BA fine underlines need for strict policies, says expert

A competition law specialist has said that the fines, the biggest ever imposed by the Office of Fair Trading (OFT), signal that it is not enough for a company simply to have a competition law policy.

"British Airways were fined before in the 1990s in relation to competition law. They had a very strict approach to competition law because of that," said Alan Davis, a competition law specialist with Pinsent Masons, the law firm behind OUT-LAW.COM. "The shock is that this happened to BA because they were a competition law compliant company on the whole."

"It shows that it is not enough to have a competition law policy, it can't just sit on the intranet," said Davis. "It has to be read by everyone, and understood. There needs to be ongoing training, and there must be support for it from management."

BA was found to have engaged in price fixing on fuel surcharges added to ticket prices from 2004 onwards as fuel prices rose. BA and Virgin were found to have co-operated on the amount and the timing of surcharges.

Both companies now face the prospect of potentially massive payouts in the US in class action lawsuits as flyers seek to recoup what they overpaid. A suit has already been filed by one law firm.

Class action suits do not exist in the UK in the same form. Collective legal redress could be sought by a consumer body through a consumer representative action in the Competition Appeals Tribunal, said Davis. Any payouts won here, though, would be used for the benefit of all consumers and would not go directly to those who flew, though.

Another mechanism is the Group Litigation Order, but it is at the discretion of the courts to group together similar existing law suits, said Davis. "I don't think we would have individual consumers seeking to go to the courts in the first place for the sake of £30," he said.

Two former BA employees are under criminal investigation by the OFT and the Serious Fraud Office and could face jail under a new competition law that came into force in 2003. "They have to show that they dishonestly fixed prices and that is a difficult condition to satisfy, it is a subjective test," said Davis. "The OFT hasn't had a conviction under the new law yet."

Virgin was not fined by either US or UK authorities because it approached authorities first with evidence of the price fixing. Though some observers have been surprised that the airline escaped with no fines, Davis said that it such immunity is a normal part of competition investigation policy.

"It is a policy that the UK and European Commission saw working in the US. It has worked incredibly well. What successful investigations there have been in recent years have used whistle-blowers," he said.

The fines related to surcharges on seats on passenger aircraft and also on cargo flights. The cargo investigation involves a greater number of airlines, up to a dozen from around the world.