Private school fee fixing scandal facts for kids

In September 2005, a group of about 50 private schools in the UK were found to have broken the law. They were accused by the Office of Fair Trading (OFT) of working together to set their school fees. This is called a "cartel," where different groups secretly agree on prices instead of competing fairly. The OFT found that these schools had shared information about how much they planned to increase their fees for three school years: 2001-02, 2002-03, and 2003-04. This broke a law called the Competition Act 1998.

The Independent Schools Council, which is a group that supports these private schools, said that the investigation was a "waste of public money."

How the Problem Was Found

The investigation started because of some emails that were leaked in September 2003. Two students from Winchester College shared these emails with The Times newspaper. The emails showed that schools were regularly swapping details about their costs and planned fee changes. They did this often, sometimes four to six times a year, as part of something called the Sevenoaks' Survey.

One important email was sent by Bill Organ, who managed the money for Winchester College at the time. He sent it to the head of the college. It included details about the fees of 20 schools and a very telling phrase: "Confidential please, so we aren’t accused of being a cartel." This suggested that the schools knew what they were doing might be against the rules.

Why Schools Said They Did It

The Independent Schools Council (ISC) felt that the OFT's actions were too harsh. They argued that sharing information was a common practice among charities. Many private schools are considered charities in the UK. The ISC said that the schools were just trying to keep fees as low as possible for parents.

Before the Competition Act 1998 came into effect in 2000, there was an older law called the Restrictive Trade Practices Act 1976. Under that old law, schools were allowed to share this kind of information. The ISC argued that the schools were simply following a long-standing practice and didn't know the law had changed. They also said they hadn't been asked for their opinion when the new law was being made.

Jean Scott, who was the head of the Independent Schools Council, wrote to the OFT director. She explained that schools were not like businesses secretly meeting to fix prices. She said they had openly continued a practice they thought was fine because they didn't know the law had changed. Jonathan Shephard, another leader at the ISC, even called the situation "Kafkaesque." This means it felt confusing and unfair, like they were being punished for something they didn't know was wrong. He also disagreed that sharing information necessarily led to higher fees.

Schools That Were Involved

About 50 private schools were found to be involved in this fee-sharing practice. Here are some of them:

For two of these schools, Truro and Sedbergh, the OFT found they only took part in the Sevenoaks Survey for two of the three years being investigated.

How the Issue Was Solved

The OFT released a long report about their findings. At first, they said that the regular sharing of secret information about fee increases was against fair competition. They believed it made parents pay higher fees than they would have otherwise. However, in the final report, this was changed slightly. The OFT stated that the schools had broken the law by working together to prevent, limit, or change competition in education services. The OFT did not say for sure what the exact effect of this rule-breaking was.

The Independent Schools Council, led by Jonathan Shephard, worked with lawyers and business experts to deal with the OFT. One of their main goals was to make sure any money the schools had to pay would go to a charity, not to the government's treasury. They wanted the money to help children from less fortunate backgrounds. However, the OFT insisted that the money should benefit the students who were attending the 50 schools during the time the rules were broken.

What the Schools Had to Pay

All the schools involved were given fines of £10,000 each for breaking the rules. However, Eton College and Winchester College had their fines cut in half to £5,000 because they cooperated early with the investigation.

In addition to the fines, the schools agreed to pay £3 million into a special fund. This fund was set up to help the students who were at these schools during the period when the fee-sharing happened. It's important to know that this fund was not considered another fine. The schools paid this money in equal parts over five years, finishing in 2010. On average, each school paid about £70,000 into this fund. This amount was roughly 0.7% of the money the schools earned during the years they broke the rules. The percentage was low partly because the schools were not told about the change in the law. Also, the agreement was made because all 50 schools accepted the settlement.

Later studies looked at how this case affected the fees the schools charged afterwards. The research showed that solving the case didn't really change fee levels much. However, it's possible that private school fees increased faster during the OFT investigation because schools were worried about new rules in the future.