British Airways is to pay a reduced fine of £58.5m after admitting colluding with Virgin Atlantic to fix passenger fuel surcharges on long-haul flights.
The Office of Fair Trading announced on Thursday that the fine it was imposing on BA had been more than halved from the £121.5m proposed in 2007 to £58.5m.
It follows the collapse of a criminal trial against four past and present BA executives in 2010 in relation to the same matter, in what amounted to a serious setback for the UK’s competition watchdog because it was the first contested prosecution for price fixing.
The OFT said the fine had been reduced to £58.5m partly because the regulator now attached greater value to BA’s co-operation during its civil investigation, compared with when the £121.5m penalty was proposed in 2007. The fine was also cut because the OFT had greater clarity on how penalties should be calculated from the Competition Appeal Tribunal and the European Commission.
The OFT concluded that between August 2004 and January 2006, BA and Virgin co-ordinated their fuel surcharges on long-haul flights to and from the UK through the exchange of pricing and other commercially sensitive information.
The surcharges, which rose typically from £5 to £60, were added to ticket prices in response to rising oil prices.
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 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.”
An OFT spokesman said the collapse of the criminal trial in 2010 had not influenced the decision to cut BA’s fine.
The civil investigation was put on hold after the OFT initiated the criminal prosecution of past and present BA executives, and the regulator began reviewing the fine after the trial collapse.
BA, which had objected to the size of the £121.5m fine after the collapse of the criminal trial, said: “We are pleased that this matter, which concerned events between 2004 and 2006, has been settled.”
The airline has no plans to appeal.
The £121.5m fine proposed in 2007 was the highest ever penalty set by the OFT for civil infringements of competition law.
The OFT’s investigation was conducted in parallel with a criminal case brought by the US Department of Justice against BA and Korean Air.
In August 2007, BA pleaded guilty in the US to two counts of engaging in conspiracies with other airlines in relation to price-fixing of fuel surcharges on passenger and cargo flights, and agreed to pay $300m in penalties.
The OFT said its reduced fine of £58.5m was still a record, taking into account how some of its penalties are cut on appeal.
In 2007, the OFT said Virgin was not expected to pay a fine because it had come forward to the OFT and blown the whistle on the price fixing.
However, the 2010 criminal prosecution failed because of the discovery of potential email evidence on Virgin’s computers, and the OFT reviewed whether the airline had honoured a deal to co-operate with prosecutors over the price fixing.
Last year, the OFT said it had concluded that Virgin’s conduct did not amount to non-co-operation, and decided not to levy a fine.
Virgin said it “regrets its involvement in this matter but is pleased that a final determination has been reached”.