On November 9, 2005, the UK’s antitrust regulator, the Office of Fair Trading (“OFT”) announced that it had issued a statement of objections to 50 of the UK’s leading private schools which set out the OFT’s provisional findings that the schools had infringed the Chapter I prohibition of the Competition Act 1998 (which is the UK’s equivalent of Section 1 of the Sherman Act in the US) by entering into an agreement to exchange detailed information about their academic fees.
The OFT believes that the schools concerned exchanged information relating to their intended fee increases and fee levels for boarding and day pupils in relation to the academic years 2001/2002, 2002/2003, and 2003/2004. The information was allegedly exchanged through a survey, known as the “Sevenoaks Survey.” Between February and June of each year, the schools gave details of their intended fee increases and fee levels for the academic year beginning in September. Sevenoaks School then collated that information and circulated it, in the form of tables, to the other schools. The information in the tables was allegedly updated and circulated between four and six times each year as schools developed their fee increase proposals in the course of their annual budgetary processes.
The OFT has provisionally concluded that this regular and systematic exchange of confidential information as to intended fee increases was anticompetitive, and resulted in parents being charged higher fees than would otherwise have been the case.
The OFT has given the schools several months to make written and oral representations on the statement of objections, which the OFT will take into account before making its final decision as to whether the Chapter I prohibition has been infringed, and as to the appropriate amount of any penalties the OFT may decide to impose on each of the schools concerned. The amount of any such penalties will reflect the particular circumstances of this case but at this stage the OFT does not anticipate that any penalty imposed will likely to be at the top end of the range available under the Competition Act (10% of worldwide turnover in the last business year).
The Times newspaper reported that one e-mail containing details of fee increases at 20 other schools was sent to Sir Andrew Large, who is Deputy Governor of the Bank of England and Warden of Winchester College. Sent by Bill Organ, Winchester College’s then bursar, it carried the message: “Confidential please, so we aren’t accused of being a cartel.” The Times also disclosed that Eton and Winchester had sought a “plea bargain” with the OFT to obtain immunity from fines in return for turning “supergrass.”
The Independent Schools Council, which represents all the schools concerned, admitted that they had exchanged information but said the investigation was a “scandalous waste of public money.”
“Exchange of information is commonplace among charities,” the council said. “Until March 2000, schools were specifically exempted from competition law and were freely able to exchange information without restriction. This exemption was silently removed – without debate (or even any mention) in Parliament – and without any consultation with schools or their representatives. Schools continued to exchange information in ignorance that the law had changed.” Jonathan Shephard, the General Secretary of the Council, said schools stopped the practice as soon as they realized it was illegal. That was in May 2003, before the OFT launched its investigation.
In terms of the number of parties involved, this is one of the largest investigations carried out by the OFT to date. In June 2004, in response to a number of questions posed by UK private schools about the application of the Competition Act (apparently following the commencement of the OFT’s investigation), the OFT published guidance on the extent to which independent schools can lawfully exchange information. The provisional findings of the OFT comes as the UK private school sector is under pressure to attract new pupils as the number of pupils attending fell for the first time in a decade this year in the face of rising fees.