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News that the Office of Fair Trading has decided that elite public schools’ collusion on fees broke competition law has come as something of a disappointment in the common rooms and bursars’ offices.

Some 50 schools were found to be exchanging information about their fees via a questionnaire known as the “Sevenoaks survey”, the answers to which were then collated, tabulated, and updated between four to six times a year as schools prepared and finalised their fee increases for the next year. The ruling surprised the schools that always considered themselves fiercely competitive – particularly at fives and lacrosse.

A spokesman for Westminster, school motto Dat Deus Incrementum (God grant us increases), said: “We are profoundly disappointed with the ruling. This is a Kafkaesque situation. We had no idea we were no longer allowed to engage in price-fixing cartels. We strenuously reject the notion that there was collusion between us to ratchet up fees.”

Meanwhile over at Eton College, motto Floreat Etonia (show me the money) a spokesman voiced his “profound disappointment” at the “Kafkaesque” ruling, adding that the school “strenuously rejected” the idea that it engaged in any kind of collusion with its rivals. He added that as soon as the schools realised they were breaking the law they all agreed to stop.

“This was a scandalous waste of money by the OFT. Who will it target next? Charity shops and care homes?”

At Winchester College (manners makyth moolah) a spokesman was at pains to deny all talk of collusion. “This is a Kafkaesque situation,” he said, adding: “They’ll be after charity shops and care homes next.”

At Rugby (Per Ardua ad Astra: if paying is a hardship sell your car) the governing council was mortified by the finding of collusion, which it called “Kafkaesque”, while Ampleforth (Non Nobis Domine: for God’s sake don’t put it in writing) wondered whether “charity shops and care homes will be next”.

The sense of shock was also reflected in the comments of Benenden (Morituri de Salutamus – we who are about to charge, salute you), Harrow (Stet Fortuna Domus Donorum dei Dispensatio Fidelis – we welcome in good faith donations in all major denominations), and Cheltenham Ladies College (Non Fortnum et Mason – never knowingly underbilled). “It’s a Kafkaesque situation,” they said.

A spokesman for the Independent Schools Council – motto: In Camera Ultra Vires – rounded on the Office of Fair Trading for beginning a costly inquiry into activities the schools already stopped once they came to understand that price-fixing behaviour was not only illegal but also bad form.

However, the OFT (Hinc Illae Lacrimae: who’s sorry now?) rejected the criticism, adding that the fact that being seen to bash toffee-nosed public schools would play well with the Labour government (motto: O tempora o mores: It’s in the Times; it’s in the Mirror) had not been a consideration when it decided to launch an all-out inquiry, rather than simply order the schools to stop their collusion.

A spokesman for the OFT said fines might well be forthcoming but that they would not be excessive. It would make up its mind on appropriate penalties after consulting widely, with the Financial Services Authority and others, to ensure its fines did not run ahead of other leading regulators.

FSA gets tough

The Financial Services Authority is putting 25 leading London hedge funds under daily scrutiny.

In the words of the FSA, the hedge funds can expect regular, if not daily chats, with what the regulator quaintly calls a “relationship manager” – which sounds rather like the kind of contact that exists between ex-cons and parole officers: “Keeping your nose clean, are you? Not mixing with any convertible arbitrageurs, I hope.”

The FSA’s concern is the systemic disruption these previously loosely regulated, fast-moving, often highly leveraged funds could create in certain markets where they hold particular clout.

But is this six-person FSA team enough to deal with such huge potential risks? For a start they seem badly overstretched. After all, the FSA has signally failed to infiltrate the hedge-fund community and has little human intelligence on its activities.

One imagines Hector Sants, the FSA’s “top cop” on wholesale and institutional markets, taking a leaf out of Sir Ian Blair’s book.

So after a quick speech about how the systemic threat from these funds is “chilling”, we could then look forward to demands for sweeping new powers, including the right to detain fund managers for 90 days without charge; a new offence of glorifying collateralised debt obligations and extending the reach of the crime of incitement to credit swap.

Copyright The Financial Times Limited 2017. All rights reserved.
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