10 Nov 2011

(by Andreas Stephan) This week the Office of Fair Trading announced that Virgin Atlantic in the Passenger Fuel Surcharges cartel case. This is despite the criminal case against four BA executives collapsing after thousands of previously undisclosed emails from Virgin were presented to the OFT during the trial. The OFT had previously indicated that Virgin’s immunity would be reviewed following this revelation.

As , the collapse of the BA case highlighted the OFT’s lack of experience as a criminal prosecutor and the perils of relying on evidence gathering from just one leniency applicant. However, it was Virgin’s disclosure of thousands of emails (previously thought to be corrupted or somehow inaccessible) which directly led to the trial collapsing, before arguments relating to the defendant’s alleged guilt were properly addressed in court. This might have occurred even if the OFT had made greater efforts to corroborate the accuracy and completeness of the evidence provided by Virgin. The failed case is thought to have cost the tax payer in the region of £1 million.

So who should get the blame within Virgin? An obvious target would be their competition lawyers, who were presumably in charge of gathering evidence and providing it to the OFT in return for immunity. No doubt, these services did not come cheap. The OFT’s leniency and no-action policy requires co-operation throughout an investigation. It may also be down to human error on the part of an individual technician responsible for retrieving deleted emails. Indeed, Virgin could have kept quiet about the emails, suggesting that their coming clean (albeit with spectacularly bad timing) showed their commitment to continuous and complete cooperation. As Virgin get to keep their immunity, there is no pressure on the organisation (for example from shareholders) to determine exactly how this came about. Indeed, this is the best outcome for the airline. Virgin has kept its immunity while its executives have been spared the pain of testifying in court that they had acted ‘dishonestly’, which would have been necessary to put BA executives behind bars.

The OFT’s decision to continue honouring Virgin’s immunity is understandable given that the civil case against British Airways has not yet been concluded. In August 2007, BA agreed to pay £121.5m as part of an early resolution agreement, but the administrative case against the firm then had to be put on ice pending the outcome of the criminal case. Following the collapse of the BA trial, IAG , “…given the way the criminal trial collapsed, we don’t believe there are any grounds for that level of fine”. The OFT needs the continued cooperation of Virgin to ensure that the civil case against BA sticks. It , four years after BA originally agreed to pay the fine. British Airways will now be examining the evidence and considering their options. If the airline chooses to fight the case, it .