Tuesday, February 19, 2008

The case for Nationwide’s claim for civil damages, suffered as a result of SAA’s abuse of dominance, was settled out of court last week.
Commercial law firm Bowman Gilfillan says because the settlement agreement is confidential, the settlement amount has not been disclosed.  The parties reached a settlement on the second day of proceedings that were expected to run for two weeks.
“The case was long-awaited, as it would have been the first ruling on a civil damages claim flowing from a contravention of the Competition Act, thereby establishing precedent,” says Bowman Gilfillan, which points out that as a result of the settlement, there is still no case law on how the civil courts would determine the damages flowing from a ruling by the Competition Tribunal that a firm had engaged in conduct in contravention of the Competition Act.      
The firm outlines the background to the settlement.
Nationwide lodged a complaint with the Commission against SAA in 2001. After its investigation of the complaint, the Commission found that SAA was abusing its dominant position and the Commission referred its findings to the Tribunal.
In 2005, the Competition Tribunal, supporting the Commission’s findings, ruled that:
·        The two incentive schemes SAA used to compensate travel agents for their services gave travel agencies a compelling commercial incentive to sell SAA tickets in preference to those of its rivals; and
·        The SAA’s Explorer scheme – a system of rewarding travel agency staff with SAA tickets on the basis of the number of SAA tickets they sold – reinforced the exclusionary effects of the incentive schemes.
The Tribunal concluded that the practical effect of the incentive schemes was to induce suppliers not to deal with SAA’s competitors, in contravention of the Competition Act. SAA was fined R45 million, the largest penalty imposed by the Tribunal at the time.
Bowman Gilfillan maintains that the ruling allowed for Nationwide and other firms or individuals who have allegedly suffered loss or damage as a result of SAA’s conduct to pursue a damages claim in the civil courts.      
Evidence presented about SAA’s and Nationwide’s internal financial affairs at the start of the proceedings for civil damages will not be reported. 
Before the settlement, Nationwide’s CEO had testified that Nationwide had grown "quite phenomenally" from the start of its operations, but that passenger numbers had decreased significantly since mid-2000.
Nationwide’s own investigation showed that this was a result of travel agents selling SAA tickets rather than Nationwide’s tickets, as they were incentivised to do so.  Nationwide claimed the loss in revenue it suffered on its domestic routes between October 1999 and May 2001 as a direct result of travel agents choosing SAA as a "preferred client".
“The settlement concludes the battle for damages suffered by Nationwide and, disappointingly, offers no indication of how damages claims will be addressed by the civil courts,” says Bowman Gilfillan.    
However, the firm advises, the Nationwide/SAA settlement does not bring to a close SAA’s exposure to a damages claim for infringements of the Competition Act.
“A complaint brought against SAA by Comair in 2006, relating to allegations of the same anti-competitive conduct of which SAA was found guilty in the Nationwide case, will be heard by the Competition Tribunal in March.  If Comair’s complaint is successful, and the Tribunal rules against SAA for abuse of dominance, Comair will be positioned to claim civil damages from SAA for contraventions of the Competition Act.” 
Tamara Dini is a director at Bowman Gilfillan.