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COVID-19 - CMA Warns: No “Free Pass” for Fee-Paying Schools to Fix Prices During CV-19 Crisis

In these extraordinary times, when cooperation amongst some businesses has been deemed necessary by the CMA to protect consumers during the COVID-19 outbreak, fee-paying schools have received a clear warning that they will not qualify for any relief should they infringe competition law, as the sector faces an existential threat.

CMA communication

On 17 April, senior director of the CMA, Howard Cartlidge, wrote to leaders in the private school sector confirming in no uncertain terms that such schools cannot swap competition for collusion to ease the impact of COVID-19 on their businesses. Despite the current environment, practices such as agreeing prices or exchanging commercially sensitive information on future pricing or business strategies with competitors, will not be tolerated.

The letter comes as fee-paying schools seek to stay afloat as some parents are now suddenly unable to pay fees due to a loss of work caused by the crisis; whilst others are unwilling to pay full fees for the substitute online services that many schools are now providing. Rather than offer discounts and refunds at competitive rates, the CMA suspects that some schools are seeking to coordinate the level of discounts and/or refunds on offer to protect their interests - at the expense of their customers. In its letter, the CMA confirmed that such moves risk “…undermining public trust more widely across the independent school sector. It is therefore vital that any poor behavior is nipped in the bud now.”

History

Unfortunately, this is not the first time that the UK competition regulator has had to step in and straighten-out fee-paying schools’ business practices. In 2006, 50 independent schools were found guilty of engaging in very similar conduct on a systematic basis, including the exchange of specific information regarding future pricing intentions. However, on that occasion, the fines imposed by the regulator were limited to just £10,000 per school due to the exceptional features of the case, namely: the voluntary admission of involvement by the schools, an agreement to make an ex gratia payment of £3 million into a fund for the benefit of affected pupils, the fact that the schools were all non-profit making charitable bodies and the fact that the schools put an immediate end to the conduct upon becoming aware that it was unlawful.

Going forward

The 2006 run-in with the regulator should still be on the minds of those leading our fee-paying schools, and any such schools currently involved in the exchange of any price-sensitive information will be expected to know that they are falling foul of UK competition law, irrespective of the circumstances. If those schools do not heed the CMA’s fresh warning, and are subsequently found to have responded to the current health crisis by setting uncompetitive fees, then it may not come as a surprise if the previous levels of leniency shown to this sector are not offered for the second time. Any fee-paying school found to infringe competition law could find itself on the receiving end of fines of up to 10% of their total annual turnover.

Related Lawyers: Kio Gwilliam, Scott Campbell
Related Practice Areas: Competition Disputes, Competition Counseling and Compliance

Related Lawyers