Competition Commission must search SAA premises 

The Competition Commission should apply to the high court for a warrant to enter and search the premises of South African Airways (SAA) and to seize the information needed to verify if a full investigation into SAA's alleged abuse of its position of dominance is warranted. 

On the 23rd of August of this year I wrote to the Competition Commission requesting a full investigation into the anti-competitive behaviour of state-backed carriers and their impact on the domestic airline market.

My request came on the back of 1time announcing that it had applied to place the companies operating subsidiaries into business rescue under section 129 of the Companies Act.

Upon meeting with the Competition Commission on the 27th of September, I was told that more evidence would be required before any investigation could be instigated. 

Given that 10 out of the 11 private airlines launched in South Africa since 1991 have had to shut down - whilst SAA soldiers on despite recording persistent losses - the DA firmly believes that the state-backed carrier is in contravention of the Competition Act 89 of 1998. 

In particular, we believe SAA to be in contravention of: 

·         Section 9(1)(a): An action by a dominant firm, as the seller of goods or services is prohibited price discrimination, if - (a) it is likely to have the effect of substantially preventing or lessening competition; as well as

·         Section 8(d)(iv): Engage in any of the following exclusionary acts - (iv) selling goods or services below their marginal or average variable cost

In April 2011 the Competition Appeal Court ruled in the case of SAA (Pty) Ltd v Comair Ltd that SAA was indeed the dominant firm in the domestic airline market in terms of section 7(a), as it had a market share in excess of the stipulated 45% threshold.

The Tribunal further noted that an anti-competitive finding is still possible if there is evidence that the exclusionary practice is substantial or significant, or has the potential to foreclose the market to competition. If it is substantial or significant it may be inferred that it creates, enhances or preserves the market power of the dominant firm.

The DA therefore believes that the liquidation of 1time airlines, as a result of unprofitable operations, provides reasonable grounds for the Competition Commission to apply to the High Court for a warrant to enter and search SAA's premises as stipulated under section 46(a) of the Competition Act 89 of 1998.

The Act makes provision for such action if there are reasonable grounds to suggest that "a prohibited practice has taken place, is taking place or is likely to take place on or in those premises". 

The DA therefore calls on the Competition Commission to use its statutory powers to obtain all relevant evidence from SAA so that it may determine if a full investigation into SAA's alleged anti-competitive practises is warranted. 

Statement issued by Natasha Michael MP, DA Shadow Minister of Public Enterprises, November 5 2012

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