OFT Brings Airline Fuel Surcharges Case to Next Step

Jack Humphrey, Regulatory journalist
November 10, 2011 /

The Office of Fair Trading (OFT) has issued a Statement of Objections to British Airways (BA) and Virgin Atlantic in its civil law investigation into alleged collusion over the pricing of passenger fuel surcharges for long-haul passenger flights to and from the UK between August 2004 and January 2006.

The OFT confirmed its investigation into alleged collusion in relation to the pricing of long haul passenger flights to and from the UK on 22 June 2006. The civil procedure was suspended in 2009, pending the outcome of separate criminal proceedings brought by the OFT against a number of individuals under the Enterprise Act 2002. These proceedings were withdrawn in May 2010 and the individuals were acquitted.

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.

Issuing a Statement of Objections is a necessary procedural step before the OFT can proceed to a final decision. The Statement of Objections outlines the OFT’s proposed decision and invites the parties to make representations.

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 of the UK).

Its European counterpart, Article 101 of the Treaty on the Functioning of the European Union, covers equivalent agreements or practices which affect trade between EU Member States.

A Statement of Objections gives notice of a proposed infringement decision under the Competition Act 1998 to the parties involved. It sets out the facts on which the OFT relies, the objections raised by the OFT, the action it proposes to take and the reasons for it.

This document is not a decision document and the parties have the opportunity to make written and oral representations in response to the alleged case set out by the OFT. Such representations (if any) will be considered by the OFT before any final decision is made.

BA reached an early resolution agreement with the OFT, which was announced in August 2007.

Virgin Atlantic was granted conditional immunity under the OFT’s leniency policy in 2006, having brought the matter to the OFT’s attention.

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, 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).

The status of Virgin Atlantic’s immunity has been reviewed following the OFT’s decision in May 2010 to discontinue criminal proceedings against four current and former BA executives for the cartel offence under the Enterprise Act 2002.

The OFT has decided that Virgin Atlantic’s conduct did not amount to non co-operation such as to warrant the revocation of Virgin Atlantic’s immunity. The OFT will publish the reasons for this decision in due course.

 

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