The possibility of Class Action claims for damages against SAA for anti-competitive conduct

Nationwide recently announced that it has issued summons against SAA in the High Court seeking damages of ZAR155 million for lost profits it suffered as a result of SAA's anti-competitive abuse of dominance practices between 2001 and 2005.

Comair (represented by one of Webber Wentzel's partners, Martin Versfeld), the operator of low-cost carrier Kulula and British Airways in South Africa, is also seeking damages from SAA for hundreds of millions of rands in two separate claims which are currently both before the High Court.

The first claim instituted by Comair and Nationwide in 2006 after the Competition Tribunal (Tribunal) found that SAA had abused its dominant position in the domestic air travel market by offering anti-competitive incentives to travel agents between 1999 and 2001. Nationwide's claim in that case was settled by SAA for an undisclosed amount. Comair's claim is expected to be heard in November of this year. The second claim by Comair relates to similar anti-competitive incentives offered by SAA to travel agents from 2001 to 2005 and is expected to be heard in the latter part of next year.

In separate proceedings SAA has agreed to pay a ZAR18.8 million penalty for cartel behaviour which took the form of price-fixing arrangements in respect of flights between Johannesburg and Hong Kong, as well as collusion on international air cargo surcharges and domestic route prices during the 2010 World Cup. Interestingly, the Competition Commission (Commission) has to date made no findings against SAA in respect of the collusion concerning international air cargo surcharges and domestic route prices.

A question that arises is whether any further civil damages claims against SAA will follow this settlement agreement. The prospects of this occurring may, at least in part, depend on whether the Tribunal, when confirming the terms of the settlement, makes a finding in relation to SAA's air cargo surcharges and domestic route prices. If the Tribunal makes no findings in relation to this aspect, those that suffered losses may arguably, thanks to a lacuna in the Act, not be able to seek damages against SAA for this conduct. In this regard, it should be borne in mind that the Act provides that persons harmed by anti-competitive conduct may only bring a civil action for damages on the basis of a finding of a contravention by the Tribunal.

It is also unclear whether or not consumers who paid higher ticket prices for flights between Johannesburg and Hong Kong will be able to recover damages from SAA. Typically, damages claims by a disparate group of consumers or unnamed plaintiffs would be brought by way of a class action. It is currently unclear whether class action claims for anti-competitive conduct are recognised in our law.

Unlike other more recent legislation such as the new Companies Act and Consumer Protection Act - which specifically provide for persons acting as a member of, or in the interest of, a group or class of affected persons to enforce contraventions - the Act is silent on this issue.

The Western Cape High Court recently dismissed a class action claim against certain South African bread suppliers for their involvement in the bread cartel, on the basis that the plaintiffs did not establish their standing to act on behalf of a class. As there is no provision in the Act which specifically provides for class action claims, the plaintiffs in this matter tried to frame their claim in terms of an infringement of a constitutional right (for which class actions have previously been recognised by the Constitutional Court). The High Court's decision is however being taken on appeal before the Supreme Court of Appeal (SCA). If the SCA finds that there is no general right under the Act or in common law allowing class action claims for anti-competitive conduct, or that such conduct does not infringe a constitutional right, the Act may need to be amended to specifically provide for class actions.

In other more developed jurisdictions such as the USA and Europe, private competition law enforcement by way of private civil damages claims and class actions against companies that contravene competition laws plays an important role in complementing the enforcement of competition laws by regulators. A legislative amendment to the Act to provide for class actions in competition matters can only aid the development of this area of competition law in South Africa, in line with international practices. The current damages claims against SAA for anti-competitive conduct are the first of their kind in South Africa. Should these cases realise significant damages awards, this may well encourage many more private damages claims in South Africa against companies that are found by the Tribunal to have contravened the Act, or which conclude settlement agreements with the Commission admitting to contraventions. Therefore, class actions aside, civil actions for damages arising from anti-competitive conduct are predicted to become an increasing feature of competition law in South Africa in the years to come.

- Polity