Fifty of Britain's most famous public schools, including Eton and Harrow, face the possibility of seven-figure fines - and subsequent lawsuits from parents - after the Office of Fair Trading (OFT) ruled that they breached competition law by exchanging detailed information about future fees.

Although the OFT, in a provisional ruling, stopped short of using the word "cartel", the watchdog said an arrangement between the schools known as the "Sevenoaks Survey" breached Chapter 1 of the Competition Act 1998, which covers anti-competitive agreements and concerted practices that restrict or distort competition.

The OFT also said that the arrangement led to parents being charged higher fees than they would otherwise have faced. Fees at the top schools now exceed £20,000 a year after rising some 50 per cent over the past decade.

The provisional ruling is the first step in a lengthy procedure that is likely to take about a year, but will almost certainly end in the schools being fined. The organisation that represents independent schools dismissed the investigation as a "scandalous waste of public money" and pointed out that all the schools involved were charitable bodies.

Under OFT guidelines, the schools face maximum penalties of up to 10 per cent of their turnover for the three-year period in question, although an OFT spokeswoman said today that was "very unlikely to happen".

The list of schools who took part in the Sevenoaks Survey, run by the bursar of Sevenoaks School, includes most of the country's elite public schools. Apart from Harrow and Eton College, Ampleforth, Cheltenham Ladies College, Shrewsbury, Stowe, Westminster and Winchester also took part in the arrangement.

In a press statement, the OFT said it had made two main provisional findings after one of the watchdog's biggest ever investigations. The inquiry began in June 2003 after The Sunday Times uncovered evidence that school bursars were meeting to discuss future fee increases.

"Firstly, 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," it said.

"The information was exchanged through a survey, known as the ’Sevenoaks Survey’. Between February and June of each year, the schools concerned gave details of their intended fee increases and fee levels for the academic year beginning in September. Sevenoaks then collated that information and circulated it, in the form of tables, to the schools concerned.

"The information in the tables was 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.

"Secondly, this regular and systematic exchange of confidential information as to intended fee increases was anti-competitive and resulted in parents being charged higher fees than would otherwise have been the case.

"The OFT has given the parties 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.

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