Dikatso Mametse|

25 May 2006

Another mega fine for SAA

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Government fines government R55m.

The Competition Commission has fined South Africa’s national carrier, SAA R55m.

Only five months ago, SAA paid another fine of R45m for competition irregularities.

The latest fine came after the commission and SAA concluded a consent agreement concerning a number of complaints against the airline.

An investigation was conducted by the commission into various bilateral agreements between SAA and Lufthansa that deal with their relationship in respect of code share flights, which they both operate between Cape Town, Johannesburg and Frankfurt.

The commission found that the bilateral agreements created a platform for SAA and Lufthansa to collude and that the airlines had used the opportunity to fix the selling price of air tickets on these flights.

SAA has agreed to pay a R20m penalty by March next year, not to engage in price fixing again, and to implement a compliance programme designed to ensure that its employees and directors are informed of and comply with their obligations under competition law.

The second issue is around a complaint initiated by the commission relating to a consent agreement regarding the agreed implementation of identical fuel surcharges levies on tickets by domestic airlines.

About two years ago, the commission initiated a complaint against the Airlines
Association of Southern Africa (AASA) and some of its members including SAA, SA Express, Comair and SA Airlink.

Comair admitted that it was involved in the scheme and said that it would help the commission with its investigation. Comair further successfully applied for immunity from prosecution in terms of the Commission's Corporate Leniency Policy.

The investigation confirmed that SAA, SA Express, SA Airlink had indeed agreed to implement a fuel surcharge levy amounting to the fixing of a price or price related trading condition.

In terms of the consent agreement SAA and SA Express agreed that they would not make any such agreement with their competitors in the future. They agreed to jointly pay a penalty of R20m by May next year.

The commission is currently negotiating with SA Airlink regarding the terms of a consent agreement.

SAA was also accused of abusing its dominance by having “trust payment agreements” and paying override commission to travel agents.

Comair filed a complaint with the commission and alleged that SAA had abused its dominant position in the domestic market in that the agreements encouraged the agents to increase their sales of SAA tickets at the expense of other airlines.

Nationwide filed a similar complaint and SAA was subsequently fined R45m payable before the end of this month.

With regards to the Comair complaint, SAA has been fined R15m payable by May next year.

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