A South African court has decided the country’s second successful antitrust follow-on damages claim, ordering South African Airlines to pay 1.16 billion rand (€84 million) to rival Comair, which operates as British Airways in the country.
The South Gauteng High Court on 16 February awarded Comair 554 million rand (€39 million) plus interest at a rate of 15.5% for losses suffered as a result of SAA’s travel incentive schemes.
Last year, the court told SAA to pay Nationwide Airlines 97 million rand (€7 million) in damages, in what was the country’s first ever successful follow-on damages claim. The facts of that case were very similar to the Comair case.
In its judgment, the High Court said “the effect of the anti-competitive conduct on the structure of the market was to inhibit the rivals from expanding the market whilst at the same time reinforcing the dominant position of SAA."
SAA incentive schemes paid travel agencies a higher rate of commission than the usual 7% for booking passengers on SAA flights. In addition to these “override” payments, SAA introduced “TRUST” payments – lump sum payments made to travel agents for achieving specific revenue and market share targets for SAA domestic ticket sales.
SAA denied that its conduct caused Comair to lose its market share, arguing that other changes in the market might have had a negative effect. Even after SAA completely withdrew its incentive schemes, the airline noted, Comair’s market share failed to increase.
Comair brought two damages actions against SAA: the first for the period 1999-2001, which covered SAA’s incentives schemes for the majority of travel agents; the second for losses suffered between 2001 and 2005 as a result of SAA’s override and TRUST payments.
Nationwide had brought its first claim against SAA in 2001, with Comair joining in 2003. In 2010, Comair and Nationwide were co-complainants at a Competition Tribunal hearing that found SAA’s incentive schemes to be anticompetitive, allowing them to seek damages.
Lesley Morphet, an antitrust partner at Hogan Lovells, said cases such as these take time to complete.
“It takes a while to weave its way through from lodging a complaint to finalising the case before the tribunal, and once the competition case is done, you have to get a certificate from the tribunal confirming that the conduct has been found to be a prohibited practice before you can lodge a civil claim for damages,” she said.
Bowmans partner Lucinda Verster, who advised Nationwide Airlines, said she expects the case to “open the floodgates” for such damages claims.
Neil MacKenzie, a partner at Fasken Martineau, said the judgment sends a strong message that firms found guilty of exclusionary dominance face “a serious risk” of follow-on damages claims from affected rivals.
The two airlines said they are still evaluating the consequences of the decision. The chief executive of Comair, Erik Venter, said the airline is pleased that a judgment has been handed down but the airline will need “more time” to study the judgment before making a detailed comment.
In an emailed statement to GTDT Aviation Law News sister publication Global Competition Review, a spokesperson at SAA said the airline’s counsel will study the judgment and advise it on how to proceed.
The spokesperson said the management team responsible for the infringements during the period investigated had all left the company, and current management is focused on turning the business around.
Counsel to South African Airlines
Cliffe Dekker Hofmeyr
Partner Willie Van Wyk in Johannesburg
Counsel to Comair
Partner Martin Versfeld in Johannesburg