1st Aug 2007 07:01
Office of Fair Trading01 August 2007 113/07 1 August 2007 BRITISH AIRWAYS TO PAY RECORD £121.5m PENALTY IN PRICE FIXING INVESTIGATION British Airways has admitted collusion over the price of 'long-haul passengerfuel surcharges' (surcharges) and will pay a penalty of £121.5m to be imposed bythe OFT, thus enabling the OFT to close its civil investigation and resolve thiscase. The penalty will be the highest ever imposed by the OFT for infringementsof competition law, and demonstrates the determination of the OFT to dealvigorously with anti-competitive behaviour. British Airways has admitted that between August 2004 and January 2006, itcolluded with Virgin Atlantic over the surcharges which were added to ticketprices in response to rising oil prices. Over that period, the surcharges rosefrom £5 to £60 per ticket for a typical BA or Virgin Atlantic long-haul returnflight. Virgin Atlantic is not expected to pay any penalty as it qualifies in principlefor full immunity under the OFT's leniency policy. Under this policy, a companywhich has been involved in cartel conduct and which is the first to give fulldetails about it to the OFT will qualify for immunity from penalties in relationto that conduct. In addition, any company staff involved in the price fixingdisclosed will qualify for immunity from criminal prosecution in relation tothat conduct. The OFT's investigation was prompted after Virgin Atlantic cameforward with information about price fixing with BA over the surcharges. BritishAirways has also provided full co-operation with the OFT's investigation underthe leniency programme and this is reflected in the penalty announced today. British Airways accepts the OFT's finding that on at least six occasions the twocompanies discussed and/or informed each other about proposed changes to thelevel of the surcharges, rather than setting levels independently as requiredunder clear and well-established competition law principles. The OFT's investigation was conducted in parallel with a similar case brought bythe United States Department of Justice (DoJ). The investigations by the OFT andDoJ were separate but the two agencies have consulted each other closelythroughout. In addition to the investigation into British Airways' corporate conduct undercivil competition law, the OFT is also conducting a criminal investigation intowhether any individuals dishonestly fixed the levels of the surcharges - anoffence under the Enterprise Act. The corporate admission by British Airwaysthat it infringed civil competition law does not imply that any individualsdishonestly fixed prices contrary to the Enterprise Act. The criminalinvestigation is ongoing and no conclusions have been reached as to whethercriminal proceedings against individuals can or should be brought. The OFT's infringement decision against BA will be taken and published in duecourse. It will record the full findings in this case and the basis for thecalculation of the penalty to be imposed on British Airways. Philip Collins, OFT Chairman said:'This case, and the substantial penalty imposed, will send an important messageto corporate boards and business leaders about our intention to enforce the law,and serves to remind companies of the substantial risks involved if they arefound to engage in such behaviour. It also illustrates how the OFT's leniencyprogramme enables companies to eliminate or reduce their exposure to penaltiesby taking prompt and effective action. On a broader front, the OFT is committedto strong and effective competition law enforcement, especially in relation toprice fixing and other hardcore infringements. Our commitment to enforcementemphasises the importance of effective and comprehensive competition lawcompliance led by boards and senior management and supported by effective riskmanagement systems and corporate governance.' NOTES 1. Fuel surcharges, when set independently, do not infringe competition law.Such surcharges were first introduced by each of BA and Virgin Airways in May2004. The earliest evidence of collusion between the companies dates from August2004. 2. The OFT confirmed its investigation into price coordination in relation tolong haul passenger flights to and from the UK on 22 June 2006. 3. The OFT's investigation was conducted under the Competition Act 1998 whichgives the OFT the power to impose penalties on companies of up to 10% of theirworldwide turnover for price fixing and other forms of anti-competitivebehaviour. 4. The Competition Act 1998 prohibits agreements, practices and conduct that mayhave a damaging effect on competition in the UK. The Chapter I prohibitioncovers anti-competitive agreements and concerted practices, that have the objector effect of preventing, restricting or distorting competition in the UK (or apart thereof). Its European counterpart, Article 81 of the EC Treaty, coversequivalent agreements or practices which affect trade between EU Member States. 5. The Enterprise Act 2002 prohibits price-fixing and other cartel agreementsmade dishonestly by individuals. The facts and matters requiring to be provedare substantially different between the civil and criminal competition lawregimes. The corporate admission by BA does not imply that individuals havecommitted criminal offences. 6. Under the OFT's leniency policy an undertaking may be granted immunity frompenalties or a significant reduction in penalty in return for reporting certaincategories of Competition Act infringement and assisting the OFT with itsinvestigation. Virgin Atlantic is expected to be granted immunity from penaltiesas it informed the OFT of the infringement before the OFT had commenced itsinvestigation; BA has been granted a reduction in penalty. 7. In calculating financial penalties, the OFT takes into account a number offactors including the seriousness of infringement, the relevant turnover and anymitigating and/or aggravating factors. The basis of the OFT's considerations areset out in 'OFT's guidance as to the appropriate amount of a penalty' - see OFTwebsite for more details. 8. The penalty will be payable following issue of an infringement decision to bepublished in due course. The full details of the penalty calculation will beincluded in the infringement decision. The level of penalty reflects not onlythe granting of leniency to BA but also the additional co-operation BA hasagreed to provide to enable the case to be resolved more speedily andeffectively. 9. Anyone who has reason to suspect that a cartel is operating, should telephonethe OFT's cartel hotline 020 7211 8888 or email [email protected]. Companiesor individuals that wish to apply for leniency should contact the Director ofCartel Investigations on 020 7211 8117. 10. Information about the US Department of Justice is available at www.usdoj.gov/atr/ MEDIA enquiries: 020 7211+ Corinne Gladstone 8899 Jonathan Marciano 8898Alex Hunter 8900 Nick Spears 8901Nnenna Oleforo 8993Out of hours: mobile: 07774 134814 fax messages: 020 7211 8961Copies of press notices: Ext. 8993http://www.oft.gov.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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