The surprise element in the double beating meted out to British Airways yesterday was not the American fine of $300 million (£148 million). That was unexceptional in a country where beefy penalties against rogue corporate behaviour are the norm. When the culprit is foreign, as in this case, or unpopular, as when Eliot Spitzer blasted the investment banks for biased research in the wake of the dot-com carnage, the fines and rhetoric may be amplified still further.

But the size of the British fine was unparalleled. At £121.5 million, it is seven times the previous biggest Office of Fair Trading penalty, one handed out to Argos and Littlewoods in 2003 for their part in conspiring to boost the price of toys and board games, including, appropriately Monopoly.

The OFT argues that it is simply following its own tariff ground rules. After taking account of BA’s worldwide turnover (£8.5 billion), the duration of the offences (17 months), the frequency of the offences (at least six dodgy communications), they came up with this – by British standards – eye-popping fine.

They were right to do so. BA’s and Virgin’s claims that no passengers were disadvantaged is disingenuous at best and probably plain wrong. Adam Smith’s dictum, that people of the same trade seldom meet together even for merriment before the conversation turns towards a conspiracy against the public or in some contrivance to raise prices, rings truer than the airlines’ spin.

More importantly, at last a British regulator has come up with a penalty capable of having a deterrent effect on the biggest blue chip. For regulators trying to monitor and police huge chunks of territory, deterrence is the only practical approach.

The price-fixing affair has made a significant dent to BA’s annual profits, which were £611 million before tax last year. That’s enough to give pause to any company director tempted to condone or turn a blind eye to anti-competitive behaviour.

Immunity for whistleblowers – an American approach introduced in the UK in 2000 – has proved to be another powerful weapon. In this case, it persuaded Virgin to dob in BA. Members of other illegal cartels may start to wonder in future whether they can trust their fellow conspirators or whether they should snitch first before they are snitched upon.

Too often unethical companies come to see reprimands and fines from regulators as just another cost of doing business, no different in kind from paying the electricity bill. Their claims that the damage to their reputations is more than enough to improve their behaviour in future don’t seem to stack up in practice. The biggest fines are fish and chip paper within hours and rarely make it outside the business pages.

The OFT, under Philip Collins, its chairman, and John Fingleton, the chief executive, has shown some real ferocity – and it has done so faster than the snail’s pace of the past, too. The entire investigation and settlement was completed in 13 months, compared to the average for an OFT case of more than three years. The criticism that the OFT received two years ago from the National Audit Office and the Public Accounts Committee seems to have worked.

Capitalism ceases to work efficiently when corporate cheats are punished too lightly. The honest majority is disadvantaged. Fines big enough to reduce directors’ bonuses or option profits are the answer. It’s a lesson that the Financial Services Authority and the water regulator Ofwat, to name two regulators a bit too gentle on the fining button, could usefully learn.

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