Skip to main contentSkip to navigationSkip to navigation
Willie Walsh

BA fined £270m for price fixing

This article is more than 16 years old

British Airways was today fined £270m in a dual action by the UK and US competition authorities, after admitting price fixing on fuel surcharges on its long-haul flights.

The US Department of Justice this afternoon imposed a penalty of $300m (£148m) on the group, just hours after a £121.5m fine was levied on the airline by the Office of Fair Trading.

The OFT fine is the biggest-ever penalty it has imposed on a company for infringements of competition law and, said the OFT, demonstrates its determination to "deal vigorously" with anti-competitive behaviour.

The airline had admitted that, between August 2004 and January 2006, it colluded with Virgin Atlantic over the surcharges added to ticket prices in response to rising oil prices. During that period, the extra charges soared from £5 to £60 a ticket on long-haul return flights.

It opens the way for passengers who believe they have been ripped off by BA to launch civil claims against the airline. As the amounts involved for individual passengers are relatively small, however, it is likely that any action would be led by a consumer group.

Earlier this year the consumer group Which? launched legal proceedings against JJB Sports to sue for damages on behalf of its customers. The retailer was one of seven companies fined by the OFT in 2003 for fixing the price of England and Manchester United football shirts sold between 2000 and 2001.

A spokeswoman for Which? said its lawyers are looking at the BA case but no decision has yet been taken on whether it will launch action against the airline.

Virgin, which blew the whistle on BA, escapes any fine after being granted immunity under the OFT's leniency policy.

BA chief executive Willie Walsh said today that while fuel surcharges are "a legitimate way" of recovering costs, "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," he added.

He said he was satisfied that the group has the right controls in place, and that it was "deeply regrettable that some individuals ignored our policy".

The OFT said that on at least six occasions Virgin and BA discussed or informed each other about proposed changes to the surcharges, rather than setting levels independently as required by competition law.

Virgin Atlantic said today it "regretted" the contacts with its rival and had informed regulators "as soon as our legal team was made aware of the nature of contacts that had occurred between some individuals at British Airways and Virgin Atlantic."

It added: "We take complying with competition laws extremely seriously and regret that contacts were made between the two companies.

"As a criminal investigation is continuing, we are unable to give further details until the regulators publish their full findings."

Philip Collins, the chairman of the OFT, 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.

Across the Atlantic, Attorney General Alberto R Gonzales said the DoJ is committed to "vigorous antitrust enforcement and will continue to bring to justice those who fix prices and thereby deprive the American public of the benefits afforded by a truly competitive market".

He added: "International law enforcement cooperation is crucial in prosecuting global cartels such as these, and today's enforcement actions represent the successful coordination between the US and the UK's Office of Fair Trading."

Passengers pay hundreds of millions of dollars in ticket prices each year, and the conspiracy raised the price on virtually every ticket purchased between 2004 and 2006 for the conspirators' long-haul international flights, the department said.

The DoJ, which also took action against Korean Air, highlighted BA's part in a conspiracy to fix air cargo prices, saying its fuel surcharge on shipments to and from the United States changed more than 20 times and increased from four cents per kilogram of cargo shipped to as high as 72 cents per kilogram.

"When British Airways, Korean Air and their co-conspirators got together and agreed to raise prices for passenger and air cargo fares, American consumers and businesses ended up picking up the tab for their illegal conduct," said acting associate Attorney General William W Mercer.

"Today's enforcement actions demonstrate that the anti-trust division will investigate and prosecute illegal cartel activity - here and abroad - in order to ensure that American consumers and businesses are not harmed by illegal cartel activities."

BA set aside £350m for the expected fines in May, when it admitted breaking competition rules. It said today that it expects the sum of the combined fines to be consistent with its provision.

Last month it was revealed that Martin George, the former BA executive at the centre of the price-fixing scandal, walked away from the group with payments that could total more than £1.6m.

Mr George quit as BA's commercial director in October after admitting that his department may have attempted to fix fuel surcharges with rivals.

The OFT and DoJ are continuing with their criminal investigation into the conduct of individuals involved in the case.

Andreas Stephan, lecturer in competition law at the ESRC Centre for Competition Policy, believes the OFT is keen to harden public opinion against price-fixing and wants to be seen to be taking a tough stance.

He believes criminal action against individuals involved in the BA case is "highly likely", and could lead to the first prosecution for the offence. He pointed out that, in the US, individuals are routinely convicted and imprisoned for similar offences.

BA shares were trading 3.75p lower at 394p, having been down more than 12p this morning.

Most viewed

Most viewed