Competition law has created a new form of delictual liability

The high court award of R104 million payable by South African Airways to Nationwide Airlines is the first case to confirm that the Competition Act has created a new form of delictual liability for anyone that uses its dominant position in a market to impede or prevent a competing firm from entering into or expanding within that market.

It is a special form of liability because the court is bound by the findings made by the Competition Authorities and evidence that the conduct constituted a prohibited practice does not have to be led in the high court. Those found to have engaged in prohibited anti-competitive conduct are liable for damages caused to any person harmed by that conduct.

The case illustrates important principles in the law of damages. Evidence was led by competing experts as to the effect of the anti-competitive behaviour on Nationwide Airlines. The calculation of damages in this kind of situation is an estimate and cannot be measured with certainty and precision.

The court had to compare the performance of Nationwide Airlines before and after the period in which the conduct took place to try to reach some estimation of how Nationwide would have performed in the absence of the anti-competitive conduct. When the conduct happened, up to November 2004, 70% of air bookings were done through travel agents and the court assumed that the online bookings would have followed the same pattern. That does not seem to be justified because online bookings are generally based on price and convenience rather than brand loyalty.

The court made a 25% contingency deduction to account for the non-travel agent sector that was not affected by the anti-competitive conduct. This figure is not arithmetically precise. It is a contingency applied in the discretion of the court.

We can expect more of these cases but they are expensive to run because it requires an in-depth analysis of the economic consequences to a company of anti-competitive behaviour. Insurers will be familiar with this kind of dispute which frequently arises in business interruption claims.

The case is Nationwide Airlines v South African Airways.