BA Fined $550 million

Back on May 18th, I wrote an article on British Airways and charges that they colluded with Virgin Atlantic Airways on fuel charge pricing.  Today the other shoe has dropped with UK and US regulators fining BA a total of $550 million dollars.   

Because Virgin first reported the collusion to UK authorities, under leniency clauses in UK law,  Virgin will not face a fine but still may face a marketing and PR issue if the public perceives that its been abused.   Virgin and BA talked at least six times in 2006 before Virgins legal department found out about the discussions and turned the matter over to the Office of Fair Trade and the US Justice Department.

In a separate incident, Korean Airlines was also charged in fuel price collusion with British Airways.   KAL, BA and Lufthansa were also cited for price fixing on cargo shipments.   

The fine issued by the British Office of Fair Trade is the largest ever issued and was intended to "send a message".

"When British Airways, Korean Air and their co-conspirators got together and agreed to raise prices for passenger and air cargo fares, American consumers and businesses ended up picking up the tab for their illegal conduct," - Acting Associate Attorney General William W. Mercer.

BA knew it was busted earlier in the year and had already reserved a fund of 350 million pounds sterling to account for the fine.   Motivation for the collusion was in response to the rising cost of aviation fuel, a major cost element in airline operations.  Only a small number of BA managers were involved in direct discussions with Virgin and have subsequently left the company.

Eric

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Comments

[Eric]

Tony, I think you presume that the only passengers paying for the artificially high fuel surcharges were Brits. In fact, at least half of any transatlantic passenger flight is occupied by American passengers. Therefore the US has every right to fine BA as its a two way trade.

As for whats done with the money, I have no idea.

As for American govt telling the EU what to do...I seem to recall some massive fines on Microsoft for what was considered anti-competitive behavior and the EU stopping the merger of two American companies, General Electric and Honeywell, a couple of years ago.

As for the war in the Middle East, I prefer we not discuss politics here unless its related to logistics and supply chain.

[Tony Fellows]

Fair enough for the British to fine BA because at least the fine will go into the British treasury pot I presume. But why should a British company pay a fine to the USA - where in the USA does the fine go? - to USA airlines ? Surely this is also anti-competitive behaviour. BA should refuse to pay the fine doled out by the USA - once collected it will only go into funding America's wars in the middle East. I think it's a damn cheek.
I've never heard of an American company paying a fine to Britain - they wouldn't do it. Britain is such a weak country to allow America to continually dictate business regulation. Britain needs to be more like Russia and tell the yanks to take a hike.