The current investigation of British Airways (BA) by the Office of Fair Trading (OFT) into alleged price fixing of fuel surcharges on long haul flights to and from the UK is a timely reminder of the powers of the OFT. Price fixing expert, Maurice Martin, a partner in the Regulatory and Investigations Group at cartel solicitors Irwin Mitchell said companies must be aware of not just fines against the company which the OFT can impose, but also potential criminal charges that could be made against senior individuals.
Price fixing Cartel
The OFT is an independent statutory body which exists with one primary goal - to make sure that traders compete properly with their rivals for business and that they deal fairly with their customers. In other words it enforces competition law in the UK. Their objective is to make markets work well for consumers.
Price fixing is a Cartel offence. A Cartel, in simple terms, is an agreement between businesses not to compete with each other. The agreement is usually secret, verbal and often informal. It is a criminal offence, relatively recently created by a piece of legislation called the Enterprise Act. Additionally, if the OFT suspect that a criminal cartel offence is being committed they will also involve the Serious Fraud Office, who will take a similarly keen role in the investigation and whose powers are equally wide ranging.
Cartels can occur in almost any industry and can involve goods or services at the manufacturing, distribution or retail level. Some sectors are more susceptible to Cartels than others because of the structure or the way that they operate. For example, where:
- There are few competitors.
- The products have similar characteristics, leaving little scope for competition or quality of service.
- Communication channels between competitors are already established.
- The industry is suffering from excess capacity although is general recession.
The Enterprise Act also gives the OFT powers to investigate companies and the individuals within them suspected of having committed the criminal Cartel offence.
Price fixing solicitors
A formal investigation, such as the one underway at BA, is usually triggered if there are reasonable grounds for suspecting that a criminal Cartel offence has been committed. Sources of information that may lead to reasonable grounds for suspecting that the criminal offence has been committed includes statements provided by employees or ex-employees, former members of the Cartel, correspondence evidencing the existence of a secret Cartel agreement or information provided in an application made by another company or an individual, who were initially under the spot lights, and who have gone down the OFT's various leniency programmes, thereby excluding them from prosecution.
Mr Martin concluded The bottom line is that if you find yourself on the wrong end of an OFT investigation, co-operate with them, make notes of everything said by any of the officials and do not obstruct the investigation in any way.