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214/05 9 November 2005
The OFT has provisionally found that an agreement between fifty fee-paying independent schools to exchange detailed information about the fees that they intended to charge was in breach of competition law.
The OFT has issued a statement of objections (see note 1) to the schools concerned (see note 2) setting out its provisional findings that the agreement, from 1 March 2001 to June 2003 (see note 3 and note 4), breached the Chapter I prohibition of the Competition Act 1998. The two main provisional findings are as follows.
Firstly, the schools concerned exchanged information relating to their intended fee increases and fee levels for boarding and day pupils in relation to the academic years 2001/2002, 2002/2003 and 2003/2004. The information was exchanged through a survey, known as the 'Sevenoaks Survey'. Between February and June of each year, the schools concerned gave details of their intended fee increases and fee levels for the academic year beginning in September. Sevenoaks then collated that information and circulated it, in the form of tables, to the schools concerned. The information in the tables was updated and circulated between four and six times each year as schools developed their fee increase proposals in the course of their annual budgetary processes.
Secondly, this regular and systematic exchange of confidential information as to intended fee increases was anti-competitive and resulted in parents being charged higher fees than would otherwise have been the case.
The OFT has given the parties several months to make written and oral representations on the statement of objections, which the OFT will take into account before making its final decision as to whether the Chapter I prohibition has been infringed and as to the appropriate amount of any penalties the OFT may decide to impose on each of the schools concerned. The amount of any such penalties would reflect the particular circumstances of this case; at this stage the OFT does not anticipate that any penalty imposed is likely to be at the top end of the range available under the Competition Act 1998 (see note 6).
In terms of the number of parties involved, this is one of the largest investigations carried out by the OFT to date.
1. A statement of objections gives notice of a proposed infringement decision under the Competition Act 1998 to the parties involved. The parties then have the opportunity to make oral and written representations in response to the case set out by the OFT. Such representations will be considered by the OFT before any final decision is made.
2. The schools concerned: Ampleforth College, Bedford School, Benenden School, Bradfield College, Bromsgrove School, Bryanston School, Canford School, Charterhouse School, Cheltenham College, Cheltenham Ladies College, Clifton College, Cranleigh School, Dauntsey's School, Downe House School, Eastbourne College, Epsom College, Eton College, Gresham's School, Haileybury School, Harrow School, King's School Canterbury, Lancing College, Malvern College, Marlborough College, Millfield School, Mill Hill School, Oakham School, Oundle School, Radley College, Repton School, Royal Hospital School, Rugby School, St Edward's School, Oxford, St Leonards-Mayfield School, Sedbergh School, Sevenoaks School, Sherborne School, Shrewsbury School, Stowe School, Strathallan School, Tonbridge School, Truro School, Uppingham School, Wellington College, Wells Cathedral School, Westminster School, Winchester College, Woldingham School, Worth School and Wycombe Abbey.
4. Although the Competition Act 1998 came into force on 1 March 2000, under the transitional arrangements in Paragraph 19 of Schedule 13 to the Competition Act 1998, agreements made before that date benefited from a transitional period of one year during which the Chapter I prohibition did not apply (subject to certain exceptions, none of which apply in this case). The Sevenoaks Survey, the operation of which the OFT considers was anti-competitive, was 'resurrected' in 1997. Thus, the OFT considers that the arrangement pre-dated 1 March 2000 and the Chapter I prohibition will only be applicable with effect from 1 March 2001.
5. The Competition Act 1998 prohibits agreements, practices and conduct that may have a damaging effect on competition in the UK. The Chapter I prohibition covers anti-competitive agreements and concerted practices, that have the object or effect of preventing, restricting or distorting competition in the UK or a part thereof.
6. In calculating financial penalties the OFT takes into account a number of factors including seriousness of infringement, relevant turnover and any mitigating and/or aggravating factors. The basis of the OFT's considerations are set out in the OFT's Guidance as to the appropriate amount of a penalty. Download guidance (pdf 145 kb). The final amount of a penalty calculated in accordance with the guidance may not in any event exceed 10 per cent of the worldwide turnover of an undertaking in its last business year.
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