Mr Branson also called for the appointment of Department of Trade and Industry inspectors to investigate BA's treatment of rivals.
The demand was backed by John Prescott, Labour's transport spokesman, who called on John MacGregor, Secretary of State for Transport, to use his powers under a new European Community law to investigate BA's 'moral fitness' to hold an operator's licence.
Virgin said the talks foundered because BA insisted that any settlement must include a commitment by Mr Branson not to refer to the dirty tricks affair again. He said: 'Censorship and true competition are incompatible.'
However, BA denied it had sought to gag Mr Branson, saying: 'We have simply asked them to agree not to rake over the events of the past and to join us in making it clear that those events are behind us.'
Virgin is likely to decide on fresh court action in the next two weeks. It is almost certain to bring the case in the United States, where it could win damages of tens of millions of pounds under anti-trust laws.
The talks began in January following a climbdown by BA in the High Court, where it publicly apologised to Virgin and paid pounds 610,000 damages and costs of pounds 3m in settlement of a libel action. Mr Branson had agreed to accept pounds 9m in compensation from BA and to return documents relating to the affair. But he said the new gag would have denied Virgin the right to defend itself.
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