Skip to main content

The Globe and Mail

To break a cartel: Change the whistleblower incentive

A businessman whistleblower.

Eric Hood/iStockphoto

Canada's competition watchdog could bolster its weak track record on prosecuting cartels by offering greater incentives to be the first participant to blow the whistle on the others in the group, a new report recommends.

The C.D. Howe Institute Competition Policy Council – a committee of competition lawyers and policy experts – says the federal Competition Bureau has had high-profile success with cases involving international cartels that come to light following prosecution efforts abroad, including the recent high-profile Libor case. But the bureau has had far less success uncovering evidence on domestic cartel cases.

The difference, the committee concludes in a report released Tuesday, lies in Canada's incentive system.

Story continues below advertisement

Cartels are notoriously difficult to detect and prosecute because participants normally have little incentive to expose their existence, and regulators have difficulty proving there is an explicit agreement among the parties to collude on pricing, market access, production levels or other factors.

The C.D. Howe report, however, says regulators should do more to exploit the biggest weakness in any cartel: instability. Cartels often break down as members grow unhappy with the arrangements and want to find ways to undercut rivals or gain market share. That instability is aggravated when cartel members grow worried about the possibility of detection and prosecution, concluding the risk-benefit calculation is increasingly unappealing.

Under current rules in Canada, the Competition Bureau will grant immunity to the first company that comes forward to the bureau with information about a cartel. The bureau says the program has been the "single most powerful means of detecting criminal activity."

The problem, however, is that there are also further stages of leniency – although not outright immunity – for the second, third and subsequent companies that admit to participation. The second participant to come forward, for example, is eligible for a 50-per-cent reduction in penalties, while the third can have a 30-per-cent reduction, and so on. With jail terms up to 14 years and maximum fines of $25-million available under the Competition Act, the benefits of self-reporting could be significant.

The C.D. Howe committee says the leniency program makes it much less attractive to be the first one to report, however, because firms know that if the cartel ever comes to light, they can jump in quickly and win significant reductions in fines anyway. The result is that many firms calculate they might as well take their chances that nothing will ever come to light, and then go second if it becomes necessary. In other words, the leniency program "may be blunting" the immunity program.

"Each cartel member might sensibly wait until others report, which, if all reason similarly, may create a situation where no member comes forward," the report says.

The committee also recommends that the Competition Bureau devote more resources to domestic cartel investigations so companies have a greater fear of possible detection.

Story continues below advertisement

"The greater the probability that the bureau will uncover the existence of a cartel without it being reported by a conspirator, the more attractive will be the carrot, reduced punishment, to a cartel member contemplating self-reporting."

The report makes no recommendations on one of the biggest disincentives to self-reporting, however, which is the emergence of class-action lawsuits against firms accused of collusion. The potential damages from legal action could be far greater than fines paid to the Competition Bureau, but the committee said it has reached "no consensus on the appropriate path forward on this emerging issue."

Report an error Licensing Options
About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at