Nationwide Airlines (Pty) Ltd (In Liquidation) v South Africa Airways (Pty) Ltd (12026/2012) [2016] ZAGPJHC 213; 2016 (6) SA 19 (GJ); [2016] 4 All SA 153 (GJ) (8 August 2016)

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[2016] ZAGPJHC 213
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Nationwide Airlines (Pty) Ltd (In Liquidation) v South Africa Airways (Pty) Ltd (12026/2012) [2016] ZAGPJHC 213; 2016 (6) SA 19 (GJ); [2016] 4 All SA 153 (GJ); [2016] 2 CPLR 472 (GJ) (8 August 2016)

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i
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL
D
I
VISION,
JOHANNESBURG
Case
number: 12026/2012
Date:
8 August 2016
In
the matter between:
NATIONWIDE
AIRLINES (PTY) LTD (IN
LIQUIDATION)

Plaintiff
and
SOUTH
AFRICAN AIRWAYS
(PTY)

Defendant
JUDGMENT
NICHOLLS
J:
Introduction
[1]
This is a delictual claim, the first of its kind, arising out of the
anti­ competitive practices of our national carrier
South African
Airways ("SAA"). The plaintiff, Nationwide Airlines (Pty)
Ltd (in liquidation) ("Nationwide"),
was a competing
airline during the relevant period, 1 June 2001 to 31 March 2005.
[2]
Nationwide claims R170 million in loss of profit from SAA arising out
of a breach of the Competition Act 89 of 1998 ('the Act").
SAA
denies that the anti­ competitive conduct caused Nationwide's
loss, but contends that if damages are to be awarded, the
maximum
amount payable is R 20 million.
[3]
The
genesis
of
the
claim
is
a
complaint
made
by
Nationwide
to
the
Competition
Tribunal ("the Tribunal") relating to SAA's
anti-competitive conduct.
There
were
two
complaints
made
to
the
Tribunal
but
for
the
purposes
of
this
claim,
it is the
second
complaint
that
is
relevant.
The
first
complaint
dealt with
the
period October 1999
to
the end of May 2001. The Tribunal found in
favour
of
Nationwide
and
handed
down
its
decision
[1]
on 28 July 2005.
Civil
proceedings
brought
by Nationwide in respect of the first complaint were settled between
the
parties.
[4]
The
complaints which are the subject
matter
of this case culminated in a
decision
[2]
handed
down by the Tribunal on 17 February 2010
in
which, as with
the
first
complaint,
it
was
held
that
SAA's
conduct
constituted
a
prohibited
practice
in terms of section 8(d)(i) of the Act
[3]
.
The Tribunal, having found that SAA
was
a
dominant
firm,
held
that
the
override
i
ncentive
agreements
and
TRUST
agreements
that
SAA
entered
i
nto
with
various
travel
agents
contravened
the
Act
by
inducing
them
to
deal
exclusively
with
SAA
at
the
expense of its rivals. TRUST was an acronym introduced by SAA that
stood for
"True
partnership;
Respect
rules;
United
focus;
Support;
Training."
Findings
of the Trib
unal
[5]
The Tribunal held that SAA's conduct was an exclusionary act as
defined
in
section
1
of the
Act,
in
that
it
"impedes
or
prevents
a
firm,
entering
into,
or
expanding
within, a market"
[4]
•
Further,
that travel agents have
the
abil
i
ty
to divert potential customers, and did indeed divert passengers, to
SAA. As regards the degree of foreclosure, the Tribunal found
that
the override agreements covered 56% to
76%
of all travel
agents'
outlets
by
number,
but
rose to
between
70%
and 90% when weighted
by
revenue
or
passenger
numbers.
I
t
was
noted
that the
travel
agents
themselves
confirmed
the
effects
of
the
foreclosure
were
significant. There is no dispute that this court is bound by the
findings made by
the
Tribunal.
[6]
Of relevance to this case is the finding that the growth of internet
and other direct sales channels, did not erode the ability
of the
travel agents to influence customers' airline preference to any
significant extent. The overwhelming majority of ticket
sales of all
the airlines at the time were through travel agents. Other sales
channels constituted approximately 30% of all sales,
which in effect
meant that travel agents' sales made up approximately 70% of sales of
domestic airline tickets. Notwithstanding
this, so the Tribunal
found, the anti-competitive conduct was experienced in the entire
domestic airline travel market and not
solely in the travel agent
sector.
[7]
The Tribunal accepted the evidence of Nationwide's Chief Executive
Officer, Vernon Bricknell ("Bricknell') that over the
relevant
period Nationwide was unable to grow on most of its routes,
particularly its core routes. It determined that the effect
of SAA's
conduct was to divert its discretionary business away from its
rivals, including Nationwide, thereby reducing Nationwide's
passenger
numbers.
[8]
The Tribunal held that the first
relevant
market was that for the purchase
of
travel
agent
services
for
the
sale
of
domestic
airline
tickets.
The
second
relevant
market was the market for scheduled domestic airline transportation
in
South
Africa.
Nationwide's
contention
was
not
that they were
completely
foreclosed
but
that their growth was
impeded
by SAA's conduct. The Tribunal found
that
the
fact
that the market share of Comair and Nationwide remained the
same
and
did not
decline
does
not
support
a
finding
that
they
were  not foreclosed from expanding into the segment of
the market covered by the SAA override
agreements
and
distributed
by
travel
agents.
[5]
[9]
The Tribunal's conclusions are summarised as follows:
"After
considering the evidence
and
arguments
in
these proceedings we
have
concluded
that SAA's incentive scheme was in contravention of section 8(d)(i)
in
that
it induced travel agents to deal with SAA at the expense of its
rivals and led
to
foreclosure of the rivals in
the
market
for
scheduled domestic airline
travel.
We
have
found that the two relevant markets for this period are the market
for travel agent services to airlines and the market for
scheduled
domestic air travel. We have
found
SAA
to
be
dominant
in
both
markets.
Despite
the
recent
developments
in
the
domestic
airline
market,
such
as
the
l
aunch
of
low
cost
carriers and the growth of alternative distribution channels, we have
found that
travel
agents still constituted the most significant and optimal route to
market for domestic airlines. While low cost carriers
accounted for
most of the growth in
the
domestic airline
travel
market we have found that during
the
relevant period, the market for these developments did not warrant
market
segmentation
into
a low
cost/time
sensitive/price sensitive market and
time
sensitive/price
sensitive
market.
While the effects of SAA's conduct
may
have had a greater
impact
on
that
segment of the domestic airline market distributed through travel
agents, we
have
concluded that
the
conduct
had
the effect of
reducing
competition
in
the
total
domestic
airline
market."
[6]
[10]
The
findings
of
the
Tribunal
were
upheld
by
the
Competition
Appeal
Court
[7]
("CAC").
I
t
confirmed
the
centrality
of
travel
agents
both
to
consumers
and as the main distribution
channel
of airline tickets. The CAC found that the
override
commissions
had
a material effect on the airlines' share of the defined
market.
This
was
particularly
marked
in
directional
selling
by
travel
agents
of
time-sensitive
(primarily business)
passengers
in favour of SAA as opposed to
its
rivals. Therefore while Nationwide was able to grow the non-time
sensitive market (primarily leisure passengers), it suffered

significant foreclosure in the travel agent's sector which dealt with
the more lucrative time-sensitive market.
[11]
Pursuant
to
the
Tribunal's
decision,
a
certificate
of
decision
in
terms
of
section
65(6)(b)
[8]
of the Act was
i
ssued
in terms of which the Tribunal certified that the incentive
agreements and TRUST payments were prohibited practices.
It
is
common
cause
that
section
65(6)
of
the
Act
contemplates
a
claim
for
damages.
This section enables those found to have engaged in prohibited anti­
competitive
conduct
to
be
liable
for
damages
to
any
person
harmed
by
that
conduct.
The
certificate
i
s
conclusive proof of its contents
and
is
binding on a
civil
court.
[9]
Issues
before this court
[12]
Various issues have been agreed. The general features of the
incentive scheme are undisputed. There is consensus that the period

of the infringement for the purposes of this claim is 1 June 2001 to
31 March 2005. Delictual liability has, for all intents and
purposes,
been admitted. Insofar as SAA initially disputed causation, it is
apparent that this does not go to the merits of the
claim but rather
to the quantum, namely that no actual damages were caused by the
anti­ competitive conduct. SAA's stance is
that if there were any
losses suffered by Nationwide, which it denies, this was caused by
factors unrelated to SAA's anti­
competitive conduct.
[13]
SAA denies in its plea that any loss of profit was as a result of
abuse of its dominant position in the market, but instead
any losses
incurred were as a result of perceptions as to how Nationwide was run
and managed. It is specifically pleaded by SAA
that:
"...
such loss was as a result of the market's and passenger's perception
of the plaintiff's business, the way the plaintiff's
business was run
and managed, competition of rivals, including carriers other than the
defendant, the growth of online bookings,
the decision by the State
to prefer the defendant as the airline of choice and the instruction
to government and semi-government
departments to fly with the
defendant, the defendant's superior frequent travel rewards, the
defendant's increased competitiveness
which included a new fleet of
aircraft, good on-time performance, better service delivery and
additional capacity and perceived
passenger concern about the age and
safety of the plaintiff's aircraft."
[14]
The central focus of this case, therefore, is the quantification of
the damages, if any, to be awarded to Nationwide. To this
end each of
the parties submitted reports prepared by aviation economists from
the United Kingdom, who were called as expert witnesses
to assist the
court. Robin Noble ("Noble") from Oxera Consulting LPP
("Oxera") testified for Nationwide and
Luisa Affuso
("Affuso") from PricewaterhouseCoopers ("PwC")
for SAA.
History
of
SAA's
I
ncentive
Agreements
[15]
In the 1990s, SAA introduced an incentive scheme whereby it paid
travel agents a standard commission of 7% in respect of each
ticket
sold. These agreements were referred to by the Competition Tribunal
as the first generation agreements. The standard commission
is a flat
rate commission deducted at source by the travel agent who sells the
ticket to the passenger. The remainder of the value
of the ticket
revenue is remitted to the airline through the Billing and Settlement
Plan ("BSP") of International Air
Transport Association
("IATA"), a clearing house for travel industry suppliers
and customers.
[16]
BSP
should
be
differentiated
from
"flown
revenue"
which
is
the
revenue
received
once
the
passenger
has
flown as opposed
to
having
merely
purchased
a
ticket.
BSP
represents
the
revenue
from
tickets
sold
by
IATA
through
travel
agents
while
flown revenue is
the
rand
value
of revenue
generated
from all
tickets
once
the
passengers
actually
board
the flight
Flown
revenue
is
therefore an
artificial
construct
and
not
a
revenue
stream
in
the
true
sense
of
the
word.
Generally the
BSP
figures
will
be
10
-
20
%
higher than the flown
revenue.
The reason
given
for
this
discrepancy
by
the
First
Tribunal
is
that
flown
revenue excludes
revenues
owing to travel agents for commission
plus
cancellations
and
interline  revenue  (where  a
flight
booking
makes  use
of
another
airline
for
a particular
leg
of the journey).
[10]
[17]
Historically
the
standard
commission
constituted
the
major
portion
of
a
travel
agent's
remuneration.
In
October
1999
SAA
introduced
new
incentive
agreements (the
so-called
second generation agreements) which applied
across
all of its domestic flights in
the
country during the relevant period, being October
1
999
to
May
2001.
The
second
generation
agreements
consisted
of
override
incentive agreements
coupled
with the
Explorer
scheme which
rewarded
individual
staff of travel agents with free international tickets and the
allocation of bonus points
to
the
agency for
tickets
sold.
[18]
The override commission was 'back to rand one' (the first sale made)
once a certain level of sales had been reached. An incremental

commission 'back to base' applied only to those sales above the
target and increased the more the sales exceeded the target level.

The base values used to determine the growth rewarded by commission
payments due to the travel agency was typically defined as
the
domestic SAA flown revenue generated for the preceding financial
year.
[19]
Following
the
first
complaint
from
Nationwide
in
July
2005,
the
Competition
Tribunal
[11]
found
that
SAA's
second
generation
agreements
contravened
section 8(d)(i)
of the
Competition Act in
that they provided strong
incentives to
travel
agents to divert passengers from rival
airlines'
flights
to
SAA. The Tribunal found that the scheme constituted an abuse of
dominance and its
effect
was to incentivise travel agents to deal with SAA thereby foreclosing
its
competitors from the market and simultaneously
reinforcing
i
ts
own position of dominance.
[12]
[20]
The third generation agreements, which are the subject matter of this
case, were introduced by SAA on 1 June 2001 and remained
in effect
until 31 March 2005. To a great extent they were similar to the
second generation agreements and consisted of override
agreements and
TRUST payments.
[21]
As with the second generation agreements, travel agents were
compensated at the flat rate commission until the target revenues

were reached. These were usually set on the previous year's sales of
the particular travel agent and were individually negotiated
with
each travel agent at consortium level. Once the target was reached
the travel agent received a commission calculated on a
'back to rand
one' basis in addition to the basic commission. Unlike the second
generation agreements the incremental commission
was flattened so
that the incentive rate remained the same for all sales exceeding the
base level.
[22]
Travel agents were induced to reach base and then strive for maximum
growth above that target, at which level they were handsomely

rewarded for their loyalty. Essentially the purpose was to increase
the number of passengers for SAA According to Conrad Mortimer

("Mortimer"), the commercial director of Tourvest, one of
the largest travel groups in the country, the targets became
more
aggressive and more difficult to reach over the relevant period.
Mortimer testified as follows:
"essentially
what
an override
is doing, it is saying you
will
earn a
commission if you achieve a volume. If
you don't achieve that volume
you will
earn
nothing,
but
if
you
achieve
that
volume
then
you will
achieve
an incentive
which
is
often
described as
a
percentage of
what
your
volume
is."
[23]
The express terms of the agreement were couched in
the
following terms:
"SAA
wishes
to
incentivise
and
reward
the
agent
by
paying
a
cash
override
incentive
for achieving and
exceeding
the
base
total
...
Accordingly,
this override agreement is established to stimulate and encourage the
increase in total
SAA
flown
revenue
and
flown
passenger
numbers
in
return
for
the
cash
override
incentive payments.
"
[13]
[24]
Targets would be set and the computation of achievement of targets
would be on the basis of flown revenue rather than BSP figures.
In
1997 SAA formed a strategic alliance with South African Airlink
("SAL") and South African Express ("SAX").
The
sales of SAA's SAX's and SAL's tickets, on all routes, were the
subject of SAA's incentive and TRUST agreements from 2001 until
the
first quarter of 2004. Until approximately June 2004, flown revenue
sold on SAX and SALS were included in the override agreements
with
major travel agents for the purpose of computing performance and
payments to travel agents.
[25]
Commissions paid by SAA in accordance with the second and third
generation agreements were paid over and above BSP commission
paid
for each ticket sold. In respect of override agreements, classes of
tickets were differentiated, but the differentiations
differed from
period to period. The profitability of a travel agent in any given
month may have been affected by the commission
which an agent earned
in the respective month.
[26]
TRUST payments were made in addition to the domestic override
incentives and were intended to compensate travel agents for
the flat
commission post target introduced by the third generation agreements.
TRUST payments were lump sum payments made to travel
agents for
receiving specific objectives. The precise formula for TRUST payments
differed across agents and through time, but the
essential features
were that they were based on sales outcomes of growth and support.
TRUST agreements were not adopted by all
travel agents and were not
made "back to base".
[27]
In November 2004, SAA announced that as from 1 April 2005 travel
agents would receive no commission, no overrides and no corporate

deals. SAA later paid a commission to agents ranging from 1-4% based
on passenger volume. (This was not generally known in the
industry.)
The November announcement precipitated an immediate diversion of
business away from SAA to other airlines. This resulted
in travel
agents charging a booking fee on air tickets sold to compensate for
the absence of a commission.
[28]
The response of the travel agents to SAA's announcement is best
summed up in an email dated 31 January 2005 written by William
Puk.
He was the CEO of Sure Travel, another of the large travel agent
groups, and sent the email to all Sure Travel Managers. It
stated:
"It
has become very clear that we cannot rely on saa for a decent
override agreement in future and our basic commission is
about to
disappear altogether...I am formerly advising you that our group
strategy is to move our discretionary business away from
saa onto
more agent friendly carriers, hence the new deals with Virgin &
Nationwide. our international priorities must now
lie firmly with
British Airways, Virgin, Lufthansa, Nationwide, Cathay Pacific etc
and domestically with BA/Comair & Nationwide
as a first priority,
an effort and directive to this effect must therefore be communicated
by you to all your staff. it makes sense
from a business point of
view, 0% commission from saa and generally expensive GOS fares to
sell to consumers, versus standard guaranteed
commission for other
airlines (provided we move the business to them) and generally better
value fares for the consumer, we need
to show saa in the months of
feb/mar/& apri that travel agents are still vital to their
business and that we can and will,
direct the business away from
them." (sic)
[29]
This is indeed what occurred and immediately after this announcement
travel agents moved a large portion of their discretionary
business
away from SAA to other airlines, albeit for a limited period. Around
this time there was an exponential growth in the
use of low cost
carriers ("LCC's"). This was coupled with a sharp increase
in internet bookings which was the preferred
sales method of the
LLC's. The above trends marked a fundamental shift in airline booking
patterns.
[30]
The LCC's made their entry into the South African airline industry in
the early 2000's. Kulula and 1Time commenced operations
in August
2001 and February 2004 respectively. This was a significant
development and the aim was to tap into a market of potential

passengers who had never flown before by luring them with low fares
and no frills service (no food or beverages were served). It
was only
at the start of 2005 that the LCC's really gained popularity. The
concomitant growth of direct sales via the internet
and call centres
impacted on the market during this period, particularly for
price-sensitive passengers. Nonetheless the Tribunal
found that
travel agency services still accounted for 70% of the total domestic
airline distribution during the relevant period.
The
Rise and Fall
of Nationwide
Airlines
[31]
It was in this aviation milieu that Nationwide flew its maiden flight
on 5 December 1995 from Johannesburg to Cape Town with
30 passengers.
Nationwide was the brainchild of Vernon Bricknell. He was the CEO of
Nationwide for the entire period of its existence
and its only
shareholder through the Vernon Bricknell Trust.
[32]
In the mid 70's Bricknell established a charter business which had
various contracts with United Nations agencies in Africa.
This later
came to be known as Nationwide Air Charter ("Charter") and
played a pivotal role in getting Nationwide off
the ground by funding
the airline. Later it provided guarantees to Nationwide in order that
it could obtain unqualified audits.
[33]
Nationwide's first aircraft were all BAC-111 (British Aerospace
Corporation) purchased from Ryan Air. Later Boeing 737's were
added
to the fleet and eventually replaced all the BAC-111's. All
Nationwide's aircraft: were purchased by Charter, which then
leased
them to Nationwide. Nationwide started its own ground-handling
service and its own Aviation Maintenance Organisation ("AMO")

to do its maintenance. Bricknell Aviation Properties provided
accommodation for crew and staff. Like Nationwide Charter and
Nationwide
Airlines, Bricknell was the sole shareholder of all these
entities through his trust.
[34]
More routes were added as the airline grew. The Durban /Cape Town
route commenced in December 2001; the Johannesburg/Port Elizabeth

route in August 2002; the Durban/Cape Town and Port Elizabeth/ Durban
route in April 2003. The Johannesburg/George, Johannesburg/Cape
Town
and Johannesburg/Durban routes were referred to as the 'golden
routes' because of their profitability. At some point a
Johannesburg/Mpumalanga
route was introduced, as well as regional
routes to Livingstone and Tanzania and international flights to
London Gatwick. The regional
and international routes are not
relevant for present purposes, as this claim is only in respect of
domestic airline travel.
[35]
Nationwide flew both leisure and business class passengers - time
sensitive and non-time sensitive passengers. Bricknell said
the
intention was to produce a unique brand and superior product with a
business class interior. The interiors were reupholstered
in leather
and re-carpeted in the Nationwide livery to create an elegant
upmarket feel. Nationwide strove to differentiate itself
from its
rivals by creating a unique on-board customer experience. Flight
attendants spoke to every passenger personally. Nationwide
was a
legacy carrier - free food and alcoholic beverages were served. The
focus was for the passenger to have the best possible
on-board
experience, so immense effort was put into training of service staff
and cabin crew.
[36]
To oversee this process, in 1997 Nationwide employed Roger Whittle
("Whittle"), a Canadian national who worked extensively
in
cabin safety with a number of Canadian airlines, including Canada's
regulatory body. The tenor of his evidence was that he was
pivotal in
drawing up the Canadian safety regulations. He testified that there
was very little regulation in the South African
aviation industry at
the time and the Civil Aviation Authority ("CAA") decided
to adopt the Canadian aviation regulations.
These later became known
as the CAA regulations.
[37]
Whittle's specific mandate with Nationwide was in respect of
regulatory compliance in the area of cabin safety. This was
undoubtedly
his area of expertise and he authored manuals and
conducted training programmes with SAA and British Airways Comair on
various
aspects of cabin safety. After a few years with Nationwide,
Whittle became responsible for corporate quality which entailed
taking
responsibility for the IATA operational safety audit (IOSA).
Towards the end of his time he became involved with all operational

areas of business. Whittle said that for the last few years
Nationwide was run by himself, Bricknell and Peter Griffiths
("Griffiths'),
the head of finance.
[38]
After Puk's email in response to the announcement of the termination
of SAA's override in November 2004, Sure Travel moved
its
discretionary business away from SAA. As a result Nationwide's BSP
share of Sure Travel increased from 10% to 14.5%. Other
travel agents
followed suit and there was a surge in passenger numbers away from
SAA to Nationwide. This was described by Whittle
as a 'step change'
and resulted in a significant improvement in Nationwide's fortunes.
The increase in passenger numbers was sustained
throughout 2005 with
a drop in 2006.
[39]
In this period of growth there were no new routes introduced by
Nationwide. No new code share agreements were signed and no
new
airline entered the market. 1Time had commenced operations in 2004,
just prior to the announcement. Nationwide submits that
the only
reason for the growth in passenger numbers over this period was the
shift in discretionary business as a result of the
termination of the
override agreements. This, it is contended, is what would have
occurred from the outset, absent the abuse. It
should be noted that
although the growth in passenger numbers was significant for
Nationwide, it represented only 2% of SAA's passenger
numbers.
[40]
From early 2005 Nationwide's passenger numbers grew steadily. It
entered into its own override agreements with some travel
agents.
These were halted in late 2005 when it was discovered that agents
were 'double dipping' by charging passengers a booking
fee when they
were being paid a 7% override commission by Nationwide. As a result
Nationwide announced that its commission would
drop from 7% to 1% as
from January 2006. According to Whittle the travel agent sector
behaved in much the same way as it had when
SAA made its announcement
and Nationwide's BSP dropped. Unbeknownst to Nationwide, SAA had
implemented an amended incentive scheme
which further contributed to
a decrease in passenger numbers.
[41]
Nationwide won awards in 2005 and 2006 for the best domestic airline
from ASATA, the Association of South African Travel Agents.
It also
successfully completed an IOSA safety audit in July 2006. This is a
pre-requisite for IATA membership and is globally accepted
as the
benchmark for airline safety. Notwithstanding this, the death knell
of Nationwide was the 'separation' of an engine on one
of
Nationwide's Boeing 737's on take-off from Cape Town International
Airport on 7 November 2007.
Nationwide's
Maintenance
I
ssues
[42]
There is a dispute as to the exact cause of the engine separation in
November 2007. Roger van Putten, a former maintenance
manager from
Nationwide, went to inspect the scene of the incident immediately
thereafter and testified that the cause of the separation
was the
result of the acoustic liner being ingested into the engine. He
stated that this caused a massive surge or stall resulting
in the
engine twisting off the wing. This was in contradiction to the CAA
report on the incident, which found that the cause of
the incident
was the failure of an aft cone bolt through fatigue. The latter was
suggestive of poor maintenance rather than an
unforeseeable once-off
incident.
[43]
After the CM investigation into the engine separation, an emergency
airworthiness directive (AD) was issued for the grounding
of all
Boeing 737's in order that their cone bolts could be inspected.
Although this was applicable to all the airlines, it was
particularly
detrimental to Nationwide as they utilized more 737's than the
others. The CM documents reflect that after the engine
separation,
some serious maintenance issues were identified with Nationwide
aircraft in mid to late 2007. On 30 November 2007 the
CM grounded the
entire Nationwide fleet and the airline effectively ceased operations
with the exception of a month or two. Nationwide
went into
liquidation on 29 April 2008.
[44]
To some extent maintenance issues dogged Nationwide throughout its
existence. Their first aircraft, the BAC-111's, had to be
replaced
with Boeing 737's because they were not fitted with an automatic drop
down oxygen system, only a manual system which required
the passenger
to plug the oxygen mask into the overhead panel if necessary. Whittle
himself made reference to perceptions in the
aviation industry that
Nationwide had an aging fleet. He believed that any negative safety
perceptions as a result thereof were
unfounded and that Nationwide
was uncompromising in ensuring that regulations and standards were
maintained at the highest level.
He pointed out that in 2006
Nationwide passed the stringent and rigorous IOSA audit after a
scrutiny of Nationwide's entire operation
and finding only one minor
non-compliance out of thousands. This, he said, was unheard of in the
airline industry.
[45]
Van Putten, who was employed as a line station maintenance manager
for Nationwide at all their stations and based at Johannesburg

International Airport from February 1996 to late 2007, also gave a
favourable account of Nationwide's maintenance standards and

compliance with audit requirements of the CAA. He explained that
scrutiny and oversight was not only conducted by the CAA but also

provided by the manufacturers of the different components of the
aircraft, as well as internal and external audits.
[46]
The evidence of poor public perceptions of Nationwide's maintenance
came from an employee of SAA in corporate sales, Ms Donna
Kritzinger
("Kritzinger''), who was employed by Comair during this period.
She said that amongst corporate customers, Nationwide's
second hand
aircraft were seen as a safety concern. Kritzinger was constrained to
concede that there were articles about SAA's
aging fleet over the
same period which would have had an equally detrimental effect on
public perception. Mortimer of the Tourvest
Group said although it
was not as large as SAA or even Comair, Nationwide was an
"airline
you
could
do
business
with.....it
was
a
competent
airline".
An SAA witness, Nicolaas Vlok,
formerly employed as deputy chief executive in charge of operations,
described Nationwide as
"formidable, not formidable that's
maybe
the wrong word but they were a good competitor
..."
In summary that there were some concerns
about Nationwide's older aircraft seems to be undisputed but it is
unlikely that this was
a significant factor in reducing the volume of
passengers.
[47]
The
engine
separation
took
place
18
months after the
end
of the abuse
period.
Although
a
l
engthy
time
was
spent
by
Mr
Pretorius,
counsel
for
SAA,
canvassing the
cause
of the engine separation
with
various witnesses,
it
was
stated
in argument
that
the purpose was
merely
to show that the
perceptions
regarding Nationwide's poor maintenance were justified. The
i
nordinate
amount of
time
spent
on
this
issue
was
unwarranted in
view
of
the
findings already made
by
the Tribunal
and
the CAC. The Tribunal
alluded
to the
bad
publicity which Nationwide had received and observed that it appeared
to have a poorer safety
record
than
that
of
its  competitors.
Nonetheless,
said  the  Tribunal,
that
Nationwide
continued
to
have
good
growth
even
though
it
had
an
inferior
safety
record,
did not mean that
SAA's
conduct failed to
have
a foreclos
i
ng
effect
[14]
•
[48]
Likewise
the
CAC
held
that while
Nationwide's
safety
record
and financial
difficulties
may
have
been
to
blame
for
the
drop
of
i
ts
market
share
during
the
relevant
period,
i
t
was
SAA's
incentive
agreements
that
had
the
anti-competitive
effect.
[15]
In
short
both
the Tribunal and the
CAC
acknowledged
the
shortcomings
in
the
safety
record
of
Nationwide
but
nevertheless
found
that
SAA's
abusive
conduct
was
the
major
cause
of
the
decrease
in
volume
of
Nationwide's
passengers.
Those
are
findings
which
cannot
be
faulted
but,
in
any
event,
to
which
this court is bound.
[49]
Accordingly, insofar as it is alleged that the reason for
Nationwide's loss of passenger volumes was the perception that it

operated an aging and unsafe fleet, these are irrelevant in light of
the above findings of the Tribunal and the CAC. These make
it clear
that the override agreements had an identifiable and separate
anti-competitive effect of inducing travel agents to divert

passengers away from Nationwide to SAA. The override agreements were
found to have had an anti-competitive, exclusionary and foreclosing

effect  on Nationwide, based on the actual market's outcome and
the assessed strength of the competition in that market.
Damages
[50]
Any
damages
suffered
by
Nationwide
would
amount
to
its
l
ost
profit
over
the
relevant
period.
I
t
is
common
cause
that
this
involves
a
comparison
of
the
actual situation
in
the
relevant
markets
with
the
hypothetical
position
or
the
so­
called
counterfactual
scenario
in
the
same
markets,
absent
the
abuse
of
dominance. In
simple
terms
the
l
ost
profit
is
the
difference
between
what
Nationwide would
have
earned but
for
SAA's
abusive conduct
and
what
Nationwide
in
fact
earned.
"The
damage
is
then
the
difference
in
the
wealth
of
economic
actors in both scenarios."
[16]
[51]
The
numerous
variables
to
be
taken
into
consideration
make
it an
impossible
exercise to quantify the damages with any precision. However, this is
not
an unprecedented
situation
in
delictual
claims.
Our
courts
have
previously
referred
to
future
l
oss
of
earnings
in
personal
injury
matters,
as
being
the
preserve of fortune tellers and soothsayers because predictions as to
the future are required which are, by
their
very nature, speculative.
[17]
A court is enjoined to
do
the
best
i
t
can
on the
material
available,
even
if
i
t
i
s
merely
an
estimation. However, a plaintiff is
obliged
to produce all evidence at
i
ts
disposal to assist the court in
making
as accurate a decision as possible.
[18]
[52]
There
are
various
possible
methods
to
quantify
damages
arising
out
of
anti-competitive
conduct.
The
Practical
Guide
on
Quantifying
Harm and Actions
for
Damages in the European
Union
[19]
at
para 123 stated:
"It
should be stressed that it is only possible to estimate, not to
measure with any certainty and precision, what the hypothetical

non-infringement scenario would have looked like. There is no method
that could be singled out as the one that would in all cases
be more
appropriate than others. Each of the methods described above has
particular features, strengths and weaknesses that may
make it
more-or-less suitable to estimate the harm suffered in a given set of
circumstances. In particular, the methods differ
in the degree to
which they are simple to apply, in the degree to which they rely on
data that is the outcomes of actual market
interactions or on
assumptions based on economic theory and the extent to which they
take into account factors other than the infringement
that may have
affected the situation of the parties."
[53]
Essentially what a court has to do is compare the performance of
Nationwide before and after the abuse period to try and reach
some
estimation of how it would have performed absent the override
agreements. SAA contends that Nationwide in fact performed worse
once
the abuse ended and therefore no damages were suffered as a result of
the anti-competitive conduct. Affuso is of the view
that, if any
damages have been suffered, the interpolation approach is a
reasonable methodology to estimate an upper limit of the
damages.
[54]
Various economic
models
have been placed before court and depending
on
the model used and the variables
taken
into consideration,
the
figures vary from zero damages to as high as R355 million. Noble
produced four economic
models
- the
linear
trend
[20]
and the
linear
interpolation
[21]
using both passenger numbers and market shares.
He
then pooled the
results
to obtain a median of R170
million.
Although
it
is
apparent
that
each
model
has
its
own
particular
attributes,
the linear
i
nterpolation
is the one model agreed
upon
by the parties. Therefore for the purposes of this
judgment
the method relied upon
to
determine
damages,
i
f
any, is
the
linear
interpolation.
Oxera's
Approach
[55]
Noble uses a three-step methodology to determine the final damages
amount. A diagrammatic representation of his framework is
set out
hereunder:
NB:
Please consult the PDF version for the images
[56]
The first step is to estimate the passengers Nationwide would have
carried but for the abuse. The actual passengers are known.
The lost
passengers amount to the counterfactual passengers minus the actual
passengers. This will be discussed in greater detail
when dealing
with the linear interpolation which is the preferred methodology to
determine the number of lost passengers.
[57]
Noble's next step is to ascertain the lost revenues as a result of
the lost passengers. Essentially this amounts to Nationwide's

counterfactual revenue minus its actual revenue. The actual revenue
is not in dispute. The counterfactual revenue is estimated
by
multiplying the number of lost passengers by the ticket price
Nationwide would have obtained for the sale of tickets to the
lost
passengers. Noble has used the average revenue per passenger that in
fact flew on Nationwide flights over the relevant period.
It should
be noted that Affuso rejects the two step approach to establishing
lost revenues and contends that it is unnecessary
to calculate lost
passenger numbers as the only reliable indicator of lost revenue is
the BSP data. This issue will be dealt with
in greater detail later
when determining the appropriate dataset to be used.
[58]
The third and final step in Noble's methodology is to ascertain the
lost profit which is the lost revenue multiplied by the
profit margin
Nationwide would have obtained on each ticket. Essentially this
amounts to lost revenues multiplied by the relevant
profit margin
less avoided cost. It is agreed by the experts that the estimated
profit Nationwide would have earned from flying
additional passengers
is 50-51%.
[59]
For the estimate of lost profits Affuso relies on the same
methodology employed by Noble to calculate lost profit from lost

revenues. This method involves applying an incremental profit margin
to lost revenues.
[60]
In estimating the profit margin it is important to determine how the
extra passengers would have been carried. There are three

possibilities - that they would have been carried on existing
flights; that additional flights would have been put on utilising
the
existing planes; or new planes would have been leased or purchased.
All have a different cost implication, with the profit
margin being
highest where the passengers are carried on existing flights. The
cost of flying additional passengers on an existing
flight is minimal
but once additional flights are required, the costs of flying these
passengers is much higher and the profit
will be commensurately
lower.
[61]
Four separate cost categories were identified by Noble. The first is
the cost incurred with every additional passenger transported
and has
a direct link with the individual passenger (such as travel agent
commission, complementary meals and drinks).The second
category is
the costs incurred with every additional sector flown and is
associated with individual flights (such as fuel and air
traffic
control costs). If an additional plane is required then costs will be
incurred in the procurement thereof (such as monthly
leasing costs).
The final category of costs is those incurred independently of the
number of passengers (such as overheads for
the head office and
marketing).
[62]
Noble contends that the additional flights for Nationwide in the
infringement period would have been accommodated on existing
aircraft
and there would have been no necessity to lease or purchase
additional aircraft. Affuso disagrees with this contention
on the
basis that Oxera's analysis relies on an average load factor whereas
in reality load factors vary significantly depending
on the time of
day and the time of the week and month. By averaging the load factor
this obscures the fact that the demand at peak
periods such as early
morning and late afternoon or on a Friday or Monday will be far
greater than at other times thus requiring
additional aircraft to
carry these passengers.
[63]
This
is
known
as
the
'avoided
costs
framework'.
The
advantage
of
this
method
is
that
one does not have to evaluate the entire
financial
situation of the
company,
merely
an
estimate
of
those
costs
that
have
not
been
incurred
because
of the infringement
[22]
.
I
n
essence what is being done is to estimate the costs that would
have
been incurred by Nationwide had the extra passengers been carried
(but were
not
as a result of the abuse).
Noble
used
Nationwide's
actual
costs
over
the
relevant
period
to
calculate
the
avoided
costs.
To
the
extent
that they were
not
actually
incurred,
these
costs
are
hypothetical:
they were
not
incurred
but
avoided.
Mr
Pretorius
took
i
ssue
with
Noble
on
his
comment that avoided costs were hypothetical. This line of reasoning
was also raised
in
argument.
What
Noble
meant
was
that
the
avoided
costs
were
hypothetical
in the sense that they were
never
incurred (because of the loss in
passenger
volumes)
as
opposed
to
the
actual
costs
which
were
incurred.
[64]
These hypothetical costs are then deducted from the revenue that
would have been earned absent the abuse and multiplied by
the agreed
profit margin. This figure will amount to the damages suffered.
[65]
In
their final joint
minute
Noble
and Affuso
agreed
on
the
avoided
costs
framework
where
the
lost
profit
amounts
to
lost
revenues
less
avoided
costs.
The lost revenues equal Nationwide's counterfactual
revenues
minus its actual revenues;
the
avoided
costs
are
the
difference
between
Nationwide's
actual
costs and the costs that would
have
been
incurred
but for
SAA's
conduct.
[23]
It was
further
agreed
that
Nationwide's
profit
margin
would
have
been
50-51%
subject to one caveat as
to
whether additional aircraft would have been required
to
carry
the
additional
passengers.
[24]
[66]
Affuso was at pains to point out that the agreement on the profit
margin was premised on the underlying data being correct.
This, she
says, she was unable to validate. Before dealing with Affuso's other
criticisms of the Oxera approach it is appropriate
to deal with the
dispute over avoided costs. A finding that Nationwide have not proved
their avoided costs would be largely dispositive
of the case.
Avoided
costs dispute
[67]
The question of avoided costs became an issue during the course of
the trial. There is agreement that avoided costs amounted
to the
difference between the costs that Nationwide actually incurred and
the costs that Nationwide would have incurred but for
SAA's abusive
conduct. It is not this formula that is in dispute but whether
Nationwide adduced any admissible evidence of its
costs. Despite
agreement on the profit margin, SAA's case is that the avoided costs
have not been proven. Any agreement Affuso
might have reached with
Noble on the profit margin was dependent on the underlying data being
proven. This, it is argued, Nationwide
has been unable to do. As the
plaintiff, it has not established its avoided costs and absolution
from the instance should accordingly
be granted.
[68]
The data Nationwide used to ascertain the avoided costs came from 3
sources of cost information: the route profitability spreadsheet,

management accounts and audited financial statements. The financial
statements are for the entire period of the abuse and aggregate
all
types of costs, including those for international and regional
routes. The management accounts are available on a monthly basis,

although February 2004 is missing. They provide partially
disaggregated data. The route profitability is the document that
Noble
primarily relied upon when determining the avoided costs. It is
disaggregated with all input and output data recorded individually.
[69]
The main complaint is that Nationwide presented no admissible
evidence of its costs other than the audited financial statements
as
confirmed by its auditor, Isak Buys "(Buys)", and
Bricknell. It is contended that the management accounts and more

particularly the route profitability spreadsheet, which were utilised
by Noble in preparing his avoided costs data, amount to nothing
more
than inadmissible hearsay evidence.
[70]
The route profitability is a voluminous spreadsheet providing very
detailed cost and revenue data per route, per month and
the number of
passengers. It was a contemporaneous document prepared over a period
of many years and utilised as a management tool
in order that
Nationwide could set its fares on the different routes. It listed
costs such as fuel, air traffic control fees, ground
handling fees
aircraft, maintenance and crew accommodation. Noble used the line
items of costs actually incurred from this document
to identify the
costs Nationwide would have incurred had it flown additional
passengers.
[71]
Griffiths was a director of Nationwide and the financial manager who
drew up the route profitability on the instructions of
Bricknell. The
purpose of this document was to enable the performance and
profitability of the airline to be monitored and assessed
on a
regular basis. Bricknell testified that it was a 'live' document that
was updated every 10 days, or even 5 days if necessary.
The
management team would get together to discuss the overall management
of the airline using the route profitability spreadsheet.
For example
it was used to make decisions as to whether cheaper tickets would be
added to a particular route; whether to operate
certain routes and to
alter frequencies of flights.
[72]
Mr Gotz, counsel for Nationwide, stated from the bar that Griffiths
had refused to testify without substantial remuneration.
Mr Pretorius
pointed out that as a director Griffiths owed a fiduciary duty to
Nationwide and contended that an adverse inference
be drawn from the
fact that he did not testify. Nationwide was criticised for not
calling other available witnesses who could have
shed light on the
actual costs but whom Nationwide failed to produce.
[73]
The following examples are cited as persons or evidence which could
have been produced to prove the actual costs. Ms Barbara
Buchanan
("Buchanan") who occupied the next most senior position in
the finance department could have been called to
testify on the route
profitability spreadsheet. Van Putten testified that each aircraft
had its own credit card for fuel which
was carried in the cockpit of
the plane - this real evidence could have been produced. It was
confirmed by the liquidator that
SARS downloaded Nationwide's server
and they could get back-ups of all the financial information - this
data could have been provided.
[74]
SAA submits that instead of calling these witnesses, reliance is
placed on the route profitability spreadsheet. It is alleged
that the
costs and standards contained therein reflect serious discrepancies
and anomalies which point to the actual costs having
been
significantly underestimated. The further criticism is that there are
significant differences between the audited financial
statements and
the route profitability report which Griffiths should have been
called to explain.
[75]
According to Mr Gotz, Nationwide was first alerted that costs were to
be disputed a few days before the commencement of the
trial. Prior to
that, because both experts had agreed to the profit margin at 50 -
51%, it was assumed that avoided costs were
not an issue. Neither was
Nationwide alerted that this would be an area of dispute during the
judicial case management process,
which the parties were obliged to
undergo before the trial could be allocated for hearing. In short
Nationwide contends that the
avoided costs had been agreed or at
least not pertinently disputed until the eleventh hour.
[76]
I
nsofar
as the agreement
on
profit margin was dependent
on
the caveat of whether
additional
aircraft
would
be
required,
Noble
dealt
with
this
in
his
first
expert
report
[25]
and  concluded
that the additional passengers
could
be
accommodated
on
the existing
aircraft.
Using
the
actual
l
oad
factor
during
1999-2004
of
60-70%,
he
said
that
all
counterfactual
passengers
could
be
carried
on
the
remaining
30-40%
available
capacity
for
most
months.
However,
additional
fl
i
ghts
would
be
required for
certain
periods.
He
was
not
cross-examined
on this aspect.
[77]
Bricknell testified extensively on how the route profitability
spreadsheet was generated. The ticket sales on a particular
route
were obtained from the revenue accounting department and the expenses
would be obtained from Buchanan. From that information
the average
ticket price could be extrapolated as well as the load factor. A
target figure would be generated for every flight
and ticket prices
adjusted accordingly depending on the rate they were being sold. This
was monitored on an hourly basis.
[78]
Bricknell explained that the direct operating costs such as the costs
in respect of approach fees, landing fees, ground  handling,

ACSA  parking fees, crew accommodation, distribution costs and
revenue costs were extracted from the actual invoices. He stated
that
the costs of the individual routes were calculated as follows:
"Well,
the aircraft and leasing would be broken down by the monthly - by the
hours flown on that particular route. The fuel,
as I said, was from
an average of each route. The aircraft fees would be the actual fees,
the approach fees. The in­ route
charges would be taken from the
invoices, the landing fees. Ground handling - that was a cost
recovery from Ground Support. Catering
was for actual catering
uplifted for the flights pertaining to that route. Crew accommodation
would be for crew accommodation for
those flights. And the liquor and
drinks - that would be part of the catering. Parking fees would be
the ACSA account, and distribution
costs again the sale of ticket
prices."
[79]
SAA's biggest complaint is with regard to fuel costs where there are
said to be various discrepancies and inaccuracies. In
this regard,
Bricknell said the fluctuation in the fuel price was monitored
because there was a levy on the fuel price which was
adjusted with
every increase or decrease in price. He went on to say:
"We
knew what the fuel burn on each sector was so that we would have
averaged out because on each sector every day you get
different
winds, assuming Cape Town
I
Joburg you always have
headwinds going down to Cape Town and as a result you always have
tailwinds. So the headwind would vary and
if it varies going down you
would make it up coming back, so the overall time on both sectors
would almost average out to be the
same. So we had to average that
out because some days we did about 54 flights, so to take each
invoice for each uplift was very,
very difficult and when an
aeroplane arrived it arrived with so much fuel and then we needed to
uplift sufficient fuel to take
us to the destination airport, the
alternate airport, and then have a diversion fuel - not a diversion
fuel, the alternatives for
the diversion. Then we had to have a
contingency fuel, which l think was 5% to allow for varying weather
and that would be the
fuel required. So the fuel required less the
fuel on board would be the uplift and that would vary all the time
because depending
where the aeroplane had come from it would depend
on how much fuel it had remaining in the tanks so it was always that
calculation
that was involved. We had uplifted the amount of fuel and
we'd go to the destination report. If we had no diversion and
everything
went according to plan,
we
land with the
fuel that we estimated we would land with, and that fuel was recorded
from the fuel gauge so there again it was as
accurate as it could be.
We had to just take the reading off the fuel gauge and so the repeat
for the next flight would be exactly
the same so that fuel was based
on an average fuel per sector."
[80]
Buys from PwC (South Africa), who audited the books of Nationwide in
its latter years, described the route profitability report
as a
management tool used by all airlines.  He said it was
particularly useful to Bricknell in deciding which routes to close

and which to continue with. It should also be noted that Nationwide
made full discovery of the hard drives of Buchanan and Griffiths

which contained all the relevant information.
[81]
Noble observes that if one compares the management accounts with the
route profitability, many items are similar. However,
the costs in
the route profitability are about 4% higher than the equivalent in
the management accounts, which means that the costs
are arguably more
conservative in the route profitability. Because of this, and as an
alternative calculation, Noble provided recalculated
costs based on
the management accounts. This lowers the final damages amount by 6%.
Flown domestic and regional revenues from the
route profitability
data are very similar to the management account data. The output data
in the route profitability spreadsheet,
such as monthly passenger
statistics, is within 3% of ACSA data over the relevant period.
[82]
Noble analysed the audited financials with the management accounts
and found a close correlation. The sale/revenue figures
were
identical. The costs in the audited financials were slightly lower.
Noble indicated that there was a 3% difference, which
he did not
consider significant.   Noble testified that the various
line items had  been checked  with  Nationwide
staff
over  a  period  of several years. The fuel price had
been checked against the monthly price advisory
from BP, Nationwide's
fuel supplier, all of which were produced as exhibits.
[83]
It has long been established that in some cases damages are difficult
to ascertain with any precision, but this does not relieve
the
wrongdoer of the necessity of paying damages. In
Esso Standard
SA (Pty) Ltd
v Katz
1981 (1) SA 964
(A) the plaintiff was the owner of a garage and filling station who
claimed damages for loss of petrol due to a leaking petrol
tank. The
defendant sought absolution from the instance on the basis that the
plaintiff was in a position to lead evidence to show
the quantum of
damages but elected not to do so and instead relied on a schedule of
damages. The question was whether the plaintiff
had produced all
evidence reasonably available to him. The Appellate Division upheld
the trial court's decision that it had no
cogent reason for doubting
the accuracy of the records on which the schedule was based.
Similarly, in this case I have no reason
to doubt that the route
profitability spreadsheet is, to a substantial degree, an accurate
reflection of Nationwide's costs.
[84]
In
any event the
evidence
relating
to the
route
profitability
is
covered
by
section
3
of The
Law of Evidence Amendment Act 45 of 1988
. The amendment
was
introduced as a response to the tendency of South
African
courts to exclude
evidence
which
was
reliable,
but
which
could
not
be
admitted
because
of
the rule
against
hearsay.
[26]
The
amendment confers a
judicial
discretion
on
courts
to admit hearsay evidence
if
i
t
is in the interests of justice.
Six
factors which
must
be considered are set out.
[27]
[85]
Section 3 of the Law of Evidence Amendment Act provides:
(1)
Subject to the provisions of any other law, hearsay evidence shall
not be admitted as evidence at criminal or civil proceedings,
unless:
(a)...;
(b...;
(c)
The court is of the opinion that such evidence should be admitted in
the interests of justice, having
regard to:
(i)
the nature of the proceedings;
(ii)
the nature of the evidence;
(iii)
the purpose for which the evidence is tendered;
(iv)
the probative value of the evidence;
(v)
the reason why the evidence is not given by the person upon whose
credibility the probative value of the evidence depends;
(vi)
any prejudice to a party which the admission of such evidence might
entail;
(vii)
and any  other factor  which  should  be taken
into account."
[86]
Nationwide submits that
on
each requirement of section
3(1)(c), it has led sufficient evidence warranting the admission of
the route profitability spreadsheet.
As regards the nature of the
proceedings, it is contended that it is not open to SAA to deny a
victim of established anti-competitive
harm, damages to which it is
entitled on the basis that there ought to be better possible evidence
relevant to the claim. The nature
of the evidence and the purpose for
which the route profitability was tendered is to show a
contemporaneous business record created
by Nationwide's senior
management for their use, based on actual cost data, actual revenue
data and actual passenger volume data.
Because one half of the route
profitability spreadsheet (that relating to revenues) is uncontested
by SAA, it is not open to them
to dispute the probative value of the
other half. Nationwide submits that it has provided a sufficient
explanation why it was unable
to secure the evidence of Griffiths,
upon whose credibility the probative value of the evidence depends.
It has also explained
why the underlying flight coupons, invoices,
receipts and other primary source documents are unavailable. (The
liquidator testified
that after the liquidation of Nationwide in
2008, these documents were removed by SARS and a potential purchaser
of the business).
Finally, it is argued that SAA has yet to show what
prejudice it suffers by the admission of the route profitability
spreadsheet.
[87]
I am satisfied that the evidence has shown that the figures contained
in the route profitability spreadsheet are largely reliable.
Further,
that it is an accurate reflection of the incremental costs of
operating the airline in the relevant time period. The level
of
de-aggregation of the costs in the spreadsheet makes it a
particularly useful record from which one can extrapolate the avoided

costs of Nationwide.
[88]
It is clear that the route profitability is a reliable record of the
revenue, passenger volumes and cost inputs of Nationwide.
I am not
persuaded that in the absence of the testimony of Griffiths the route
profitability spreadsheet has not been proven. Nor
indeed, whether
calling him would have considerably enhanced the weight to be given
to the document. It is unlikely that Griffiths
would have been able
to confirm or deny the accuracy of every one of the thousands of
cells in the route profitability spreadsheet.
He may have been the
author of the document but he compiled it from the diverse sources of
information provided to him.
[89]
To call every person who had an input into the route profitability
spreadsheet  or  even to  produce  every

original  invoice  would  have  been  an
unwieldy and not very productive exercise. While there
may be some
discrepancies, the margin of error is small. Perfection in these
circumstances is unachievable. Viewed holistically,
the conclusion
must be reached that the route profitability is admissible on the
basis of the evidence before court. Even if this
were not the case,
the route profitability should be admitted on the the basis of its
reliability in terms of section 3 of the
the
Law of Evidence
Amendment Act 45 of 1988
. Because Noble conceded that the costs, when
compared to the management accounts, could be considered slightly
high, I am inclined
to utilise his lower recalculated figures.
PwC's
Approach
[90]
Affuso's primary submission is that no damages have been suffered by
Nationwide. Her opinion is that the incentive agreements
could not
have any impact other than in the sales through travel agents. She
disregards sales via other channels such as direct
sales through call
centres and internet sales. She uses only the sales generated by
travel agents which are recorded in the BSP
revenue data provided by
IATA. In addition Affuso only uses the data on those routes where
Nationwide competed with SAA. Her reasoning
is that passengers could
only be diverted on routes where SAA, SAL and SAX overlapped with
Nationwide.
[91]
With reference to the BSP data on those particular routes, Affuso
uses the ex post period - the period unaffected by the infringement
-
to compare the trend in Nationwide's market share. From this she
concludes that no damages were suffered by Nationwide. The crux
of
her argument is if, as Nationwide claims, its market share was
significantly reduced by the SAA override agreements then one
would
expect Nationwide's market share to decline in the infringement
period, coupled with a corresponding increase in the ex post
period.
In fact, she says, the direct opposite occurred. Nationwide's market
share increased during the infringement period and
declined in the ex
post period.
[92]
Affuso contends that if one looks at the period after SAA had removed
the overrides in April 2005, Nationwide's BSP market
share does not
appear to register an increase, as would be expected if the abusive
conduct was having the alleged impact. Instead
Nationwide's BSP share
experienced a significant decrease following the removal of SAA's
override agreement. She pointed out that
from April 2005 until March
2006 Nationwide's average BSP share of the market decreased to 7.9%.
From the period March 2006 to
September 2007 it continued to decrease
to 4.3%. On this basis Affuso concludes that the incentive agreements
did not foreclose
the markets.
[93]
A diagrammatic representation of her argument is set out hereunder
from which it appears as though Nationwide's BSP revenue
dropped
after the anti­ competitive conduct ended. It should be noted
that this graph does not take into account the sharp
spike at the end
of 2004 when SAA's announcement was made that overrides were to be
terminated. A fundamental problem with this
hypothesis, and an issue
which will be dealt with in greater detail later in this judgment, is
the now accepted fact that the BSP
data in the ex post period was
corrupted. The further criticism is whether one can make a valid
comparison between the abuse period
and the ex-post period.
NB:
Please consult the PDF version for the images
[94]
Affuso's analysis reflected on the above diagram is that there was no
increase in Nationwide's BSP share in the ex post period
and
therefore no damages suffered by Nationwide. She criticises Oxera for
inflating lost revenue by accounting for other distribution
channels
and domestic routes unaffected by SAA's overrides. She accuses Oxera
of making no adjustment to counterfactual passenger
numbers in order
to account for other factors like LCC's and internet bookings.
[95]
It is the very criticism which Affuso levels at Oxera which reveals
the fundamental flaw in her ex-post analysis, namely that
she ignores
the fact that the ex-post period was not a valid comparator. Instead
of the reliance on travel agents as the primary
distribution channel
for airline tickets, the ex-post period was characterised by
significant development in the LCC's. While Kulula
and 1Time
commenced operations during the abuse period in August 2001 and
February 2004 respectively, it was in the ex-post period
that there
was a burgeoning growth in the LCC market. Mango also entered the
market in the ex­ post period in November 2006.
This is evidenced
by LCC's gaining a market share of 11% during the abuse period as
opposed to 23% after the abuse period.
[96]
As a consequence of the unprecedented growth in LCC's, the rise of
ticket sales via the internet grew from less than R40 million
to just
under R120 million in the ex-post period. To suggest that the market
was the same in the ex­ post period, and accordingly
a valid
comparator with the abuse period, would be factually incorrect. The
airline industry was in constant flux at the time.
The ex­ post
period is characterised by the waning role of travel agents'
centrality in the purchase of airline tickets. Moreover
because of
having been foreclosed in the time-sensitive market, Nationwide's
non-time sensitive passengers would be far more susceptible
to the
introduction of the LCC's than other airlines. The changes are best
reflected in two graphs which show the growth of LCC's
over the
period and the growth of internet banking sales.
[97]
A diagrammatic representation of these trends is best observed in the
two graphs below. The first graph reflects LCC passengers
based on
ACSA data and includes Kulula, 1Time and Mango. The FSC (full service
carriers) are shown as the darker blue. The second
graph reflects
internet sales as share of total sales in the market. The total
market includes Nationwide, SAA, and Comair. SAX,
SAL and LCCs are
excluded. (The data for this graph is Nationwide sources of sale,
Nationwide domestic revenues, SAA yields and
Internet data, SAA
domestic revenues, Comair point of sales data - Oxera analysis.) From
the two graphs it is apparent that the
abuse period and the ex-post
period are not comparable. Due to changes in the market it was
inevitable that there would be some
decline in BSP revenue. To
extrapolate from Nationwide's decrease in BSP revenue over this
period that no damages at all were suffered
is an inaccurate
assumption.
[98]
The growth in low cost carriers is particularly marked in the ex-post
period.
NB:
Please consult the PDF version for the images
[99]
In light of the concessions that ex-post period BSP data is incorrect
and because the ex-post period is not an appropriate
comparator
period, Affuso's analysis that there has been zero damages is not
sustainable. As an alternative to her analysis on
the ex-post period,
Affuso applies the interpolation method to show that Nationwide's
damages were minimal. It is difficult to
marry Affuso's two methods,
which on the face of it produce contradictory results: her
interpolation shows some damages were suffered,
although greatly
reduced, whilst the ex-post analysis shows zero damages.
[100]
Initially Affuso interpolated the counterfactual scenario between the
ex­ ante market share of 6.4% based on the three
relevant routes
and the ex-post share of 7.9% based on an average of six relevant
routes. This produced an initial figure of R5.9
million which
increased by R2 million with the inclusion of SAL and SAX. It has
been revised as high as R58 million based on her
most recent
calculations taking into account the misallocated BSP data.
[101]
A diagrammatic representation of her interpolation method is seen
hereunder. It should be noted that the BSP data used is
for all
relevant routes where Nationwide and SAA competed. On Affuso's
interpolation, Nationwide's only damages are identified
as those
where the pale grey line (the actual BSP passengers on the relevant
routes) dips below the pink dotted line (the counterfactual
BSP
passengers on the relevant routes).
NB:
Please consult the PDF version for the images
Nationwide
actual BSP share, relevant routes Nationwide counterfactual BSP
share, relevant routes
[102]
To understand the extent of divergence between the two experts using
the linear interpolation method, the diagram below shows
a comparison
of Oxera and PwC's damages. The reason for this is that PwC have used
BSP data in the relevant routes while Oxera
have used passenger
numbers for all routes.
NB:
Please consult the PDF version for the images
[103]
As the interpolation methods of Noble and Affuso produce such
divergent results, it is evident that before any meaningful

interpolation can take place this court has to make certain
determinations firstly, regarding the correct data set to be used and

secondly, the appropriate averaging methods to be applied
to
the
interpolation. Both are a fundamental point of departure between the
experts, and one which has a significant impact on the
outcome of the
calculation of damages.
Appropriate
Data Set
[104]
The first significant area of difference is whether to use data from
only those routes where Nationwide competed with SAA
or the entire
domestic market. Affuso's model uses only those routes which both SAA
(including SAX and SAL where appropriate) and
Nationwide flew. This,
she submits best gives effect to the Tribunal's and the CAC's
findings that the effect of the overrides
was felt predominantly in
the travel market sector. On the other hand Noble advocates the use
of total data for the entire domestic
airline travel market which he
says best adheres to the decisions of the Tribunal.
[105]
The Tribunal found that:
"While
the
foreclosing
effects
of
its
conduct
were
greater
in
this
[travel
agent]
segment
of
the
market,
competition
in
the
overall
domestic
airline
travel  market
was
reduced
by SAA's incentive scheme."
[28]
(my
underlining)
[106]
Whether to use only those routes where SAA and Nationwide competed
was considered and rejected by the Tribunal, which found
that the
override agreements applied to all SAA domestic flights across the
country. Nor were they limited to only those routes
where SAA faced
competition from rival airlines but applied to potential competition
on routes where rivals had not yet introduced
scheduled flights.  For
this  reason the Tribunal made the finding that the two domestic
air travel. It is noteworthy
that Bricknell's evidence at the
Tribunal was that when Nationwide wanted to open new routes they were
advised against it by travel
agents. What is clear is that on a
correct reading of the decision of the Tribunal, and as confirmed by
the CAC, it is not open
to Affuso to merely use those routes where
SAA competed with Nationwide.
BSP
v Passenger Numbers
[107]
Interrelated to the debate of relevant routes versus the total
domestic market is whether total passenger data or BSP data
should be
used in the calculation of damages. Noble uses passenger numbers for
the whole of the domestic airline travel market.
Affuso's approach is
to use the BSP data on all routes where SAA and Nationwide competed.
Therefore PwC uses revenue data to estimate
passenger numbers whereas
Oxera is more concerned with volume of passengers lost. Having
determined that the total domestic market
is the relevant market,
this court must then determine whether BSP or passenger numbers is
the appropriate dataset.
[108]
Because BSP data records all sales made via travel agents, Affuso
contends this approach is in line with the findings of the
Tribunal.
She criticises Oxera's data as producing unrealistically high
predictions of counterfactual passengers. By amending Noble's

methodology to confine it to travel agents sales and the relevant
routes, the damages estimate is drastically reduced.
[109]
Noble contends for the use of actual passenger numbers to estimate
Nationwide's counterfactual passengers. This method is
said to be
useful because it relies only on data regarding Nationwide and not
the other airlines. SAA questions the reliability
of this approach
for precisely the same reason - it ignores the rest of the market.
[110]
Affuso's criticism of the use of passenger numbers is that it
fundamentally ignores the fact that revenue depends upon both
price
and passenger numbers (which, in turn, depend on price). Hence, by
separating both passenger numbers and price (or yield),
Noble is
assuming passengers would not respond to prices. This, she says, is
fundamentally wrong as it ignores the law of supply
and demand. In
addition, avers Affuso, like the argument regarding the relevant
routes, it ignores the fact that the Tribunal concluded
that any
effect would be felt primarily in the  travel agents' market. By
using BSP data which relates directly to sales deriving
from travel
agents, which is the segment of the market covered by the override
agreements, Affuso claims to be adhering to the
Tribunal's finding
that the major effect of the overrides was to be felt in the travel
agents sector.
[111]
Nationwide provides several reasons why the use of BSP data is
incorrect. The first argument is that using BSP data is impractical

in view of the fact that Nationwide's BSP data is not available
before January 2001. To add to this, BSP data is not on a
route-by-route
basis. Affuso divides the total BSP revenues by total
flown revenue to calculate a percentage share and then applies this
percentage
to flown revenue on individual routes to estimate a BSP
sales revenue figure on each route. As a result the missing Nationwie
BSP
data must be constructed on the basis of assumptions, which are
not necessarily correct.
[112]
Noble correctly points out that firstly, it assumes a 1:1
relationship between BSP and flown revenue for travel agents, which

is not correct. Secondly, this calculation assumes that the flown
revenue across all  routes flown by all the airlines is

consistent, which is not necessarily true. For example a route such
as the Johannesburg/Cape Town route is likely to have a higher
ratio
of travel agent sales than other routes. Comair's BSP data also only
commences in July 2000, which causes further difficulty
in correctly
dividing the BSP data between the different airlines.
[113]
Moreover, there is no BSP data on passenger numbers, only BSP
aggregate revenues. These values need to be converted to passenger

numbers which require assumptions about the relevant yield. In
contrast, the passenger number data sets used by Noble are admitted

and accepted as accurate. They are available for the entire period
unlike the BSP data. They are disaggregated for each of the
relevant
airlines and on a route-by-route basis. Hence there is no need for
assumptions.
[114]
Perhaps the most compelling criticism of the use of BSP data is the
anomalies in the BSP data for SAA, SAX and SAL, which
emerged during
the course of the trial. The discrepancies in the data, although
apparently known to Affuso much earlier on, were
picked up late in
the day by Nationwide's legal representatives. It is not disputed
that from July 2004 to March 2008 the SAL and
SAX BSP revenues are
lower than the flown revenue. This is clearly indicative of an error
in the data. Over this period there is
a significant decline in SAX
and SAL's BSP data. As from April 2008 the BSP data is significantly
higher than flown revenue (as
one would expect).
[115]
The BSP data sales of all the airlines operating at the time - SAA,
SAX, SAL, Comair and Nationwide - is agreed. If the incorrect
data
from SAA, SAL and SAX is added to the data from Comair and
Nationwide, an aggregate BSP data set is produced, which is very

similar to the data sets provided independently by the five airlines.
This means, submits Nationwide, that the corrupt data was
adjusted to
cure the anomalies in the SAX and SAL's data set. The only plausible
explanation for the anomalies is that the SAL
and SAX data was
misallocated to SAA, which would have the effect of artificially
inflating SAA's BSP data to the detriment of
Nationwide, whose market
share would be artificially suppressed.
[116]
Affuso
did
not dispute that the SAA data was incorrect and attempted to cure
the
problem
by
reconstructing
the
SAL,
SAX
and
SAA
data
sets.
She
estimated
the
missing
SAL
and
SAX
data
by
using the
average
proportion
of
BSP
revenue
to
flown
revenue
for
SAL
and
SAX
in
the
months
where
the
discrepancy
does not exist.
Alternatively,
she interpolated the missing SAL and
SAX
data. On these two bases Affuso concluded that the damages suffered
by Nationwide amounts to R16.9
million
to
R17.3
million.
[29]
[117]
It
was pointed out by Nationwide at the time that while the SAL and SAX
data
was adjusted, there are no changes to the SAA data, which assumes
that the missing data was
not
misallocated to SAA, contrary to all
i
ndications.
This has
the
effect
of
erroneously
increasing
the
total
BSP,
which
is
known
and
agreed.
The correct approach would be to subtract the reconstructed SAL and
SAX data from the SAA data, which results in the correct
aggregate
total
BSP data
from
the
five
airlines.
[30]
[118]
During
the
course
of
a
subsequent
matter
-
Comair
v
SAA
[31]
(where
Comair
is
similarly claiming delictual
damages
for anti -competitive conduct over
the
same
period)
evidence
emerged
which
confirmed
the
stance
taken
by
Nationwide.
According
to
further
submissions
[32]
received
from
Affuso
in
July
2016,
Janaurieu D'Sa of IATA testified that IATA collates BSP data from
travel agents and then remits
this
data to the individual airlines. The BSP data for SAA,
Nationwide
and Comair
is
correct. This means that
SAA's
BSP
was
incorrect.
Any
correction
to
SAL
and
SAX
BSP data
must
be
accompanied
by
a corresponding decrease in the SAA BSP data. This was exactly the
contention
of
Nationwide. On the basis of this evidence Affuso
recalculated
the damages using the
corrected
data
from January
2004
and January
2005,
and using the start dates of the linear
i
nterpolation
as being October 1999 and April 2000. The damages increased
to
amounts ranging between R28.9
million
to
R48.5
million.
[119]
What
the
above
indicates
is
that
Nationwide's
criticism
of
SAA's
use
of
BSP
data is clearly justified.
Nationwide
successfully
made
out a case that the
SAA
BSP
data
was
corrupt,
and
the
initial
attempts
by
Affuso
at
curing
the
problem
significantly
underestimated
the
impact
it
would
have
on
any
final
damages
figure. Subsequent evidence in
the
Comair case has proven this to be correct.
For
this
reason
alone
the
BSP
data
is
too
unreliable
to
use
as
the
appropriate
dataset.
However,
and
equally
i
mportant,
using
BSP
data
on
the
relevant routes fails, in my view, to give effect to the findings of
the Tribunal that
whi
l
e
the
effect of SAA's conduct was felt primarily in
the
travel agent sector, the conduct
had
the
effect
of
reducing
competition
in
the
total
domestic
airline
market.
[33]
[120]
Affuso was unable to provide a satisfactory answer as to how effect
should be given to the Tribunal's finding, which is binding
on this
court. She repeatedly stated that she had found no evidence that
there had been any impact on markets other than the travel
agents'
sector. In my view this is tantamount to suggesting that the findings
of the Tribunal must be disregarded. While it may
be that this court
finds that no damages were suffered in the domestic market as a
whole, it is not for an expert to decide this
and merely omit the
relevant data from her methodology.
[121]
The Tribunal found that the effect of the override agreements was to
shift passengers who might have flown with Nationwide,
to SAA. The
effect is one of volume. Therefore the obvious starting point is the
passenger numbers. I am in agreement with Noble
that passenger number
data best reflects the Tribunal's finding that the total domestic
market was affected.
[122]
Noble's alternative method, and one supported by SAA if BSP data were
to be rejected, is the market share approach. This analysis
also
relies on passenger numbers to ascertain the market share. It
involves estimating Nationwide's counterfactual share by focusing
on
the split in the total passenger volumes between the three main
airlines rather than actual passenger numbers. Nationwide's

counterfactual market share is then converted into counterfactual
passenger numbers. This involves looking at the entire airline

domestic market - Comair, Nationwide and SAA (including SAL and SAX).
According to Noble this exercise was done across the relevant
period
for the whole of the domestic market in order to remain aligned to
the Tribunal's decision. It did not include LCC's because
they had a
very different business model to attract customers who have never
flown before. It looks at Nationwide's market share
before and after
the abuse period to estimate what share it would have obtained during
the abuse period. Nationwide contends that
the market share approach
shows that the market in absolute terms continued to grow; Nationwide
also grew but would have grown
more absent the abuse.
[123]
While based on passenger numbers, the total size of the market in the
counterfactual scenario is assumed to be the same as
the actual
scenario. Therefore all market factors at play during the relevant
period are considered. In light of the significant
changes taking
place in the aviation industry at the time, it is important that any
methodology estimating counterfactual passengers
must not only
reflect seasonality but also properly reflect the changing trends in
the airline industry.
[124]
The distinct advantage of using market share is that it captures the
impact of changes taking place in the market as a whole.
For example,
if the overall market increased over the holiday season this method
would estimate the higher passenger numbers for
all three airlines
and not only Nationwide. Similarly, the impact of the entry of the
LCC's such as Kulula and 1Time would be accounted
for. In this
manner, the outcome of market processes that affect people's choices
are effectively embedded in the analysis. It
would also take into
account the impact of the price wars that took place in the travel
industry between 2002 and 2004 as testified
to by Mortimer.
[125]
Having rejected the argument for the use of BSP data on the relevant
routes, I am persuaded that Nationwide's market share
would be a more
appropriate dataset to utilise, rather than passenger numbers. My
conclusion is therefore that any interpolation
must be based on
market share data on all routes, rather than BSP data on routes flown
by SAA and Nationwide.
Lost
revenue
dispute
[126]
The other area where the opinion of the experts diverged widely is
how to calculate lost revenues. As alluded to previously,
Oxera
determines lost revenue in two steps. Noble uses actual passenger
number data to estimate the counterfactual passenger numbers,
which
are then converted to counterfactual revenues by multiplying them by
Nationwide's actual average revenue per passenger. Affuso
disputes
that it is necessary to identify the lost passengers because on her
model the only relevant lost revenue is the BSP revenue.
She
estimates Nationwide's counterfactual revenue as the counterfactual
BSP revenue for the relevant routes. Noble therefore uses
two steps
in his analysis which focuses on passenger data while Affuso uses
actual revenues to estimate the counterfactual revenues
in one step.
[127]
Affuso prefers the one step approach for a number of reasons.
Firstly, because yield masks the considerable differences in
the
ticket fares paid by passengers, ranging from business class to the
cheapest economy fare. Secondly, the number of passengers
depends on
the fare and if the fare goes up the passenger numbers will go down.
By looking at revenue only, in Affuso's view, all
those interactions
are taken into account. Whereas if the two components are separated
and assumptions are made on yield and passenger
numbers separately,
the impact on yield cannot properly be determined. This was a matter
of much debate during the trial.
[128]
On the other hand Noble considers the single step approach
inappropriate because revenue data is a combination of the revenue

per passenger and the number of passengers. For example Nationwide
could earn revenue of R1000 by selling 10 air-tickets at R100
each,
but the same revenue could be earned carrying 5 passengers at R200
each. Yield and revenue do not necessarily follow the
same trend. The
yields were higher during the abuse period than they were before and
after. This could therefore mask a drop in
passenger numbers.
[129]
It was further contended that using BSP data to interpolate can mask
a decline in Nationwide's passenger numbers as a result
of SAA's
abusive conduct, thereby underestimating lost revenue. This is
because the BSP data is the end result of a combination
of the
passenger numbers and the price of the ticket sold. It does not take
into account that the price is subject to external
variables such as
inflation and fuel price. Simply put, if the price of a Nationwide
ticket increases to compensate for the loss
of passengers as a result
of the abusive conduct, the BSP figure will mask the fact that
Nationwide has lost passengers.
[130]
What
Affuso's approach overlooks is that the impact of the overrides was
felt
in
the
volume
effect,
namely
that
passengers
who
would
have
flown
with
Nationwide
were
diverted
to
SAA.
The
anti-competitive
conduct
influences
passenger numbers rather than price. Therefore,
I
am
in agreement with Noble that
Affuso's
approach,  by
using
revenue
alone,
would
have
the
effect
of
masking a drop in passenger numbers. In
fact,
as pointed out by the
CAC
[34]
,
it
is
possible
that Nationwide would have obtained a higher revenue per passenger
in
the
counterfactual
without
SAA's
conduct.
This
is
an
indication
that
Noble's
figures
may
be
somewhat
conservative.
[131]
In summary, the correct method in my view, would be to utilise the 3
stages suggested by Noble and to interpolate on the market
share of
Nationwide. Having determined the correct dataset to be utilised and
the approach to be adopted, the number of lost passengers
has to be
ascertained. This is estimated by looking at the period before,
during and after the infringement to estimate what the
passenger
numbers would have been, absent the infringement. As mentioned
previously, there is more than one approach that can be
used to
assess the lost passengers (and lost revenue as a consequence of the
lost passengers) but the linear interpolation is the
one method
agreed upon by both parties.
Linear
I
nterpolation
Method
[132]
What the interpolation method does is place two points on a graph,
the first representing the before period and the second
representing
the after period. A straight line between these two points will
indicate what the growth would have been but for the
abuse. It can be
used to estimate the counterfactual passenger numbers or the
counterfactual market share. The stylized diagram
below demonstrates
the lost passengers as being the difference between the actual
passengers (represented  by  the  solid
black
line)  and  the  counterfactual passengers,
which is shown on the area between the solid line
and the dotted
green line between points B and C.
NB:
Please consult the PDF version for the images
[133]
Nationwide's interpolation method applied to market share is
illustrated below. The shaded area represents the counterfactual

market share for each month.
NB:
Please consult the PDF version for the images
[134]
The linear interpolation method involves comparing the
pre-infringement value to the post-infringement value. An important

determining factor in arriving at the final damages sum is where the
pre- and post-infringement comparator periods should begin
and end.
Both experts agree that the calculation of damages should be made
with reference to a time period unaffected by the abusive
conduct, a
so-called 'clean' or uncontaminated period. This is in line with the
European Commission which states that:
"Another
simple
technique
for
deriving
a
comparator
value
from
a
range of data
observations
is linear interpolation. Where
a
comparison
over
time
has
produced
price
series
from
before and
after
the
infringement, the 'non-infringement' or
"counterfactual
price
during the infringement
period
can be estimated by drawing
a
line between the pre-infringement
price
and the post infringement
price."
[35]
[135]
Noble
and
Affuso
agree that a 12-month averaging period should be used to
account
for
seasonal
variation
in
the
airline
industry.
[36]
However
there
is
disagreement
on when the starting point of the interpolation (the ex-ante period)
should
commence and when the lingering effects of
the
abuse of dominance will come
to
an
end
(the
ex-post
period). The
figures
change dramatically depending on when one starts and ends the
interpolation. Affuso uses a trailing averaging
method
which
calculates the 12-month average using the 12 months before the
abuse
period and the 12 months after the abuse period.
Noble
uses a centred
averaging
approach where the beginning and end dates of the the abuse are used
as a midpoint and the 12 months before and after
these dates are used
to calculate
the
12-month
average
The
first
diagram shows the
averaging
period
for
the
start of
the
interpolation. By using the Oxera averaging period for the start of
the
interpolation,
PwC's
damages
calculation
increases
to
R62
million.
The
second
diagram reflects the averaging period
for
the end of the interpolation. By using
the
Oxera
averaging
period
for the end of the
interpolation
PwC's
damages
increase by
R48
million.
[136]
The dramatic difference the averaging makes to the final figure is
set out in the diagrammatic representations. The visual

representations are the PwC diagrams using BSP data.
NB:
Please consult the PDF version for the images
[137]
Noble uses 12-month averages centered around the beginning and end of
the infringement period, namely September 1999 and April
2005. Data
for the six-month period before and after these points is utilized
which means that inevitably data within the abuse
period is used. In
respect of the before point, his reasoning is that Nationwide, being
a new airline, was growing rapidly at the
time. Therefore, taking the
12 months before the infringement as the averaging period would
introduce a growth bias. On the other
hand Affuso starts the
averaging period 12 months before the infringement period and argues
that the interpolation should not overlap
at all with the
infringement period. She calculates Nationwide's counterfactual share
with reference to a comparator period unaffected
by the abuse. Her
initial calculations used a linear interpolation between Nationwide's
average market share over the twelve months
before the infringement
(October 1998 - September 1999) and the twelve months after the end
of the infringement (April 2005 - March
2006). A diagrammatic
representation of the effect of the different averaging methods is
set out hereunder.
NB:
Please consult the PDF version for the images
[138]
Affuso
criticizes
the
approach
of
Oxera
as
intellectually
inconsistent
and
illogical because
i
t
utilises
data within
the
infringement
period.
This she
states
is
"technically incorrect and
invalidates
the
approach".
Moreover
i
t
has the effect of inflating
the
result.
[37]
However,
in
her
testimony
Afffuso
stated
that
the
real
effect
of
the
abuse
was
felt
from
April
2000
when
all
the
offending
incentive
agreements
commenced,
bar
one
-
American
Express  wh
i
ch
commenced
in
October 1999.
She
indicated
that
as
an
expert
she
would
"have
no
difficulty"
starting
the
abuse
period
from
April
2000.
This
means
that
the
start
point
of
the
i
nterpolation
correlates
with
the
Oxera's
12-month
averaging from
April
1999
to March 2000.
In
light of this concession
I
am
of the
view
that
the
averaging
period
for
the interpolation starting point should be the
12
months
prior
to April 2000.
[139]
As regards the end point, Affuso's 12-month averaging period
commences when the abuse period ends in April 2005 to end March
2006.
She excludes data from July 2005 as SAA staff went on strike during
July and passengers had no choice but to fly on other
airlines
including Nationwide, thereby inflating its market share. This was a
once-off event that would distort the overall picture.
Oxera's
averaging period is centred on the end date of the infringement and
therefore includes the six months before and after
April 2005.
[140]
The undisputed evidence is that once SAA made its announcement of the
termination of its override agreements in November 2004,
travel
agents almost immediately diverted their discretionary business from
SAA. As with the starting point, it seems that the
date from which
the abuse of dominance ceased to have an effect must be the correct
starting point for the end averaging period.
This broadly coincides
with the averaging period used by Oxera. In the light of this
evidence, I am of the view that the centred
averaging approach of
Noble is more appropriate and the end point averaging period should
run from October 2004 until September
2005. However, I am in
agreement with Affuso that the July 2005 data, when the SAA strike
was taking place, should be excluded.
Contingencies
[141]
Noble testified that SAA's abusive conduct would have had an effect
beyond the travel agent sector and that the override schemes
would
negatively affect Nationwide's brand. I am persuaded that once a
passenger is repeatedly persuaded by the travel agent sector
that SAA
is a superior airline this will create a bias in favour of SAA even
when that passenger is buying his/her ticket through
distribution
channels other than travel agents. Repeated exposure to SAA in a
passenger's business travel under a corporate agreement,
does have
the potential to influence the choices that passenger makes  as
a leisure traveller. Travellers, who have only been
exposed to SAA
flights due to directional selling of SAA tickets by travel agents in
the past, are likely to remain loyal to SAA
regardless of the
distribution channel through which they may purchase air tickets in
the future. Brands matter because people's
choices are influenced by
their past behaviour.
[142]
Further,
while the effect of loyalty programmes may be limited, the lure of
earning
Voyager points, SAA's highly successful loyalty programme, cannot be
totally
disregarded.
SAA
argues
that
because
Nationwide
continued
to
grow
during
the affected period, this is an indication the anti-competitive
effect of the loyalty programme
was
limited.
[38]
I
do
not
agree
with
this
proposition.
Once
a passenger's business travel has been diverted to SAA and a certain
number of
mi
l
es
accumulated,
it is probable that many passengers would remain with SAA for
l
eisure
and
other
non-time
sensitive
travel
in
order
to
accumulate
further Voyager miles.
[143]
That some allowance must be made for brand loyalty is self-evident,
but sight should not be lost of the fact that while the
Tribunal held
that the effects of SAA's anti-competitive conduct may have had the
effect of reducing competition in the total domestic
market, its
effect was greater in the airline market distributed through travel
agents. In short, the effect was felt predominantly
in the travel
agent sector but not exclusively. Any estimation of damages must take
this finding into account.
[144]
The question is really how much should be attributed to brand. In
other words what percentage of the non-travel agent market
should be
attributed to the abusive conduct. Both the Tribunal and the CAC
stressed that the main effect of the abuse of dominance
was to be
found in that part of the domestic air travel which was distributed
by the travel agent sector. Despite the growth in
internet and direct
sales the Tribunal found that the travel agent sector accounted for
70% of the total domestic air travel market
at the time.
[145]
The
question of contingencies was
not
raised by either expert.
However,
it
is
in my
view
the
only
way
to
account
for
the
fact
that
any
damages
must
take into the consideration
the
whole market but must bear in mind that the effects
of
the
abuse
was felt
predominantly
in
70% of the market (the travel agent sector). The issue
of
a
contingency
deduction
was
suggested
by
Mr
Pretorius
in
his
heads of argument. When a possible
contingency
deduction
was
put
to
Mr
Gotz in
argument
his
response
was
that
the
effect
would
be
to
reduce
passenger
numbers,
which
would
make
no
difference
as
the
gradient
would
remain
the
same,
an
argument
that
I
do
not
accept.
On
being
pushed
he
said
a
maximum
discount
of 25% should be applied to their damages calculation.
[146]
In
2
Travel
Group
PLC
(in
liquidation)
v
Cardiff
City
Transport
Services
Ltd
[39]
the
Competition Appeal Court in
England
considered a
claim
by
the
liquidators
of
2
Travel
for
a
l
oss
of profit and a
l
oss
of capital assets. In para 397 of
the
judgment
the
court
said
the
following:
"Of
course, it is absolutely right that the Tribunal can only determine
this case on the evidence before it, and cannot have
regard to
factual material that was not adduced before it. Neither Mr Good, nor
Dr Niels nor Mr Haberman adduced such factual material.
They provided
expert opinion evidence. In particular, Mr Good and Dr Niels sought
to assist the Tribunal in what sort of revenue
would have accrued to
2 Travel had the infringement not taken place. We have found the work
extremely helpful, and have taken it
fully into account, but we
certainly do not consider that the opinion evidence in the reports
must be used on a 'take it or leave
it' basis. It is for the Tribunal
- based upon the factual evidence - to make an assessment of what
would have happened in the
counter-factual scenario, and this may
very well involve re-working calculations done by the experts or
adopting an approach which
- although it draws on the work of both
experts - adopts neither approach completely. This is what has
occurred in this case. Our
approach is neither that of Mr Good nor
that of Dr Niels but - based upon the factual evidence we have heard
- represents our concluded
view as to what would have occurred in the
counter-factual scenario."
[147]
It lies within the discretion of the court to determine what
contingencies should be applied. In my view a 25% contingency

deduction applied to Nationwide's figures would properly account for
the non-travel agent sector unaffected by the anti-competitive

conduct.
[148]
What remains is to deal with two further defences raised by SAA. The
first relates to the settlement of the civil claim arising
from the
anti-competitive conduct during the period September 1999 to May
2001. The second is whether Nationwide's loss of profit
can be
attributed to poor management.
Settlement
of
the First
Action
[149]
One of the points raised by SAA is that Nationwide issued summons for
payment of damages after the First Tribunal in the maximum
amount of
R269 million and a minimum amount of R43.7 million. This action was
apparently settled for a fraction of the amount without
going to
trial. The effect of this is that Nationwide has been compensated for
the damages it suffered until May 2001 which include
Noble's starting
point of October 1999. It is contended that Noble's calculation
ignores the legal consequences of the settlement
of the first action.
The net result of this, so it is argued, is that Noble has used the
incorrect starting point for the calculation
of damages, which has
been inflated not only by including 6 months after October 1999 in
the averaging period but also by using
November 2004 as the end point
averaging period.
[150]
Noble in
his
first
report makes it
clear
that the counterfactual
was
calculated
for
the
entire
period
of
the
anti-competitive
conduct,
from
October
1999 to
March
2005.
However,
he
goes
on
to
state
that
the
damages
values
relate only to the second period as damages for the first period were
claimed in
separate
proceedings. Only
the
lost passengers for the period 1
June
2001 to 31 March
2005
are included in
the
calculations and the damages for the first period are
specifically
excluded.
[40]
[151]
Later in his report Noble at para 4.36 goes on to explain:
"The
damages estimate for the first period included a claim for two weeks
of dissipation or lingering effect following the
end of the
period-Le. 1 June to 14 June 2001 (this was included because SAA's
override agreements are likely to have had a continued
effect beyond
the official end of the period). In light of this, the amount
corresponding to the two weeks of dissipation has been
deducted from
the second period damages estimate calculated in this report to avoid
double recovery for this period."
[152]
From
the
above
i
t
i
s
evident that the submission that there has been
some
duplication in
the
claim is
factually
i
ncorrect.
Insofar
as
i
t
may be suggested that the starting point
for
the interpolation does not
take
into account the first claim,
i
t
bears mentioning that both experts agreed that the
i
nterpolation
should begin
at
the end of September 1999
.
[41]
By
necessity
i
t
would cover the period of the first claim for
damages
but
this
does
not
mean
that
the
damages
are
in
fact
claimed
for
that
period.
In fact the
contrary
has
been shown to
be
the case.
[153]
In
their
third
set
of
heads
of
argument
[42]
SAA
changes
the
goalposts
and
alleges
that the
issue
is not whether
Noble
incorporated
the
damages
of
the first period
into
the
second
period
but
rather
that
whilst
damages
of
between
R34.7
million
to
R269
million
were
claimed,
the
action
was
settled
for
a
fraction
of
the
amount.
This
is
said to
be
indicative
of
the fact
that
the
basis
for
the
calculation
of
the initial amount
was
fundamentally
wrong
and
this was
not
factored
into
the
calculation
for
the
second
period.
This
is
a
novel
proposition.
What
calculations
were
presented
and
what
factors
were
taken
into
consideration
at
the
time
the
claim
for
the first
period
was
settled
are
not
before this court. This
is
not anything
this
court can take cognizance of.
Poor
Management of Nationwide
[154]
One of the defences raised in its plea is that Nationwide's loss of
profit was as a result of poor business management. No
direct
evidence was led by SAA, but Mr Pretorius argued that the best
evidence of this is the fact that Nationwide's liabilities
exceeded
its assets each year of its existence. In addition, once the abusive
conduct ended it increased its passenger numbers
while substantially
increasing its losses. The accusation is levelled that Noble's
counterfactual scenario is fundamentally flawed
with no bearing on
the real world. Mr Pretorius dismisses Noble's counterfactual world
where  Nationwide makes a handsome
profit when the
passenger numbers increase. However, in reality Nationwide's losses
increased when its passenger numbers increased.
Both scenarios cannot
be true, it is argued.
[155]
Ashton
and
Henry
at
para
graph
8.094
[43]
summarise
how
the
European
Union
deals
with
factors
extraneous to
the
anti-competitive conduct in
the
following
manner:
"8.094
As discussed in section Ill. A, when quantifying damages, all
those factors have to be controlled that bear no causal relationship

with the incriminated behavior. The extent to which the factors have
an impact on the profits follows from the respective multivariate

regressions. The quantification of damages is thus corrected for the
effects of these factors. An important factor in this context
could
be the business model used by the firm, which may differ in
situations with and without abusive conduct. In principle, the

econometric methods allow for an estimation of the impact of these
factors on cost, revenue and profits and the determination of
the
extent to which the changes in profits can be explained by these
factors. Depending on the case at hand, however, this may
be
difficult. For an estimation of the damages that is as precise as
possible, it is, however, of central importance to identify
all these
factors and to control them in an econometric analysis. Otherwise it
is possible that changes in profits will be attributed
to the abusive
conduct even though the changes will have had - at least in part -
different causes. "
[156]
In the European Guide reference, is made to a finance-based analysis
where the financial affairs of the company pre- and post
the abuse
period are compared, to identify whether the company has made a
profit during the infringement period. However, as Mr
Gotz correctly
points out, no case was made out for such an analysis. This was not
the model used by PwC, and in fact Affuso makes
no reference to such
a model, but rather submitted that the interpolation was the
appropriate model to use. It was not canvassed
between the experts
and cannot be considered by this court.
[157]
If the financial performance of the company was to be regarded as an
indicator of the damages suffered, then this model should
have been
put up by Affuso and evidence led on this aspect. The court cannot be
asked to make this finding on the basis of the
financials alone when
both experts have agreed on the interpolation method as the
appropriate model to estimate damages. Moreover,
it is not Noble's
evidence that Nationwide would have been profitable absent the abuse
but that it would have earned a greater
profit. Whether this would
have meant that the business as a whole would have made a profit (on
its books) or perhaps only shown
less of a loss is entirely
irrelevant for present purposes.
Conclusion
[158]
A summary of my findings is set out hereunder. In order to give
effect to the decision of the Tribunal that the anti-competitive

effects of SAA's conduct were felt in the market for domestic airline
travel, the appropriate dataset to use would be that of passenger

numbers rather than BSP data, which only reflects the sales by travel
agents. In the same vein, the Tribunal found that the anti­

competitive effect of SAA's conduct was not confined to those routes
where Nationwide and SAA competed but also on routes where
Nationwide
did not fly. Accordingly, I reject Affuso's use of BSP data on only
those routes where SAA and Nationwide competed and
conclude that the
appropriate data set would be that of passenger numbers in the entire
domestic market.
[159]
In assessing which passenger data better reflects the above findings,
I am of the view that market share data is a preferable
option to
passenger numbers. Although based on passenger numbers, market share
also takes into account the various market factors
at play at the
time. These include not only seasonal variations but also the growth
of the low cost carriers and other distribution
channels like
internet and direct sales. I accept the two-stage approach of Noble
as a more accurate reflection of lost revenue
than the use only of
BSP revenue data, and am in agreement with his three stage method to
determine lost profit or damages. Insofar
as it has been argued that
the avoided costs have not been proven, this is rejected for the
reasons set out herein.
[160]
In line with the consensus of both Noble and Affuso, I accept that
the linear interpolation model using market share on all
routes is
the appropriate methodology to apply. As regards the start and end
points of the interpolation, for the reasons set out
in this judgment
l accept the averaging periods preferred by Oxera with the caveat
that the data for July 2005, the time when the
SAA strike took place,
be excluded.
[161]
To account for the fact that the Tribunal and CAC found that it was
in the travel agent sector, which accounted for approximately
70% of
the market at the time, that the effects of the abuse were
predominantly felt, it is appropriate to apply a contingency

deduction to the final damages figure. I am of the view that a 25%
contingency should be deducted from any figure arrived at in
order to
make allowance for those passengers (and therefore revenue) which
were totally unaffected by the overrides and any brand
loyalty
emanating therefrom.
[162]
According
to
the
tables
provided
by
Oxera
[44]
the
figure
for
interpolation
using
market
shares
October
1999
to
March
2005
(centred
averaging)
adjusted
for
the
July
2005
SAA
strike
and
using
the
profit
margin
based
on
Nationwide's
management
accounts,
the
final
damages
figure
is
R
139.5
million
(Model
01).
The
total damages for each model are set out hereunder.
INTERPOLATION
- JULY 2005 STRIKE ADJUSTMENT AND PROFIT MARGIN BASED ON NATIONWIDE'S
MANAGEMENT ACCOUNTS
Model
Model
description
ModelDl
Base
model-
ModelD2
Base
model with
ModelD3
Adapted
start
ModelD4
Adapted
start
Model
OS
Adapted
start
October
1999 (centred) to March 2005
trailing
averages- October 1999
date-April
2000
(trailing) to
March
2005
date-April
2000 (trailing) to March 2005
and
end date-
April
2000 (trailing) to
(centred)
(trailing)
to March
(centred)
(trailing)
October
2004
2005
(trailing)
(trailing)
Interpolation
using pax
217.4
171.8
193.5
181.6
245.3
Interpolation
using
139.5
92.5
122.0
103.3
164.1
market
shares
Interpolation
average
178.5
132.2
157.8
142.4
204
[163]
To this figure a 25% contingency deduction should be applied. I am
accordingly of the view that Nationwide should be awarded
damages in
the sum of R104.625 million arising out of SAA's anti-competitive
conduct over the relevant period.
In
the result I make the following order:
1.
SAA is to pay to Nationwide damages in the sum of R104 625 million
2.
SAA is to pay interest on the said sum at 10.25 % as from the date of
judgment until date of payment.
3.
SAA is to pay Nationwide's costs on a party and party scale including
the costs of two counsel
and the qualifying costs of the expert
witness, Robin Noble.
_________________________
C
H Nicholls
Judge
of the High Court
Gauteng
Local Division, Johannesburg
APPEARANCES
PLAINTIFF
:
Adv.
A Gotz
Adv. M Le
Roux
Instructed
by Bowman Gilfillan
DEFENDANT
:
Adv. G Pretorius SC
Adv. B
Manentsa
Instructed
by Cliffe Dekker Hofmeyr
HEARING
DATES:        01 to 23 February &
30 March 2016
JUDGMENT
DATE:       08 August 2016
[1]
Competition
Commission v South
African
Airways (Pty)
Ltd
(18/CR/Mar01)
[2005]
ZACT
50
(28
July
2005),
hereafter also referred
to
as
"First
Tribunal".
[2]
Nationwide
Airlines
(Pty)
Ltd
&
Comair
Limited
v
South
African
Airways
(Pty)
Ltd
(80/CR/SEPT06)
[2010]
ZACT
13
(17
February 2010), hereafter referred
to
as
"Second
Tribunal".
[3]
Section
8(d)(i)
provides that
"It
is prohibited for a dominant firm to: (a) - (c) ...
(d)
engage in any of the following exclusionary acts, unless the firm
concerned can show technological, efficiency or other

pro-competitive gains which outweigh the anti-competitive effect of
its act –
(i)
requiring or inducing a supplier or customer to not deal with a
competitor."
[4]
Section
1(1)(x).
[5]
Second
Tribunal
para 107, 116,
209.
[6]
Second Tribunal,
para
8.
[7]
South
African
Airways
v
Comair
and
Another
2012
{1)
SA
20
(CAC)
para
142
(hereafter
referred to as "CAC judgment").
[8]
"(6) A person who has suffered loss or damage as a result
of a prohibited practice -
(a)
...
(b)
If entitled to commence an action referred to in paragraph (a), when
instituting proceedings, must file with the
Registrar or Clerk of
the Court a notice from the Chairperson of the Competition Appeal
Court, in the prescribed form -
(i)
certifying that the conduct constituting the basis for the action
has been found to be a prohibited practice
in terms of this Act;
(ii)
stating the date of the Tribunal or Competition Appeal Court
finding; and
(iii)
setting out the section of this Act in terms of which the Tribunal
or the Competition Appeal Court made its finding.
"
[9]
Section 65(7).
[10]
First
Tribunal,
para 65.
[11]
Second Tribunal, supra fn
1.
[12]
Second Tribunal, para 218.
[13]
Domestic
Override
Agreement
Between
SAA
and
Seekers
Travel/American
Express,
jointly
known as Tourvest,
commencing
1
April
2003,
clause
2.1.3.
[14]
Second Tribunal,
para
229.
[15]
CAC judgment,
para
140.
[16]
Ashton and Henry (Elgar)
Competition
Damages Actions in the EU: Law and Practice
(2013)
at p 244 para 8.074.
[17]
Southern
Insurance
Association
Ltd v
Bailey
NO
1984
(1)
SA
98
(A)
at
113;
Goodall
v
President Insurance
Co
Ltd
1978
(1) SA 389
(W) at 393.
[18]
Aaron's
Whale Rock
Trust
v
Murray
and
Roberts
Ltd
and
Another
1992
(1)
SA
652
(C)
at 655H-656F;
Esso
Standard
SA
Pty
Ltd v Katz
1981
(1) SA 964
(A) at 970E-F.
[19]
European
Commission,
'Practical
Guide:
Quantifying
Harm
in
Actions
for
Damages
Based
on Breaches
of
Article
101 or
102
of
the
Treaty
on
the
Functioning
of
the
European
Union'
(11
June 2013).
[20]
Linear
trend
is
a
methodology
which uses
the
'before' period
as
a
benchmark
for
the
counterfactual performance in
the
'during' period. No
data
from the 'after' period is used.
[21]
Linear
interpolation
uses
the
'before'
and
'after'
period
as
a comparator
to
establish
what
would
have
occurred
in
the
counterfactual
period.
[22]
European Commission, 'Practical Guide: Quantifying Harm in
Actions
for Damages Based on
Breaches
of Article 101 or
102
of the Treaty
on
the Functioning of the European
Union'
(11
June
2013),
para 190.
[23]
Experts' Second Joint Minute, January 2016, para 81, 82 and 83.
[24]
Experts' Second Joint Minute, January 2016,
para
F2 and F5.
[25]
Oxera's
First
Expert Report dated 7 April 2015,
paragraph
6A.
[26]
In
Vulcan
Rubber Works (Pty) Ltd v South
African
Railways
&
Harbours
1958
(3) SA 285
(A) a witness could establish missing bales of rubber at
certain ports by saying he had searched for them
and
not found them
but
could not establish this from the reports of local officials as this
would
be
hearsay.
[27]
In
McDonald's
Corporation
v
Joburgers
Drive-Inn
Restaurant
(Pty)
Ltd;
McDonald's
Corporation v
Dax
Prop
CC
and
Another;
McDonald's Corporation
v
Joburgers
Drive-Inn Restaurant
(Pty)
Ltd
and
Dax Prop CC
1997
(1) SA
1
(A) at p27 it was
held
that
a
decision to admit hearsay evidence is not only an exercise of
judicial discretion, but a decision of law which may be
set
aside if
the
hearsay evidence is
found
to be incorrectly admitted
[28]
Second Tribunal para 247.
[29]
PwC Summary
of
Final Damages Submissions.
[30]
Nationwide:
Treatment
of
SAL
and
SAX
within
PwC
modelling',
Oxera
23
March
2016.
Noble
recalculated
PwC's
model
using
the
subtractive
method
and
obtained
figures
of
R53.7
million
and
R49.5 million respectively.
[31]
Comair
Ltd
v
South
African
Airways
(Pty)
Ltd
Case
No.
23443/2008
and
34079/2011
(consolidated).
This
matter commenced on 18 June 2016 and is not yet completed.
[32]
'Update on Damages Calculation in the matter of SAA v
Nationwide',
PwC,
July 2016.
[33]
Second Tribunal para 8.
[34]
CAC judgment
at
para
142
found that
during
the abuse
period:
"There
was accordingly
a
clear drop
in
Nationwide's
average
fares
towards
the
bottom
end
of
the
market
and
away
from
SAA
which suggested
that
Nationwide
's
growth
was
achieved
only
in the non-time
sensitive
part
of
the
market,
and that it was foreclosed
from
the high-yield
time
sensitive part
of
the market
as
a
result of SAA's incentive agreements."
[35]
European
Commission,
'Practical
Guide:
Quantifying
Harm
in
Actions
for
Damages
Based
on
Breaches of Article
101
or102 of the Treaty
on
the
Functioning
of
the
European
Union'
(11
June 2013),
page
23, paragraph 67.
[36]
Experts' Second Joint Minute, January 2016,
paras
E1 &
E10.
[37]
PwC Expert Report, 5 May 2015, para 83.
[38]
Virgin
Atlantic Airways
Ltd
v British Airwaves
pie
[2001] USCA2 282
;
257
F.3d
256
(2d Cir. 2001) was
criticized
for
finding
the loyalty scheme was considered an abuse.
Oxera
in a previous paper found that the continued growth of the market
share by Virgin was evidence of the limitation of the

anti-competitive effects of the loyalty program which did not
foreclose sales to Virgin. Gunnar & Jenkins, 'Reform of Article

82;
Where
the link between dominance and
e
ffects
breaks down',
European
Competition Law Review (2005)
ECLR,
Weet
and Maxwell, pages 605-610.
[39]
2
Travel
Group PLC (in liquidation)
v
Cardiff City Transport Services Ltd
[2012)
CAT
19.
[40]
Oxera Report dated 7 April 2015, para 3.19.
[41]
Experts' Joint Minute, January
2016,
E19.
[42]
Defendant's
Further
Submissions to
Plaintiffs
Replying
Heads
dated
30
March 2016.
[43]
Ashton
and
Henry
(Elgar)
Competition
Damages
Actions
in
the EU:
Law
and
Practice
(2013)
at
p 244 para 8.094.
[44]
Matrix of Damages
Estimates
for
Nationwide
Claim,
Oxera,
18
March 2016.