UK: Collapse of OFT's Case Against One Current and Three Former BA Executives

The Office of Fair Trading (OFT) announced on 10 May 2010 that it has dropped its criminal proceedings against one current and three former executives of British Airways (BA) following a significant collapse in the prosecution's evidence. This case was a high-profile attempt by the OFT to secure its first contested criminal prosecution under rules introduced in 2003. The withdrawal of the OFT's case could have major implications for future investigations and for the OFT's enforcement priorities.

The cartel offence: a precedent for the OFT

The case related to alleged price-fixing for fuel surcharges between 2004 and 2006 and represents the first criminal investigation carried out by the OFT in order to secure a prosecution against a not-guilty plea. The OFT's ability to bring criminal proceedings was introduced in June 2003 (the so-called cartel offence under the Enterprise Act 2002). The cartel offence, being part of the criminal law, demands a higher standard of evidence to establish guilt.

The original allegations against BA under the mainstream civil competition rules, which led to a fine of £121.5m in 2007, arose when Virgin Atlantic blew the whistle on BA. This in turn meant that Virgin received full immunity from penalties (civil or criminal) provided it cooperated with the OFT throughout the process.

How did the evidence collapse?

The trial against the four executives began in Southwark Crown Court on 26 April 2010 and a substantial amount of previously undisclosed 'electronic material' then came to light. Amongst this material was an email which suggested that Virgin had increased its fuel surcharge prices without consulting BA, which undermined the OFT's arguments that the two airlines had colluded on price.

The OFT has argued that, had the new material been uncovered earlier, there is every prospect that the trial could have proceeded. However, given that the trial had already begun and given the volume of the new material, the OFT accepted that to continue the case would potentially be unfair to the defendants. Following this week's developments, the four defendants have been formally acquitted. Furthermore, the OFT has suggested that the discovery of the new material may have an impact on Virgin's immunity as Virgin omitted to disclose such a significant number of emails (but the OFT has stressed that no inferences or conclusions should be drawn at this stage).

After the collapse of the case, the defence for one of the executives accused the OFT of 'incompetence' and said that the regulator was 'not fit for purpose', sentiments which have been echoed in press coverage. The OFT responded to the negative statements made against it by the defence saying that it considers the remarks to be 'without merit and wholly unwarranted'. The defence later unreservedly withdrew the remarks.

The implications for the OFT

As this was the first major criminal investigation by the OFT, it is from a purely legal perspective disappointing that there is no indication of how the Courts will view penalties in this type of action.

In practical terms, however, there may be important lessons to be learnt for the OFT in future investigations, given the potential impact on the OFT's case prioritisation policy and on the future enforcement of the competition rules. In selecting other attempted prosecutions to bring under the cartel offence rules, the OFT may, for instance, review its approach to evidence and carefully assess whether to ask the Serious Fraud Office to pursue a case (the SFO having the power to prosecute serious or complex criminal cases) or whether the OFT should develop its own specialised criminal enforcement team.

The OFT's general press release can be found here and the response to the defence's criticism here .

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 14/05/2010.

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