City Law In Practice; Cartels

Regulation is becoming more cross-border in nature, as evidenced by the cooperation of the OFT and DoJ in the BA case.

Cartels hit the headlines again this summer when it was discovered that the UKs Office of Fair Trading (OFT) and the Department of Justice (DoJ) in the US are investigating an alleged cartel in the setting of fuel surcharges by the airline industry. It is understood that the OFT and DoJ carried out simultaneous dawn raids on British Airways (BA) in the UK and the US after Virgin Atlantic blew the whistle on its rival.

In 2004 BA and Virgin Atlantic introduced fuel surcharges for long-haul flights in response to higher fuel prices. The surcharges imposed by the two airlines have generally risen in line with each other and this summer both were imposing a surcharge of 35 for their long-haul flights. While it is legal for companies to watch their competitors prices from afar and set their own prices unilaterally, it is prohibited for companies to agree their prices with competitors, as it is alleged that BA and Virgin Atlantic did.

No sector is immune
It is not just the airline industry that has been the uncomfortable focus of competition investigations recently. In October unannounced inspections were carried out in connection with an alleged cartel in the sector for static random access memory chips, or SRAMS, which are used in mobile phones and computers. So far in 2006, the European Commission alone has imposed fines for hardcore cartels totalling e1.3bn (881.84m) in the following industries: bleaching chemicals (e388m (263.2m)); acrylic glass (e345m (234.03m)); road bitumen (e267m (181.12m)); and copper fittings (e318m (215.71m)).

In the UK, the OFT has been carrying out investigations in the construction industry, where companies have allegedly been involved in bid-rigging (colluding with competitors to fix the