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BA fined £270m for price-fixing

01/08/2007

British Airways (BA) has been fined more than £270 million by authorities on both sides of the Atlantic for price-fixing.

Following an earlier record £121.5 million fine from the Office of Fair Trading (OFT) for a breach of competition law, the US department of justice has levied a $300 million (£148 million) penalty upon the airline.

BA says it has already set aside £350 million to cover the costs of fines after admitting that it had colluded with rival airline Virgin Atlantic over surcharges that were added to ticket prices in response to rising fuel costs.

The additional penalty imposed by US authorities comes after BA managers entered into a plea agreement with officials, the airline said in a statement today.

According to the OFT, passenger fuel surcharges rose from £5 to £60 per ticket for a typical BA or Virgin Atlantic long-haul return flight between August 2004 and January 2006, the period during which the former admitted to colluding with its rival over prices.

"British Airways accepts the OFT's finding that on at least six occasions the two companies discussed and/or informed each other about proposed changes to the level of the surcharges, rather than setting levels independently as required under clear and well-established competition law principles," said the OFT.

The regulator said that Virgin Atlantic would not be expected to pay a penalty for its behaviour because it qualified for immunity under the OFT's leniency policy as a result of coming forward with information about the price-fixing.

Announcing the conclusion of its civil investigation into BA's conduct, the OFT said the fine imposed on the airline demonstrated its determination to "deal vigorously" with anti-competitive behaviour. A criminal investigation by the regulator into whether charges should be brought against individuals involved in the BA case is still ongoing.

Commenting on today's ruling, 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."

In response BA insisted that it viewed anti-competitive behaviour as "entirely unacceptable".

"I want to reassure our passengers that they were not overcharged. Fuel surcharges are a legitimate way of recovering costs," said BA chief executive Willie Walsh.

"However this does not in any way excuse the anti competitive conduct by a very
limited number of individuals within British Airways," he added.

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