SAA faces massive fine

[Gunship]

From Business Report ... www.busrep.co.za



SAA could face a fine of nearly R2 billion if a complaint by rival Nationwide that it is a dominant firm offering incentives to travel agents in contravention of the Competition Act is upheld by the competition tribunal.

The tribunal will hear the complaint from April 26. If it decides that SAA has contravened the Competition Act, the airline faces a fine of up to 10 percent of revenue.

SAA's results for the year to March this year have not yet been published, but its revenue in the preceding year was R17.3 billion.

The matter has been referred to the tribunal by the competition commission following its investigation of Nationwide's complaint, made in 2001. There have been delays since then because SAA took the matter to the high court and there were various interlocutory applications until late last year.

The basis of the complaint is that SAA, already the dominant airline in South Africa, has agreements to pay some travel agents more than the standard commission on ticket sales when they reach or exceed a certain target.

It offers a further incentive of free air miles for each booking made with SAA.

The commission claims that these incentives constitute an abuse of dominance in that they are designed to induce travel agents to book flights on SAA at the expense of other carriers, even when other carriers have tickets available at lower prices.

It argues that these incentives are detrimental to the interests of the consumer and has the effect of creating barriers to entry and eliminating or impeding a competitor from expanding in the market.

The commission has asked the tribunal to order that the incentive scheme was an abuse of dominance in terms of the act, to declare all agreements with travel agents void and to impose an administrative penalty on SAA of 10 percent of turnover, plus interest to the date of payment.


SAA denies that its incentive scheme is anti-competitive.

Travel agents' commissions have caused bitter controversy in the industry. SAA has tried to cut costs by reducing them (although it still offers a higher rate to those agents who exceed targets) and is trying to increase direct sales to customers online.

The airline pays a standard rate of 7 percent to travel agents and has suggested that commissions should be abandoned altogether and that agents should charge customers a fee.

Anthony Howard of Aviation Consultants SA suggested this week that SAA might also face possible claims for compensation that could exceed R3 billion if the families of passengers killed in the Helderberg crash brought a case against it.

Under the Freedom of Information Act "it is now possible for the families of the victims to apply to the state to have all files in respect of the Helderberg investigation released for scrutiny". This, he claimed, would "end a 17-year cover-up".

The possibility of future claims was referred to when Swiss Air's holding company bought a 20 percent stake in SAA. A spokesperson for SAA said at the time that any future claims in respect of the Helderberg disaster would be the responsibility of Transnet.

Onkgopotse JJ Tabane, SAA's vice-president of communications, said yesterday that the airline would not comment on speculative stories.

[Gunship]

:* The competition tribunal yesterday asked the competition commission for information on which it could base a decision relating to the size of an administrative fine it might impose on SAA if it found the airline guilty of anti-competitive behaviour in its provision of incentives to travel agents.

At yesterday's proceedings, the tribunal heard closing arguments from the commission, which is alleging the various incentives provided to travel agents by SAA are in contravention of the Competition Act as they represent an abuse of a dominant position and reduce access to an important distribution channel for SAA's competitors.

Today SAA's legal team will argue why its activities do not represent a contravention of the act.

The case was brought to the commission by Nationwide Airlines in April 2000. A similar case was brought by Comair in October last year.

In the case before the tribunal, the commission has requested the tribunal to impose the maximum fine of 10 percent of SAA's annual turnover and to ban SAA from distorting incentive structures when it remunerates travel agents.




In terms of the Competition Act, the tribunal may impose a fine of up to 10 percent of SAA's annual turnover in the Republic and its exports from the Republic during the firm's preceding financial year.

The tribunal attempted to establish from the commission's lawyer what base year it should use and what was the appropriate turnover. However, the lawyer responded that they had difficulty on this front. "We have asked SAA for financial statements but we were never given them. SAA could tell you but I'm not in a position to."

SAA could be fined, if found guilty, R200 million.

The act states that a number of factors should be used in determining what percentage of turnover the tribunal should apply. These include the nature, duration, gravity and extent of the contravention; any loss or damage suffered as a result of the contravention; the behaviour of the respondent and the profit derived from the contravention.

The commission has not asked for costs.

[kissavvy]

Seeing that our wonderful National Carrier posted a net loss of ohh ....about a gazillion Rand, does this mean that Nationwide and Comair have to pay in 10% if they win the case? Savvy

[Gunship]

:mad: I have given up on "our National Carrier" mate.

$3k from Ct - Jhb - ACC return.

Via London (18 hrs flight) :* it will cost me $1,7 max !

How does that tally ?

Monopoly ?

:mad:

[kissavvy]

Howdy gunship!

Couldn't agree more! Have you also been applying?
Change of topic - do you own one?
Me got a .45

[BAKELA]

an administrative fine it might impose on SAA

Except for the "might" in the above qoute, consider...

Right! SAA pays fine. No sweat. To who?

The Government.

Right! Who bails SAA out?

The Government?

Right! Where's the fine?

With SAA.

Now what now?

[Solid Rust Twotter]

The fine will be paid by the SA taxpayer and slip quietly into the black hole from where the Mercedes/BBJs/overseas trips for mates/new house for Mad Bob/ anything else loony and over-the-top are funded.

[V1 Rotate]

Guns, Great Post.

It is a pity that nothing will come of it. All credit to the guys at Nationwide and Comair that they can survive in the face of such brutal and unfair competition.

V1 :(

[Gunship]

They say they hit you while you are struggling to come up after the first hit ... :E

The Competition Tribunal fined South African Airways (SAA) R45m - the largest fine in the history of the Competition Act -- on Thursday for abusing its dominant position in the domestic airline market.

The national carrier, which has just seen the end of a massive strike, has 20 days to pay the fine.

According to a statement from the tribunal, SAA broke the law by operating incentive schemes for travel agents which were in breach of the Competition Act.

"The Tribunal found on the evidence that the override schemes gave travel agents a compelling commercial incentive to sell tickets of SAA in preference to that of its rivals, and secondly, that to a significant extent, they were able to influence customer preferences."

The Tribunal further found that the Explorer scheme, a system of rewarding travel agency staff with SAA tickets on the basis of the number of SAA tickets they sold, helped to reinforce the exclusionary effects of the override scheme.

"While the Tribunal accepted that, at the same time as it had behaved anti-competitively, SAA was also engaged in more aggressive pro-competitive behaviour, the evidence was such that it could nevertheless find that the abuse of dominance had played a significant part in the decline of Nationwide and Comair."

The case followed a complaint lodged by Nationwide Airlines in 2001.

"The Tribunal has concluded that the incentive schemes were unlawful and a prohibited practice.

"Nationwide and Comair will be able to proceed with a civil claim against SAA in the high court if they can prove that they suffered damages as a result of the abuse during the relevant period."

[SA Fred]

Which, to put it in perspective is a pretty weenie fine actually since : Economist Mike Schussler says the South African Airways strike is costing the airline more than R20-million a day and is also having an effect on the catering and hotel industries

ie the strike has "fined" them far more than the competition board...

[ByAirMail]

Common, we are going to give Zim. 7 billion, the tax payer would not even notice the 500mill we will give to S.A.A.

Sorry it is in Afrikaans.


http://www.news24.com/Rapport/Nuus/0,,752-795_1742552,00.html

[SFO]

Nationwide need the money - after working his crews to death to help SAA Vernon wrote a letter saying Sorry Guys, can't afford increases this year!

[Gunship]

SAA appeleer teen boete.

Die besluit van die Suid-Afrikaanse Lugdiens (SAL) om teen sy administratiewe boete van R45 miljoen te appelleer, kom as geen verrassing nie.

Die lugdiens het vandeesweek gesê sy benadering tot die appèl sal gelei word deur "noukeurige ondersoek" van die Mededingingstribunaal se redes vir die oplegging van die boete.

Die SAL het die boete gekry weens die oortreding van die Mededingingswet deur sy lojaliteitskema en bykomende aansporings aan reisagente om besprekings op sy huishoudelike vlugte bo dié van ander lugdienste te bevorder.

Volledige berig : (http://www.news24.com/Finance/Sake/Maatskappye/0,,1518-6-100_1749436,00.html)

[yogibear]

Nationwide need the money - after working his crews to death to help SAA Vernon wrote a letter saying Sorry Guys, can't afford increases this year!


SFO....Just where do you get such :mad: info from huh ?????

[SortieIII]

Yogi, if you are looking for k:mad: k information on a wide variety of subjects, you have come to the right place! ;)

[sky waiter]

Definately not k*k at all, happened to have seen the response letter from the crew ( in particular the ground and cabin staff) not sure bout the flight deck, thats the way it is there. In the two and a bit years i was yhere, got 1 increase and never got a bonus ( over 3 christmases) or even a thank you note from the CEO. Still a nice company if you forget the pay not slating them just telling the truth... :ok:

[Gunship]

SAA has until the close of business today (19 Aug) to appeal the competition tribunal's ruling in the case initiated by Nationwide Airlines in October 2001, failing which it must adhere to the tribunal's order and pay the R45 million fine.

In terms of the legislation, SAA has 15 days from the date of the ruling within which to appeal, failing which it must pay the fine within 20 days. The latter deadline expires next Friday.

SAA has said it would appeal the ruling on a wide range of issues, but by close of business yesterday it seemed the tribunal had not received word from SAA.

Anybody know if they appealed ?

Full Report (http://www.busrep.co.za/index.php?fSectionId=553&fArticleId=2843084)

[ASD]

Yip they appealed - From Sunday Times 21/08/2005

---------------------------------

SAA appeals Tribunal ruling


ADELE SHEVEL

SOUTH African Airways (SAA) lodged an appeal with only a few hours to spare on Friday against the R45-million fine imposed by the Competition Tribunal for abusing its dominant position in the local airline market.

SAA has appealed both the Tribunal’s finding and penalty.

The carrier had until the close of business on Friday to appeal against the ruling, though it had said at the outset it would appeal.

The fine is the biggest ever handed out by the Tribunal.

It found that the incentive schemes offered by the airline were unlawful and a prohibited practice. The abuse of dominance relates to two incentive schemes for travel agents that SAA operated.

The first involved a system whereby agents were paid a bonus commission in addition to their basic commission if they made sales above a certain specified target.

The other involved rewarding travel agency staff with SAA tickets on the number of airline tickets they sold.

I-Net reports that the Tribunal found the schemes gave agents a commercial incentive to sell tickets of SAA in preference to those of its rivals and that they were able to influence customer preferences in that regard.

Complaints over the incentive scheme were received from Comair and Nationwide Airlines. The case follows a complaint lodged by Nationwide in 2001.

According to I-Net this entitles the two affected airlines to proceed with a civil claim against SAA in the High Court — if they can prove that they suffered damages as a result of the abuse during the relevant period.

The appeal from SAA is
all-encompassing, taking on virtually every aspect of significance, from the Tribunal’s definition of the market to its finding of abuse and the fine itself.

Meanwhile, Shan Ramburuth, acting commissioner at the Competition Commission, says: “The commission will consider cross-appealing the Tribunal’s decision with respect to the penalty. We would argue that it’s too low.”

The Competition Appeal Court will determine a date on which to hear the appeal.

[Beta Light]

An eleventh hour application for appeal is a sign of no confidence in their appeal. I confident lawyer would appeal A.S.A.P.
But hey, if they lose the appeal it is no problem, tax man will just keep signing those cheques.

[Gunship]

Well if you have contacts - make use of them :E

Johannesburg - The competition commission has undertaken not to enforce the payment of the R45 million fine owed to it by SAA until May 31, although in terms of the competition tribunal's ruling the national airline was due to effect the payment by the end of last week.

The postponement was agreed to after lengthy negotiations between the commission and SAA, which means that it will not have to be made in the current financial year. Its financial year-end is March 31.

Louisa Zondo, SAA's legal counsel, confirmed yesterday that the flag carrier and the commission were negotiating a settlement of all the outstanding competition matters relating to SAA that were before the commission.

As part of these negotiations, "the airline has indicated to the commission that it will be in a position to pay the R45 million administrative penalty in the 2006/07 financial year".

SAA had also "reaffirmed its commitment to put appropriate mechanisms in place for compliance with the relevant provisions of the Competition Act", said Zondo.

SAA's apparent need to postpone the payment beyond March may explain why it initially decided to appeal the fine. The time involved in the appeal would have ensured that whatever the outcome, payment of the fine would have been delayed.

However, the commission's cross-appeal, which involved the possibility of levying a substantially higher fine, appears to have persuaded SAA to come to an arrangement with the commission.

The tribunal fined SAA R45 million after finding it guilty of abusing its dominance through the use of "an objectionable" override incentive scheme in a case brought by Nationwide Airlines.

The scheme was designed to encourage travel agents to sell SAA tickets to customers regardless of what was being offered by other airlines such as Nationwide and BA/Comair.

The commission is also investigating a similar complaint by Comair. Other investigations include charges of collusion, which relates to the code sharing agreement SAA has with Lufthansa and the fuel levy charges that are applied by all the domestic airlines. These cases are believed to be the subject of negotiations between SAA and the commission.




Business Report (http://www.busrep.co.za/index.php?fArticleId=3069871)

[flyboy2]

May 25, 2006 By Jabulani Sikhakhane

Although the R100 million that SAA has to pay to the competition commission may be regarded in some quarters as amounting to little more than a book entry among various government departments, it does represent a significant dent to SAA.

Not only a dent to its finances, but one to its reputation.

Again, it has to be pointed out that the agreement between the commission and SAA does not include an admission of guilt by the airline. However, many people will regard this as a legal nicety rather than a reflection of the way SAA behaved in the market place.

While the R100 million penalty is important in the short term, as a means of discouraging anti-competitive behaviour by SAA and other dominant players in the longer term, the more significant aspect of the agreement is the undertakings by SAA to implement compliance programmes to ensure that its business practices comply with the Competition Act.

It would be rather sad if SAA interpreted this commitment as needing to employ lawyers and economists to tell it what sort of behaviour it should not be caught indulging in.

There is the danger that such a compliance programme would become like so many other box-ticking exercises that the corporate world gets involved in. Most of these exercises lack any substance.

Much more effective would be experts on organisational behaviour, who could unpack SAA's practices to identify and alter practices that inevitably encourage anti-competitive behaviour.

All three of the anti-competitive cases brought against SAA relate to periods before Khaya Ngqula took charge of the airline. With any luck, Ngqula will use this agreement to launch a new, more pro-competitive approach from SAA.

The alternative is the awful prospect of continued regular trips to Pretoria by all concerned, including journalists, to listen to ever more anti-competitive allegations against SAA.

http://www.busrep.co.za/index.php?fSectionId=553&fArticleId=3260908

[putt for dough]

I wonder if this even hurts SAA?:ugh: :ugh: :ugh:



SAA fined R15m for agent payments

Mon, 04 Dec 2006
The Competition Tribunal on Monday confirmed a consent order that imposed a R15-million fine on South African Airways for anti-competitive practices, the tribunal said in a statement.

The tribunal came to the decision after allegations made by Comair against SAA were investigated by the Competition Commission.

Comair has alleged that SAA was compensating travel agents for their services.

"Comair alleged that SAA was dominant in the market for domestic airline travel and that it used this dominance to engage in exclusionary practices in contravention of the Competition Act."

Challenged consent order

The consent agreement states that SAA would no longer include incentive payments in its agreements with travel agents.

"SAA also undertakes to implement a compliance programme [and]... agreed to pay an administrative penalty of R15-million," it said.

Nationwide and Comair have challenged the validity of the consent order, arguing that it did not contain an admission of liability.

The airlines have also argued that the fine was too low.

According to the statement, Comair and Nationwide could lodge a civil claim through the tribunal.

SAA's total liability amounts to R100-million, including the R45-million from the Nationwide case, R15-million in respect of this consent order, and an additional R40-million for two other consent orders confirmed by the tribunal previously, the statement read.

Comair was not immediately available for comment.

Sapa

[Deskjocky]

This isn’t a new fine, this is all about the confirmation of the consent order- which is a "plea bargain" for a complaint raised some time ago by Comair. They objected and the commission agreed to review the decision. They have and they stick by their ruling.

Comair has it knickers in a knot because this will make their civil claim all the more harder as they do not have an admission of guilt to enter into evidence. Now they are going to have to prove their case in civil court. Something I doubt they are going to be able to do.

I am sure they are going to persue it and its going to go on for years and cost them and SAA huge money. But then again its big bucks at stake.

[Romeo E.T.]

Heard on Talk RAdio 702, an interview with G Novik where he indicated that Comair WAS definitely going to go for a "civil court case/claim" against SAA after the previous ruling.

[Deskjocky]

Heard on Talk RAdio 702, an interview with G Novik where he indicated that Comair WAS definitely going to go for a "civil court case/claim" against SAA after the previous ruling.

Of course he is going to say that- the amount he is going to sue for is equivalent to 5 years profit for his airline. Rest assured the matter will be vigorously defended form and SAA perspective- in fact we are really looking forward to it as there is some really smelly laundry about Comair that is going to come out into the public domain during proceedings. People in glass houses and all that…..:=

Things at SAA have changed from back in the day when this fine was imposed- one of the main reasons for the fine was SAA’s high handedness during proceedings, this really peeved the tribunal and they bit back. The people who were responsible are all long gone, the new team are not so stupid, Nuff said…..let the games begin!

[Karooboer]

SFO....Just where do you get such :mad: info from huh ?????

HEY DICK FOR BRAINS, THIS WAS A JOKE BASED ON FACTS, VB ALWAYS HAVE SOME EXCUSE NOT TO PAY HIS CREW BONUSES, INCREASES OR PERFORMANCE BONUSES

Look who's talking - the guy makes a comment in August 2005 and you take offence at it today, almost 18 months later. Chill that delayed-reaction moermeter of yours please. 4HP

[unmanned]

Does anyone know what happened to all those allegations against the SAA and their partners, with regard to them paying bribes etc to travel agents for booking on SAA first before considering other airlines?

We heard lots of rumours about them having been found guilty in certain circumstances and having to pay huge money to Nationwide. Comair was also in the mix for a payout, but have heard nothing since.

Just interested because Mango is also highly anti competitive with SAA backing them right up to SAA baggage tags on Mango luggage. Surely the private guys must be taking this further. Evidently you can book a Mango ticket and land up on a SAA flight. I know this happens at Kalula but they are not claiming separate companies.

South Africa I think is now the only Country in the world to have 3 state funded airlines, what happened to free enterprise?:cool: