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Company British Airways [Company Info]
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Date Issue Title
1st Aug 2007 Questionable Practice BA's price-fix fine reaches $550 million

British Airways has been fined about $550 (270m) after it admitted collusion in fixing the prices of fuel surcharges.

The US Department of Justice has fined it $300m (148m) for colluding on how much extra to charge on passenger and cargo flights, to cover fuel costs.

It followed a decision by the UK's Office of Fair Trading to fine BA $250m (121.5m), after it held illegal talks with rival Virgin Atlantic.

Surcharges were added to passenger fares in response to rising oil prices.

Virgin has been given immunity after it reported the collusion and is not expected to be fined, the OFT said.

BA now faces the possibility of legal challenges by customers on both sides of the Atlantic who believe they lost money as a result of the collusion.

The airline could face multiple lawsuits for damages in the US from aggrieved passengers.

The OFT and the DoJ began investigating BA's price-fixing in June 2006.

BA, which made a 611m profit last year, revealed in May that it had set aside 350m to cover fines and the costs of legal action.

It is the first time that the UK and the US have simultaneously brought action against a company.

The DoJ said that the fine to BA - and another given to Korean Airlines - was the second-largest dispensed by the department to date.

The fines will end the civil case against BA, but a criminal investigation is still continuing, and the OFT said no conclusions could be drawn about whether charges against individuals would be brought.

Last October, BA's commercial director, Martin George, and communications chief, Iain Burns - who had been on leave of absence since the inquiry began - quit the company.

BA had colluded with Virgin Atlantic on at least six occasions between August 2004 and January 2006, the OFT said. During that time, surcharges rose from 5 to 60 per ticket.

BA's chief executive Willie Walsh insisted that passengers had not been overcharged because fuel surcharges were "a legitimate way of recovering costs".

However, he acknowledged that the conduct of some of the carrier's employees had been wrong and could not be excused.

"Anti-competitive behaviour is entirely unacceptable and we condemn it unreservedly," Mr Walsh said.

"We have a long-standing competition compliance policy which requires all staff to comply with the law at all times.

"I am satisfied that we have the right controls in place. However, it is deeply regrettable that some individuals ignored our policy."

Scott Hammond of the DoJ's antitrust division said that "virtually every American business and consumer was impacted by these crimes".

"American companies rely on competitive shipping rates to export their goods to foreign markets, American consumers rely on imports for so many consumer and household goods, American families flew these airlines on international destinations.

"In every instance American businesses and consumers ended up paying more as a result of these crimes."

OFT chairman Philip Collins said that the hefty fine would "send an important message" to companies and business leaders about its intention to enforce the law.

"This serves to remind companies of the substantial risks involved if they are found to engage in such behaviour," he said.

Virgin Atlantic said that it had informed the OFT as soon as its lawyers were made aware of the nature of contacts that had occurred between individuals from the two airlines.

"We take complying with competition laws extremely seriously and regret that contacts were made between the two companies," it said.

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

The collusion between BA and Virgin Atlantic was "as blatant a breach of competition law as it's possible to imagine".

"This was not a careless accident. The two big birds... were not competing properly on price over an extended period: they were giving each other comfort that they would not undercut each other on the fuel surcharge."

He added: "Virgin won't pay a penny in fines and actually emerges as a winner, since all the opprobrium of the rule-breach has been heaped on BA."

Related Company Press Release

Other Reports on British Airways
Date Issue Company Report
7th Aug 2008 Fraud Investigation British Airways BA bosses in price-fixing charge
26th Dec 2007 Other Issue British Airways BA accused over air cargo cartel
17th Dec 2003 Questionable Practice British Airways British Airways to eliminate 5,000 office staff
16th Oct 2003 Questionable Practice British Airways Questionable Advertising

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