Competition Commission vs South African Airways

Description

Competition Commission vs South African Airways: Abstract

Competition Commission vs South African Airways is a case study by John Luiz and Eulalie Metton.

In July 2005, the BA/Comair (Comair) executives were eagerly awaiting the Competition Tribunal’s decision in the case brought by the Competition Commission against South African Airways (Pty) Ltd (SAA), South Africa’s dominant domestic airline. The case had been brought on behalf of the Nationwide Group, a domestic air travel rival to SAA. Nationwide lodged its complaint in October 2000, contending that, since 1999, SAA’s incentives schemes to travel agents were so attractive as to force travel agents into selling SAA domestic travel tickets to the exclusion of Nationwide. Comair had lodged a similar complaint in October 2003, starting from the same period, but alleging that the incentives were continuing. Its case was yet to be heard. Would the Tribunal judge SAA’s schemes as anti-competitive, thus paving the way for Comair’s case?

Epilogue

The Tribunal found SAA in contravention of the Act, that is that its incentive schemes had been exclusionary and that it had abused its dominant position in the market. The Tribunal also noted while it wasn’t necessary to consider the consumer to prove the case: “…it is highly likely that this foreclosure has had adverse effects on consumers… consumers are likely to have made wrong choices of airlines, chosen the wrong prices and, essentially, it has led to the wrong set of outputs.” SAA was ordered to cease the incentive schemes and fined R45 million. At the time, this was the highest penalty yet imposed by the Tribunal.

Multi-part case

• Part A
• Part B: Epilogue (only available with a Teaching license purchase)
• Part C: Competition Commission: 1999–2009 Background Note (only available with a Teaching license purchase)

Teaching objectives

This case intends to generate learning and discussion about the principles of competition theory, especially unfair competition and abuse of dominance. It can be used in conjunction with the Competition Commission Background Note that forms part of this series.

Epilogue

This is the epilogue to the case with the same name. It explains the ruling of the Competition Tribunal and should be used in conjunction with the main case.