/ 22 March 2005

Airlines face fines for price-fixing

Collusion claims against South African Airways (SAA), SA Airlink, SA Express and Nationwide have been referred to the Competition Tribunal for a ruling, the Competition Commission said on Tuesday.

The airlines are accused of agreeing to introduce a fuel surcharge simultaneously on the price of tickets for domestic flights, which resulted in price increases.

The commission has recommended the airlines each be fined up to 10% of their turnover in the previous financial year.

”SAA, SA Airlink, SA Express, Nationwide and Comair are competitors in the provision of passenger airline services within South Africa and as competitors, the commission is of the view that they contravened … the Competition Act by agreeing to simultaneously introduce a fuel levy, which was initially R28 and subsequently increased to R40 per ticket carriage,” the commission said in a statement.

The Act prohibits competitors from agreeing to fix prices.

Commissioner Menzi Simelane initiated the investigation in May 2004 into the Airlines Association of Southern Africa — of which SAA, SA Airlink and SA Express are members — and Nationwide and British Airways (Comair).

Comair successfully applied for corporate leniency. It admitted to contravening some Sections of the Competition Act but agreed to assist the commission in the collusion case.

Comair was not referred to the tribunal, although this situation could change if the leniency were withdrawn.

Simelane said the airlines should have consulted the commission before implementing the levy.

”According to our investigations, it appears that the commission was consulted only after a decision was made indicating to us that these companies intended to go ahead with the decision, regardless of the fact that they were breaking the law.”

Price-fixing has a negative effect on consumers and competition between companies, Simelane said. — Sapa