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BA’s price-fix fine reaches £270 mln

British Airways has been fined some £270 million ($546 million) after it admitted collusion in fixing the prices of fuel surcharges.

The US Department of Justice (DoJ) has fined it $300 million (£148 million) 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 (OFT) to fine British Airways £121.5 million, 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.

The OFT and the DoJ began investigating BA’s price-fixing in June 2006. BA revealed in May that it had set aside £350 million 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 - were the second largest ever dispensed by the department. 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 CEO Willie Walsh said 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 behavior is entirely unacceptable and we condemn it unreservedly,” 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.”

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 behavior,” 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.”

BBC business editor Robert Peston said that 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.” (