SAA faces global legal battles

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SAA faces global legal battles
2009/10/02 11:24:00 AM

Sikonathi Mantshantsha



Johannesburg - State-owned airline South African Airways (SAA) is fighting legal battles in at least five countries on four continents in an attempt to stave off possible penalties in excess of R100m.

"The Anti-trust Division has issued subpoenas for SAA to provide information and documentation in respect of a price fixing inquiry in progress within the USA," SAA disclosed in its 2009 annual report.

The company said the maximum penalty would be $10m (about R77m) should it be found guilty on the charge, but stated it is confident about its prospects to refute the allegations.

The inquiry relates to SAA's alleged involvement in price fixing in respect of its cargo operations within the USA. It said the US Department of Justice was also investigating other global airlines on the same allegation.

While maintaining it was not involved in anticompetitive conduct, said SAA in the report, it was prepared to defend the matter if an indictment should be issued against it.

Because a successful prosecution on an antitrust charge normally results in a civil claim against the convicted party, SAA has also been cited as a defendant in a district court class action on alleged price fixing and conspiracy to fix cargo prices with other airlines and cargo industry players.

The US case is one of four alleged competition contraventions in five countries, including a long-running competition hearing in South Africa.

South Africa

In 2006, SAA reached a settlement with the Competition Tribunal to pay a R100m fine without admitting guilt for anticompetitive practices.

After this, its rival Comair and the liquidators of Nationwide Airlines applied for a guilty verdict so that they could proceed with possible civil claims against SAA. The arguments on the matter were heard in March 2009 and the tribunal is expected to make a ruling before the end of the year.

European Union

On another unspecified investigation by the European Union Competition Commission, SAA said it was "strongly of the view" the evidence against it was "fragmented and inconclusive" and that it was "insufficient" to constitute an infringement.

The company said it provided sound arguments and "will prevail" if the commission goes ahead with prosecutions. SAA could not estimate the fine should it be found guilty.

Australia and Switzerland

In Australia, SAA also has a collusion matter to answer to, and said it has secured legal representation in that country to "protect its rights". It is not in a position to assess the extent of any exposure.

SAA has also engaged legal representation in Switzerland to deal with an investigation by that country's competition authorities into anticompetitive activities in which it was implicated. It could not provide an estimate of any exposure to the matter.

"There are various other court cases pending in which SAA is a defendant," it admitted in the annual report.

"SAA's maximum exposure in this regard is estimated at R50m." The annual report also indicated that SAA is exposed to liabilities associated with "travel agent agreements and the collection of taxed fees and charges globally". It said it cannot yet quantify the value of those potential exposures.

- Fin24.com