Office of Fair Trading Investigation into Charitable Independent Schools

Dear Parents,

OFFICE OF FAIR TRADING INVESTIGATION INTO CHARITABLE INDEPENDENT SCHOOLS

You will recall I wrote to you last November concerning the OFT investigation into the exchange of fee information by 50 charitable schools, including Tonbridge. In recent weeks there has been a series of meetings between a Steering Group appointed by the Independent Schools Council (ISC) on behalf of the schools concerned and the OFT. The proposed outcome was to remain in strict confidence pending acceptance by all the schools and remains open until 31 March when, assuming acceptance, a joint ISC/OFT press release was planned. However, the proposed settlement was disclosed, with commendable accuracy, by the Daily Telegraph this last Saturday. It is therefore appropriate that I should tell you the present situation and our intended way forward.

The exchange of information was entirely lawful for many years with charities being actively encouraged to share information as a means of improving efficiency and securing best practice. The law was changed by the Competition Act 1998, which removed the previously existing statutory exemption for educational institutions. The preponderance of legal advice is that, from March 2001, the previously lawful exchange of information infringed the Competition Act. However, none of the normal consultation ahead of legislative change applied: there was no reference in either Houses of Parliament to the removal of the statutory exemption nor was there any consultation with schools or with their representative bodies. With no warning that the law might change or had changed, exchanges of information openly continued.

Once schools became aware of what was seen as a technical and wholly inadvertent breach of the Act, the practice ceased immediately, and was followed by a strict Code of Conduct agreed with the OFT on what information could be lawfully exchanged. Against this background, you may agree there are strong moral and legal arguments in favour of no action being taken against the schools or for the imposition of any penalty.

Despite this the OFT has decided to pursue this action and, although there are arguments of law and principle for taking our case through the courts, your Governing Body is minded, in the interests of the charity, to accept the settlement reached on behalf of the 50 schools by the Steering Group spoken of above. This entails taking a pragmatic decision to bring the matter to an end, rather than engaging in protracted and expensive litigation. I anticipate that the Skinners' Company, which is the other relevant 'legal entity' in this case, will take a similar view.

Under the terms of the proposed settlement each school will pay a nominal penalty of £10,000. The 50 schools collectively would then pay into a charitable fund an average of £12,000 per school for each of the next five years. That amounts to an average £60,000 payment per school, amounting to £3 million in total. Compared with the costs of litigation, which are not merely financial but are also very heavy in management time, your Governing Body considers it right to end the matter at this stage and on those terms.

Critically, the OFT make no finding on whether the exchange of fee income had any effect on fee levels. We have argued from the beginning that the exchange of information had either no effect or a beneficial effect, and independent analysis supports this view. The OFT's decision gives no support for any contention that fees have risen more than they otherwise would have done.

The proposed settlement allows the school to concentrate on its charitable and educational functions and to move on from an issue that has occupied too much time over nearly three years.

Yours sincerely,

Graham Thompson