Office of Fair Trading Investigation into Charitable Independent Schools

Dear Parents,

OFFICE OF FAIR TRADING INVESTIGATION INTO CHARITABLE INDEPENDENT SCHOOLS

You have probably read in the newspapers that the Office of Fair Trading has been investigating the exchange of financial information by charitable independent schools, including our own school.

We have of course taken legal advice, and the advice is as follows:

• Exchange of information is part of the charitable ethos and is actively encouraged by the Charity Commission.
• From at least 1976 until 2000 schools were specifically exempted from the requirements of Competition Law and were freely able to exchange financial information with no restrictions at all.
• The Competition Act 1998, which came into force on 1 March 2000, removed this exemption.
• It is unclear whether the removal of this exemption was intentional. There is no record of the removal of the exemption being referred to in Parliament, either in the House of Lords or House of Commons.
• There is also no record of any consultation with the independent schools sector. The independent sector receives many requests from Government departments for consultation responses, often on quite minor matters. This major issue was not notified to the sector, despite the strict Government Code of Practice which requires this to be done.
• Nonetheless, certain exchanges of financial information after 1 March 2000 may be in contravention of competition law.

Ignorance of the law is of course no defence, but ignorance does seem in this case to have extended to both Houses of Parliament. In the event, schools (including our own school) continued to exchange financial information because they were unaware that the law had changed. They became aware of the change in the law after a Sunday Times article in April 2003. The Independent Schools Bursars' Association (ISBA) immediately advised schools that financial information should not be exchanged. This was followed by a Code of Practice agreed between the Office of Fair Trading and the Independent Schools Council.

Despite the fact that the inadvertent breach of an unknown law was remedied as soon as known, the Office of Fair Trading has continued with its investigation, which has now lasted for more than two years.

The Office of Fair Trading has been strongly criticised in the Press for the length and weight of the investigation, particularly because all the schools are charities, and there is no possibility of any personal gain by anyone.

Nonetheless, the investigation has rumbled on, and is now reaching a critical stage. The Office of Fair Trading has issued so-called Statements of Objections to 50 schools, including our own school, indicating that they believe that there has been a breach of competition law.

The Office of Fair Trading could impose a fine but has indicated that it does not anticipate that any penalty imposed is likely to be at the top end of the range available under the Act. We believe that any fine is wholly inappropriate. We are working closely with the Independent Schools Council and will be making a full and considered response to the Office of Fair Trading, setting out the regulatory failures which have been the main cause of this whole matter. The response is due by 10 March 2006, so we have plenty of time to prepare what we believe is a cogent response. The Office of Fair Trading then has several more months to consider our response, and we hope that they will see the force of our arguments. Meanwhile life continues as usual and we will of course keep you informed of developments.

Yours sincerely,

Graham Thompson