BA fined £121m for price fixing

And the airline, which admitted illegal discussions with its big rival Virgin Atlantic, was facing a second hefty fine - of possibly as much as £230 million - later today from the US Department of Justice (DoJ).

The £121 million from the UK’s Office of Fair Trading (OFT) came after the OFT found that on at least six occasions between August 2004 and January 2006, BA and Virgin discussed and/or informed each other about proposed fuel surcharges on long-haul flights.

They did this rather than setting levels independently. During the collusion periods, the surcharges varied between £5 and £60 for a long-haul return flight.

In the late winter of 2006, Virgin effectively blew the whistle on BA by informing the OFT of what had been going on.

Under the OFT’s leniency policy, a company involved in cartel conduct and which is the first to give full details is eligible for immunity from penalties. So Virgin is not expected to face any fine.

The OFT and the DoJ began investigations in June 2006. Today’s OFT fine is the highest yet imposed for an infringement of competition law.

And BA could still face further charges against individuals in the company, as the OFT and the DoJ are continuing with a criminal investigation into whether anyone dishonestly fixed the level of surcharges.

Once the OFT investigation was announced in June 2006, BA’s commercial director, Martin George, and its head of communications, Iain Burns, both went on leave of absence. They resigned in October 2006.

BA chief executive Willie Walsh insisted passengers had not been overcharged, but condemned anti-competitive conduct by a “limited number of individuals” in the company.

He said: “I want to reassure our passengers that they were not overcharged. Fuel surcharges are a legitimate way of recovering costs.

“However this does not in any way excuse the anti-competitive conduct by a very limited number of individuals within British Airways.”

Mr Walsh went on: “Anti-competitive behaviour is entirely unacceptable and we condemn it unreservedly.

“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.”

Virgin Atlantic said today: “We 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.

“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.”

OFT chairman Philip Collins 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.

“It also illustrates how the OFT’s leniency programme enables companies to eliminate or reduce their exposure to penalties by taking prompt and effective action.”

He went on: “On a broader front, the OFT is committed to strong and effective competition law enforcement, especially in relation to price fixing and other hardcore infringements.

“Our commitment to enforcement emphasises the importance of effective and comprehensive competition law

compliance led by boards and senior management supported by effective risk management systems and corporate guidance.”

The OFT said the corporate admission by BA that it infringed civil competition law did not imply that any individuals dishonestly fixed prices contrary to the Enterprise Act.

“The criminal investigation is ongoing and no conclusions have been reached as to whether criminal proceedings against individuals can or should be brought,” the OFT added.