News

Charities warned on information sharing

Finance | Ian Allsop | 1 Dec 2005

Charities that exchange information have been warned that they could be caught by competition law after a recent finding by the Office of Fair Trading (OFT) investigation into fee fixing at independent schools.

A provisional report found that 50 of England's top independent schools may have broken competition law by sharing information about fees and were found to be provisionally in breach of the Competition Act 1998 which came into force in 2000.

The OFT's main preliminary finding was that the schools exchanged information about their intended fee increases and fee levels for boarding and day pupils. This regular and systematic exchange of confidential information was said to be anticompetitive and resulted in parents being charged higher fees than would otherwise have been the case.

Until March 2000, schools were specifically exempted from competition law. The schools assert that this exemption was silently removed without debate in Parliament and without any consultation, so they continued to exchange information in ignorance that the law had changed.

Jonathan Shephard, general secretary of the Independent Schools Council, called it a Kafkaesque situation and said schools are now being held liable for breaking a law which no-one knew applied to them. "The moment that schools realised that the law had changed they immediately stopped exchanging information. This was done before the OFT launched its investigation."

He also said that the OFT's broad assertion that sharing information produced higher fees is highly contentious. "Fees in the independent sector rise in line with costs in the maintained sector, for the obvious reason that most of the costs are staff salaries and pensions. Schools, along with care homes and other charities, are concerned to keep their fees as low as practicable. Sharing information is an effective, though no longer legal, way of doing just that."

He concluded that the OFT has failed to understand that charities have no motive for raising more money than is needed for charitable activities and warned that the fact the OFT appears to have no understanding of the charitable ethos of sharing information should worry all charities. "We have no doubt that exchange of information among charities in noneducational sectors still continues - and these are sectors which have never had an exemption from competition law. Will charity shops and care homes be next?"

The schools have until next March to respond. If the OFT decides the law has been broken, it has said it would impose penalties that would reflect the particular circumstances of this case.

Tweet