Tony Halpin, Education Editor of The Times, examines the implications of today's Office of Fair Trading ruling that 50 top public schools breached the Competition Act by exchanging information on fees - and the possible redress for parents.

What has the Office of Fair Trading found the schools guilty of?

After an inquiry lasting more than two years, the Office of Fair Trading has issued a provisional Statement of Objections finding that 50 fee-paying independent schools have broken competition law by exchanging information with each other about their proposed price increases and fee levels over a period of three years from 2001/02 to 2003/04.

The schools participated in the "Sevenoaks Survey" in which bursars sent each other updated information between four and six times a year as they prepared their annual recommendations for fee increases for their governing bodies.

The OFT concluded that this activity "resulted in parents being charged higher fees than would otherwise have been the case". It has given schools until March to make representations before reaching a final decision on any fines next year.

Do the schools accept any wrongdoing?

The Independent Schools Council (ISC), which represents the fee-paying sector, has consistently argued that schools were unaware that the practice of sharing information about fees and costs, which had gone on for years, was now illegal. Until 2000, schools, as charities, were specifically exempt from the provisions of competition law.

It says that schools ceased the practice as soon as they were informed that the law had changed. However, it also accused the OFT yesterday of "a scandalous waste of public money" in conducting the inquiry and of having "no understanding of the charitable ethos of sharing information".

The ISC has characterised the regulator’s findings as an "attack" on the charitable sector as a whole. It has said that it will argue vigorously against the imposition of any fines.

How much might the fine be for a school such as Eton College?

The OFT can fine an enterprise a maximum of 10 per cent of its worldwide turnover in the business year immediately preceding the one in which it is found to have breached the Competition Act.

In Eton’s case, this could be as much as £3 million, while Winchester College could be liable for a fine of up to £1.5 million. However, the OFT has indicated that it does not expect any penalties to be "at the top end of the range".

A number of schools have asked for leniency after cooperating with the investigation. Which ones and how much will they save themselves in fines?

Both Eton and Winchester have sought a "plea bargain" deal with the OFT, in which any fines would be cut by 50 per cent in return for turning "supergrass" and cooperating fully with the regulator’s investigation.

The OFT’s rules state that "leniency" can be offered to the first organisation that comes forward with evidence of cartel activity before the regulator issues a Statement of Objections. Eton and Winchester applied together and persuaded the OFT to treat them as the first applicant for leniency purposes.

The OFT said the collusion resulted in higher fees for parents - will they have any redress?

This is the key question for parents who have been watching the progress of the inquiry. If the OFT, after listening to schools’ representations, concludes that competition law was broken, then it is almost certain to impose fines.

Parents who had children at the 50 schools during the years in question would be able to argue that they had been overcharged and could point to the OFT’s inquiry as conclusive evidence of this. The schools could then face demands for refunds from parents, backed by threats of legal action for damages suffered as a result of their anti-competitive behaviour.

Parents of children presently at the schools may also be able to argue that the current charges are higher than they otherwise should be as a result of a fee-fixing cartel, and that they too are due a refund.

Equally, the OFT has to balance the need to punish breaches of competition law with the possibility that heavy fines imposed on schools may simply end up being paid by parents in the form of still higher fees. This would inflict additional injury on parents.

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