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Companies intending to take advantage of the 2010 World Cup should beware. That is the message from the Competition Commission following the investigation into allegations of collusion amongst South African passenger airlines to fix prices or pricing strategies ahead of the FIFA 2010 World Cup.
The World Cup provides an opportunity for South Africa to showcase its ability to host a world class event, and will stimulate the economy. However, it could also enable businesses to use the event for their own benefit by engaging in anti-competitive behaviour. The Competition Commission's Deputy Commissioner, Tembinkosi Bonakele unequivocally stated that "anyone who opportunistically exploits consumers during the World Cup will be prosecuted."
The airline investigation follows a November 2009 request from the Office of the President to look into concerns that airlines planned to escalate their fares during the World Cup, after the presidential hotline received numerous complaints about the price of local air tickets during the World Cup. This was followed by an application for leniency from SAA in terms of the Commission's Corporate Leniency Policy. All major South African airlines including BA/Comair, South African Airways, 1Time, SA Airlink, Mango and SA Express are under the Commission's spotlight.
In terms of SAA's leniency application, it undertakes to cooperate fully with the Commission in exchange for leniency in relation to prosecution under the Competition Act. News reports suggest that notwithstanding the leniency application, SAA has denied involvement in collusion, as have all the other airlines implicated in the investigation.
The Commission's leniency policy is designed to allow parties who have been involved in cartel behaviour to 'come clean' in order to assist in the prosecution of others in the cartel. Generally, the Commission requires an applicant to admit which provision of the Competition Act has been contravened.
The Commission will therefore have to decide whether it is appropriate to accept leniency applications based purely on possible contraventions of the Act, rather than admissions. Although this will allow the Commission to scrutinise a wider range of conduct, it could lead to over-enforcement of the Act and a potential stifling of competition, because businesses may be implicated for engaging in conduct that is not anticompetitive.
Depending on how the Commission responds, SAA's precedent may provide the opportunity for savvy market players who are uncertain as to whether or not they have contravened the Act, to make leniency applications without admissions, but still get off scot free if the Commission subsequently finds that anti-competitive behaviour has been committed.
Written by: Lara Granville and Christopher Kok, Associates at Deneys Reitz
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