Whistle-blowing on illegal cartels drops 70% in 5 years

Competition and Markets Authority (CMA) recently increased award to £250,000

Calls to the CMA hotline have plummeted from 1,442 in 2017 to 427 in 2022

The Competition and Markets Authority (CMA) has seen a 70 per cent drop in the number of people reporting illegal cartel activity over the last five years, new data from international law firm RPC has revealed.

In June, the CMA announced it would increase its reward from £100,000 to £250,000 to people who can provide significant information about cartel activity that leads to enforcement action.

But the number of unique calls made to the CMA cartel hotline have plummeted from 1,442 in 2017 – when the regulator first introduced whistle-blowing rewards – to just 427 in 2022, a Freedom of Information Act request (FOI) shows.

This latest figure hovers just above the 363 calls made to the hotline in 2016, the year before the CMA announced its cartel crackdown.

The data also revealed there was an increase in activity during the pandemic in 2020, when 955 calls were made.

While the data does not show which industries these calls pertained to, the CMA has revealed that cartels have been uncovered across a wide range of sectors, including construction, healthcare and consumer products and services.

Businesses found to have been involved in illegal cartels – an agreement between companies not to compete in order to keep their prices high - can be fined up to 10% of their annual turnover.

Individuals directly involved can face up to five years in prison and company directors can be disqualified from holding director positions for up to 15 years.

Chris Ross, a Partner in RPC's competition litigation team, said the drop in whistle-blowers coming forward could be explained by "a variety of compelling reasons."

He said: "Whistle-blowers might be fearful over finding employment again in the same industry after reporting wrongdoing, becoming financially insecure or causing damage to their reputation.

"Some do not find the potential reward great enough to compensate the potential fallout that could upturn their lives after speaking out – however much is offered."

Some of that fear may have been assuaged during the pandemic, when the CMA received an increase in calls.

Ross explained: "The peak in 2020 could be explained by employees, for the first time, having a physical distance from the office and therefore feeling freer to make these whistle-blowing claims."

With a £150,000 increase in the reward money offered to whistle-blowers, Ross said there could be a rise in the number of calls being made to the CMA – and subsequently more claims being heard at the Competition Appeal Tribunal (CAT).

"If this hike in whistle-blowing payments has the desired effect – encouraging people to come forward – one would expect that the CMA would carry out more investigations and that might subsequently lead to the uncovering of more findings of cartel activity.

"Once there is evidence of cartel activity, anyone affected by that has a right to bring a claim and so we would also expect a rise in the number of claims on the back of that."

The CMA has previously described cartels as causing "serious damage" to customers as well as "weakening price competitiveness – a particular concern at a time of cost-of-living pressures."

Commenting on the impact to the construction sector, Partner Arash Rajai and Associate Joshua Green from the Real Estate and Construction team said: "Construction is a major industry, essential to delivering public services such as school, hospitals, housing and employed over 2.15 million people in the UK 2021.

"Cartel activity disrupts fair competition within the industry, for example by fixing prices, rigging bids, or agreeing to share markets. Cartels can result in higher prices, restricted innovation and less choice for consumers.

"Innocent firms may miss out on work they may be best placed to undertake or are forced to reduce their profit margin to secure work.  In an economy that saw a 25.7% increase in construction business insolvencies across the UK in 2021, it makes the environment in which law-abiding companies operate even tougher to succeed in."

* Information obtained by international law firm RPC via a Freedom of Information Act request

Number of unique contacts calling CMA cartel hotline since 2014