Expanding protections for antitrust whistleblowers - A good start

The proposed antitrust whistleblower legislation introduced last week by Senators Leahy (D-Vt.) and Grassley (R-Iowa) is certainly a step in the right direction. It would for the first time provide protections for employees reporting to the government or within their company antitrust violations in which their company is actually or potentially engaging. Up until now, the government has largely relied on the antitrust wrongdoers themselves to self-report their criminal conduct through the government's corporate leniency program. The draft legislation follows the recommendations the Government Accountability Office (GAO) made in a report it released last summer. After studying the state of criminal antitrust enforcement, the GAO concluded that bringing whistleblowers into the enforcement mix would be an important supplement to the leniency program.

The problem with the legislation is that it does not go nearly far enough in providing adequate incentives for would-be antitrust whistleblowers to step forward. It would merely allow them to seek reinstatement, backpay and special damages if their employer retaliates against them for blowing the whistle on the company's anticompetitive conduct. What it would not do is offer the whistleblower any kind of financial incentive for risking this retaliatory treatment in the first place.  In fact, in his statement introducing the legislation, Senator Leahy highlighted the fact that the language is "carefully drafted to ensure that whistleblowers have no economic incentive to bring forth false claims."
 
In failing to provide a financial bounty for whistleblowers, this draft legislation would part ways with the False Claims the linchpin of the American whistleblower system and the statutory vehicle through which the vast majority of whistleblowers bring their claims. Notably, it was only after the whistleblower reward provisions of the False Claims Act were increased and strengthened in the mid-1980s -- providing for a whistleblower reward of up to 30 percent of any government recovery -- that whistleblowers began to bring claims under this law.  Since then, whistleblowers have led the charge in government fraud enforcement and the government's recovery of billions of dollars a year in associated penalties.
 
In failing to include a whistleblower reward, the draft legislation would also differ from the recently enacted Dodd-Frank Wall Street Reform Act. This statute was Congress' response to the Great Recession and the wild west behavior of the Wall Street institutions that led us there. Largely modeled on the False Claims Act, Dodd-Frank also includes a whistleblower reward of up to 30 percent of any government recovery. Obviously, in passing this recent legislation, Congress was fully aware of the need to include financial incentives as a means to encourage whistleblowers to suffer through what is typically a tiresome and unpleasant ordeal. Indeed, regardless of what anti-retaliatory protections may otherwise exist, the risk to whistleblowers of retaliation or some form of estrangement, alienation or even blacklisting remains very real.
 
That is why the explicit absence from the new legislation of any financial incentives is so surprising and why, as currently drafted, it is unlikely to accomplish much. It is all the more surprising given Senator Leahy's own recognition, as stated by the Supreme Court forty years ago, that the antitrust laws are "the Magna Carta of free enterprise . . . as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms."  So, if we are really serious about bringing whistleblowers into the antitrust enforcement scheme, and it seems that all agree that we should be, this new legislation will need to show whistleblowers some money. Mere protection from retaliation just isn't going to cut it.

Schnell is a partner in the New York office of Constantine Cannon LLP, specializing in antitrust, whistleblowers, and fraud.

---