On 1 August 2007, following the admission by British Airways that it had colluded with Virgin Atlantic over long-haul passenger fuel surcharges, the Office of Fair Trading imposed its biggest ever fine of £121.5 million.  On the same day and a few hours later, the Department for Justice announced further financial penalties payable by BA of $300 million (approximately £147.75 million) – representing $100 million fines relating to passenger fuel surcharges and $200 million for cargo fuel charges. These financial penalties draw a line under the investigations by the UK and US regulators, but leaves open the question of private actions for damages by passengers and corporates for allegations of overcharging, and in respect of possible criminal penalties against those individuals alleged to be the main conspirators.

Criminal Charges

The admission by BA does not imply that individuals have committed criminal offences which require different facts to be proved. The Enterprise Act 2002 makes it a criminal offence for an individual to dishonestly agree with another that two or more corporations will engage in prohibited cartel arrangements including price-fixing. The Act allows the OFT to investigate individuals, to seize documents and to prosecute before our criminal Courts those responsible for any “cartel offence.”  The OFT has already flexed its muscles in bringing criminal proceedings under this legislation, including a case currently coming to trial relating to allegations of price fixing in the sale of generic drugs to the NHS where a number of pharmaceutical companies and their directors face criminal sanctions. In the United States, the announcement following the fine led to a statement from the Department of Justice referring to crimes against US citizens and corporates arising from these activities.  Earlier criminal prosecutions by the US authorities included the price fixing between the auction houses Sotheby’s and Christie’s.  There remains a possibility that the US Authorities will “name and shame” those executives the regulator feels were responsible and the possibility of extradition to the United States for criminal trial.

The Position of Virgin

The legislation on both sides of the Atlantic recognises the need to grant immunity to any participant in illegal activity in return for the reporting of it and cooperating with the regulator.. In this way, Virgin is likely to have immunity in both the UK and US from the regulators.  However, individuals could still face criminal investigation and it is still exposed to the possibility of civil action from passengers and corporate buyers who believe they have lost money.  It is to be emphasised that both airlines maintain that fuel surcharges are a proper pricing mechanism to reflect increases in fuel costs and both strongly maintain that no passenger has been overcharged. 

Actions for Recovery of Money

Customer class actions are far more common in the United States than in England.  A number of recognised specialist US law firms familiar with fronting class actions have already targeted the airlines on behalf of groups of passengers. 

In the UK, there is a specialist forum which allows any person (including corporates) to bring an action for damages where the OFT finds that a relevant breach of competition law has taken place.  Under Section 47A of the Competition Act, any person who has suffered loss may bring a claim for damages before the Competition Appeal Tribunal. If proceedings were brought, there will clearly be an issue about whether loss was suffered  or if passengers were merely paying an appropriate level of fuel surcharge at the time of their flights, which properly reflected an increase in fuel cost.

The CAT has already flexed its muscles in connection with similar claims.. In March of this year, following allegations of abuse of a domination position in the healthcare market, an interim level of damages was set at £2 million, representing 70% of the alleged loss. Other cases in the pipeline include a claim brought by the Consumers Association on behalf of the group of consumers against JJB Sports in connection with the pricing of replica football shirts..  Another pending case arises from price-fixing allegations brought by a group of corporations affected as a consequence.

It will remain to be seen how many passengers will join in class actions particularly where the sums involved are relatively small. Larger corporate buyers of tickets may be in a different position.