Independent schools have received a stern warning from the competitions watchdog over potential collusion on fees during the coronavirus outbreak, a leaked letter reveals.
The Competition and Markets Authority (CMA) has written to private schools leaders saying it believes “some schools may be engaging in discussions with each other” about discounting or refunding school fees during closures due to the coronavirus outbreak.
It warns that schools found to have breached competition rules face significant penalties, including fines of up to 10 per cent of their turnover.
Such “poor behaviour” must be “nipped in the bud now”, states the letter, sent on 17 April from CMA senior director of cartels Howard Cartlidge to Independent Schools Council chairman Barnaby Lenon.
Coronavirus: Exclusive: Hundreds of private schools ‘bust by Christmas’
Independent schools: ‘Will our pupils ever come back?’
Read: Prep schools expected to cut fees
Copies of the letter were also sent to the Headmasters’ and Headmistresses’ Conference, the Independent Schools’ Bursars Association and the Independent Schools Association UK.
While the current “extraordinary situation” may require organisations to cooperate, “this does not give a ‘free pass’ to businesses to engage in non-essential collusion, even where such businesses are charitable in nature”, says the letter, leaked to campaign group Private School Policy Reform.
The letter comes amid warnings that hundreds of independent schools could be forced to permanently close by Christmas due to the effects of coronavirus.
Some private schools are cutting summer term fees by a third and the sector is expecting to suffer “painful losses”.
The letter says: “While most independent schools are, of course, striving to do the right thing under very challenging circumstances, we have become aware that individuals at some schools may be engaging in discussions with each other about the level of discounts and/or refunds on school fees that could be applied as a result of the impact that the coronavirus (COVID-19) outbreak is having on families and on the schools themselves.”
It continues: “We would like to take this opportunity to remind you as representatives of the independent school sector that all independent schools, in determining the level of discounts and/or refunds that could be awarded on school fees, must act independently.
“In particular, the CMA will not tolerate businesses, including independent schools, agreeing prices (including the level of discounts and/or refunds) nor exchanging with their competitors commercially sensitive information on future pricing or business strategies, where this is not necessary to meet the needs of the current situation.
“Such behaviour would almost certainly infringe competition law.”
The letter also states that the CMA’s predecessor authority, the Office of Fair Trading, found in 2006 that 50 fee-paying independent schools had broken competition law by “exchanging specific information regarding future pricing intentions on a regular and systematic basis.”. Each of the schools were hit with a fine of up to £10,000.
The letter urges the ISC to refresh its guidance to members on compliance with competition law “to help ensure that any harmful practices are identified and stamped out quickly”.
This is so “families can be sure that they are being treated appropriately by educational institutions during these challenging times and compliant schools are not being placed at an unfair advantage by the actions of others”.
The letter says: “We are sure that you share our concerns not just about the unacceptability of anti-competitive practices in the current circumstances, but also the risk of undermining public trust more widely across the independent school sector. It is therefore vital that any poor behaviour is nipped in the bud now.”
Robert Verkaik, co-founder of Private School Policy Reform, said: “Instead of worrying about how much profit they are making, the private schools would serve their communities much better by opening up their classrooms and large playing fields to less wealthy children, both during this crisis and beyond. It is what their founders would have wanted.”
ISC chief executive Julie Robinson said: “Schools, like so many small organisations, are operating under tremendous pressure during this unprecedented crisis and they are trying hard to understand the best way of offering reductions or rebates to support parents during these difficult times.
“We know of no evidence that schools are deliberately sharing information with each other and the CMA acknowledges that schools are striving to do the right thing. This matter has been resolved amicably with the CMA and of course, we continue to brief schools on their responsibilities to comply with all relevant laws and regulations.
“We are grateful for the CMA’s timely reminder, which is entirely in line with the advice the ISC and its constituent associations are giving members.”
A CMA spokesperson said: “Where cooperation amongst businesses or other organisations is necessary to protect consumers in the coronavirus outbreak, the CMA will not take enforcement action.
“But we will not tolerate organisations agreeing prices or exchanging commercially sensitive information on future pricing or business strategies with their competitors, where this is not necessary to meet the needs of the current situation.
“We welcome the confirmation by the independent schools representative bodies to whom we have written that they are urging competition law compliance on their members.”
