening the categories of persons protected; and
  • introducing a “bounty” or reward system for whistleblowers.

Read more here.

The inquiry is ongoing. Submissions closed on 10 February 2017, with the final report due 30 June 2017. We will watch with interest to see whether the ACCC’s recommendation is followed (and if so, whether it leads to an increase in enforcement action).

[Image credit: makamuki0 / pixabay.com / CC0 1.0]

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About The Author

is a solicitor in the Sydney office of King & Wood Mallesons.

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