British Airways to pay £58.5 million penalty in OFT fuel surcharge decision
33/12 19 April 2012
The OFT has today announced its decision that British Airways (BA) and Virgin Atlantic Airways (VAA) engaged in anti-competitive practices in relation to the pricing of passenger fuel surcharges, and has imposed a fine of £58.5 million on BA. VAA brought the matter to the OFT's attention and, under the OFT's leniency policy, has not been fined.
The OFT has concluded that between August 2004 and January 2006, BA and VAA co-ordinated their surcharge pricing on long-haul flights to and from the UK through the exchange of pricing and other commercially sensitive information. This decision brings the OFT's investigation to a conclusion.
The £58.5 million fine imposed on BA is a reduction from the level of fine originally agreed between the OFT and BA in August 2007 as part of an early resolution agreement. The fine was reassessed following the issue of a Statement of Objections in November 2011 in light of a number of factors. These included legal developments regarding penalty setting for competition law infringements and the fact that the overall value added to the OFT's investigation by BA's co-operation was greater than had been anticipated at the time of the original agreement.
Ali Nikpay, OFT Senior Director of Cartels and Criminal Enforcement, said:
'This decision brings an end to this investigation and sends out a strong message that co-ordinating pricing through the exchange of confidential information between competitors is unlawful. The size of the fine underlines that it is important for companies to take steps to ensure that they have an effective compliance culture. The fine would have been higher still but for the co-operation provided by BA throughout the OFT's investigation. Without this, together with BA's admission of the infringement, the case would have taken considerably longer to resolve.'
- The OFT's investigation was conducted under the Competition Act 1998, which gives the OFT the power to impose penalties on companies of up to 10 per cent of their worldwide turnover for infringements of the Act and/or of the equivalent EU prohibitions on anti-competitive conduct.
- The Competition Act 1998 prohibits, among other matters, agreements and practices that have the object or effect of preventing, restricting or distorting competition in the UK or a part of it and which may affect trade in the UK or a part of it (the Chapter I prohibition). Its European counterpart, Article 101 of the Treaty on the Functioning of the European Union (TFEU), covers equivalent agreements or practices which may affect trade between EU Member States.
- Under the OFT's leniency policy an undertaking may be granted immunity from penalties or a significant reduction in penalty in return for reporting certain categories of Competition Act infringement and assisting the OFT with its investigation (including complying with the obligation to maintain continuous and complete co-operation during the OFT's investigation).
- Under the terms of the early resolution announced in August 2007, BA agreed to pay a penalty of £121.5 million, which took into account a reduction under the OFT's leniency policy and an additional reduction for further co-operation with the OFT. See press release British Airways to pay record £121.5m penalty in price fixing investigation (1 August 2007).
- In November 2011, the OFT issued a Statement of Objections giving notice of a proposed infringement decision under the Competition Act 1998 to BA and VAA. See press release OFT takes next procedural step in airline fuel surcharges case (8 November 2011).
- Factors taken into account as part of the OFT's reassessment of the level of fine include recent case law of the Competition Appeal Tribunal regarding the calculation of penalties under the Competition Act 1998, together with the level of co-operation provided by BA, in particular, following the conclusion of the original early resolution agreement in 2007. As a result, the fine has been reduced to £58.5 million.
- The text of the OFT's decision is expected to be published on the OFT website later this year following the redaction of confidential information. The detailed reasoning behind the penalty calculation is set out in full in the decision.
- The OFT separately brought criminal proceedings for the cartel offence under the Enterprise Act 2002 against four current and former BA executives. In May 2010, these proceedings were discontinued and the individuals were acquitted. The decision in the passenger fuel surcharge case relates only to the civil investigation and the infringement of the Chapter I prohibition and/or Article 101 TFEU by BA and VAA. It is entirely separate to the earlier criminal proceedings and does not concern the application of the cartel offence to the conduct of any individual.
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