Independent school fee fixing scandal

In September 2005, fifty prominent independent schools in the United Kingdom were found guilty of operating a fee-fixing cartel by the Office of Fair Trading. The OFT found that the schools had exchanged details of their planned fee increases over three academic years between 2001-02 and 2003-04, in breach of the Competition Act 1998.

The Independent Schools Council said that the investigation had been "a scandalous waste of public money".^[1]

Evidence

Emails showed that the schools were routinely swapping information about their costs and intended fee changes, as often as four to six times a year as part of a Sevenoaks' Survey. The investigation was prompted by the September 2003 leak of emails to The Times. Originally from Bill Organ, Winchester College's bursar at the time to the Warden of the College, they contained details of 20 schools' fees and the phrase:

Arguments in support of the Schools

The Independent Schools Council felt that the action was disproportionate. It was argued that sharing information was common amongst charities (as the schools are classified) and that the aim was to keep fees as low as practicably possible. Until 2000, when the Competition Act 1998 displaced the Restrictive Trade Practices Act 1976, the practice was legal as the schools were exempt from the anti-cartel laws that apply to businesses.

Jean Scott, the head of the Independent Schools Council, said that independent schools had always been exempt from anti-cartel rules applied to business, were following a long-established procedure in sharing the information with each other, and that they were unaware of the change to the law (on which they had not been consulted). She wrote to John Vickers, the OFT director-general, saying, "They are not a group of businessmen meeting behind closed doors to fix the price of their products to the disadvantage of the consumer. They are schools that have quite openly continued to follow a long-established practice because they were unaware that the law had changed."^[2]

Jonathan Shephard, also of the ISC, stated: "This is a Kafkaesque situation... the law seems to have changed without Parliament realising - and without the independent sector being consulted - contrary to the government's own strict guidelines on consultation. Schools are now being held liable for breaking a law which no-one knew applied to them". He added: "The OFT's broad assertion that sharing information produced higher fees is highly contentious."^[1]

Schools involved

For Truro and Sedbergh Schools, the OFT's preliminary findings are that they took part in the Sevenoaks Survey in only two of the three years investigated.

Resolution

The OFT released a 500-page statement which was summed up thus:

All the schools involved were given fines of only £10,000 each for their infringement (out of a possible 10% of total income) but together agreed to pay £3 million into a trust fund aimed to benefit the pupils attending the schools during the period involved ; it has been stressed that the trust fund is not a fine. The schools will pay equal instalments, finishing in 2010, totalling around £70,000 each. Eton and Winchester obtained 50% cuts in fines in return for co-operation in the investigation of other schools.

The impact of The OFT's case on day and boarding fees set subsequently by the schools has been analysed. Research indicates that the case had an insignificant impact on fees levels.^[3]

References