It’s more bad news for South African Airways after the Gauteng High Court awarded Nationwide Airlines (now in liquidation) damages of R104.625 million against SAA on 8 August 2016. The judgment was the culmination of a long-running competition law fight and subsequent civil damages claim between Nationwide Airlines and SAA stemming from SAA's abuse of dominance through its succession of travel agency commission schemes. In 2010, the Competition Tribunal found that SAA’s travel agency commission schemes were an abuse of dominance which had an anticompetitive effect in both the travel agency market and in the whole domestic airline market. The Tribunal's decision was confirmed by the Competition Appeal Court.
In terms of section 65 of the Competition Act, anyone who suffers loss or damage because of a prohibited practice may claim civil damages. The claimant has to obtain a certificate issued by the Tribunal or Competition Appeal Court certifying that the conduct which is the basis of the action is a prohibited practice, stating the date of the Tribunal or Competition Appeal Court's finding and the section of the Competition Act in terms of which that finding is made. Section 65(7) of the Competition Act says that that certificate is conclusive proof of its content and binds a civil court. In its judgment handed down on 8 August 2016, the High Court adopted the view that the findings of the Tribunal relating to the anticompetitive effect of SAA’s conduct bind the court, not just the Tribunal’s conclusion that SAA was guilty of an abuse of dominance in terms of section 8(d)(i) during a particular period.
In the end, SAA admitted that its anticompetitive conduct was a delict and the only real dispute between the parties was the amount of any damages payable to Nationwide. SAA claimed that Nationwide hadn't suffered any damages at all because of SAA's anticompetitive conduct. SAA blamed Nationwide’s loss of profits on a host of other reasons including negative market and passenger perception of Nationwide especially relating to the age and safety of its aircraft, SAA's successful Voyager customer loyalty program and the State’s decision to use SAA as a preferred supplier. The case was the ultimate battle of the experts. The court held that Nationwide's damages would be its lost profit over the relevant period, that is the difference between its actual profit and the profit it would have made but for SAA's abuses. But calculating that lost profit is much easier said than done. The court frankly acknowledged that it is impossible to precisely quantify damages in cases like this. In the end, the court said that courts must just do the best they can with the available information.
In a judgment which weighed up each aspect of the evidence of the economic experts, the court calculated the number of passengers it estimated that Nationwide had lost because of SAA's behavior (using market share information), multiplied that "lost passenger" number by Nationwide’s average revenue per passenger and multiplied that result by Nationwide's profit margin. The end result was discounted by 25% to take account of the fact that only 70% of all airline bookings are done through travel agents and that that was the market that the Tribunal had found to be most affected by SAA's abuse of dominance.
The damages award will presumably please Nationwide’s liquidators and is a salutary warning that anticompetitive conduct can result in much more than a hefty fine from the Competition authorities. But the fact remains that Nationwide is in liquidation and SAA has one less competitor to deal with.