MacRoberts Competition Law e-update 26/04/10
AIRLINES MAY BE GROUNDED BY PRICE FIXING CLOUD
There is a dark cloud hanging over the offices of Virgin Atlantic and Cathay Pacific. No, it has nothing to do with volcanic ash - rather, the airlines have found themselves accused of price fixing by the Office of Fair Trading (OFT).
The OFT announced last week that it had issued a Statement of Objections to the airlines, alleging that they had been fixing the price of passenger fares on the London to Hong Kong route. It is claimed that, between 2002 and 2006, employees of each airline had been co-ordinating pricing strategies through the exchange of commercially sensitive information on pricing and other matters.
The arrangement came to light when Cathay Pacific confessed all to the OFT and, as a result of its timely approach to the authorities, it has received 100% immunity from fines. Virgin Atlantic, however, is not quite so fortunate. If found guilty, it could be fined up to 10% of its worldwide turnover and the individuals involved may find themselves the subject of criminal prosecution for cartel offences.
There is a certain irony in all of this. You may recall that, back in August 2007, British Airways was fined a record £121 million for its role in a price fixing scheme with Virgin Atlantic. In that instance, Virgin Atlantic received total immunity from fines because it was first to confess. Now, however, Virgin Atlantic may be on the receiving end of a hefty penalty whilst its alleged cartel partner receives total immunity. It is also worth noting that Cathay Pacific is part of the oneworld alliance which, of course, is led by British Airways!
It is also worth bearing in mind that the earlier infringement (and record penalty) concerned a period which did not exceed 18 months. Here, however, the arrangement is alleged to have lasted for around 4 years.
Virgin Atlantic now has the opportunity to respond to the OFT's case against it and has vigorously denied the allegations that it has broken the competition rules.
It has been a busy time for the OFT. It recently fined two tobacco manufacturers and a number of retailers a total of £225 million for unlawful practices in relation to the retail prices of tobacco products in the UK. Again, there were winners and losers in the leniency race.
Last week's announcement, together with the tobacco fine, again emphasises the importance of
being first to the OFT's door with cartel information. 100% immunity sounds very nice in theory - it sounds even better when quantified in Pounds Sterling saved!
MacRoberts has extensive experience in dealing with cartel investigations and leniency applications. Immediate specialist help is imperative when dealing with the OFT to ensure that your interests are fully protected. We also offer full competition law training, compliance and audit services to help you educate your staff and comply with the rules. Compliance training is regarded favourably by the OFT and its cost is significantly less than any potential penalty! For further information, please contact David Flint or John Reid on 0141 303 1100.
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