OFT fines BA £121m for price-fixing
By Michael Peel and Kevin Done in London and Stephanie Kirchgaessner in Washington
Published: July 31 2007 22:58 | Last updated: August 1 2007 14:47
British Airways was on Wednesday hit by a record £121.5m fine from the UK Office of Fair Trading for price-fixing in transatlantic passenger and worldwide cargo fuel surcharges.
The OFT said BA admitted that between August 2004 and January 2006, it colluded with Virgin Atlantic over surcharges that were added to ticket prices in response to rising oil prices. Over that period, the surcharges rose from £5 to £60 a ticket for a typical BA or Virgin Atlantic long-haul return flight.
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Virgin Atlantic is not expected to pay any penalty because it came forward to the OFT with information about price fixing. BA admitted in May that it had breached its own rules covering its compliance with competition law regarding fuel surcharges.
The penalty is the highest ever imposed by the OFT for infringements of competition law.
Philip Collins, OFT chairman, said: “This case, and the substantial penalty imposed, will send an important message to corporate boards and business leaders about our intention to enforce the law, and serves to remind companies of the substantial risks involved if they are found to engage in such behaviour.”
Willie Walsh, BA chief executive, said in a statement: ”I want to reassure our passengers that they were not overcharged. Fuel surcharges are a legitimate way of recovering costs.
”However this does not in any way excuse the anti competitive conduct by a very limited number of individuals within British Airways. Anti-competitive behaviour is entirely unacceptable and we condemn it unreservedly.”
The OFT investigation was conducted in parallel with a similar case brought by the US Department of Justice. The investigations were separate but the two agencies have consulted each other closely.
The DoJ action would cover allegations of illegal price-fixing of long-haul fuel surcharges on air cargo and a separate probe into alleged price-fixing of fuel surcharges on passenger fares, one person familiar with the case said.
Combined, the two investigations could result in BA being fined around £350m. The airline said on Wednesday that figure was consistent with a provision that it has already set aside and added that it was in plea negotiations with the US regulator.
The DoJ fine is expected to be announced later on Wednesday.
The OFT’s criminal probe into the allegations will continue.
The regulator’s civil powers allow it to fine companies up to 10 per cent of their worldwide sales, which in BA’s case reached £8.5bn last year.
BA faces further investigations over the cargo case in Brussels, Australia, Canada, New Zealand and South Africa, as well as civil litigation in the US, Australia and Canada. The DoJ and OFT could also take action against individuals allegedly involved in the passenger and cargo cases.
The gravity of the price-fixing allegations for both BA and some of its staff became apparent last October, when Martin George, previously seen as a candidate to become chief executive, resigned as commercial director over the fall-out from the passenger surcharges case. Kingsley Napley, Mr George’s law firm, declined to comment on Tuesday.
European and US antitrust officials first raided the offices of British Airways, Lufthansa, Air France-KLM, Cargolux and other air cargo companies as part of a global cartel probe in February last year.
In September, Germany’s Lufthansa said it had agreed to pay $85m (£41.8m) to settle class-action lawsuits pending in the US.
FT.com