Summary of Judgment

1. Introduction

This matter concerned consent proceedings before the Competition Tribunal of South Africa, in which the Tribunal was asked to confirm a settlement agreement as a Tribunal order.

The parties were the Competition Commission of South Africa (as applicant) and British Airways Plc (as respondent). The settlement agreement also described the underlying complaint as having been initiated against British Airways Plc and Virgin Atlantic Airways Limited, although the agreement placed British Airways Plc in settlement with the Commission in these proceedings.

The procedural history reflected in the order and the settlement agreement was as follows. The Commissioner initiated a complaint on 24 January 2008 under Commission case number 2008/Jan3488. After investigation, the Commission referred the complaint to the Tribunal for adjudication on 12 April 2012 under Tribunal case number 41/CR/Apr12 (the Tribunal order itself reflecting case number 019257). British Airways Plc then entered into settlement negotiations with the Commission, culminating in a written settlement agreement signed in June/July 2014. The settlement was placed before the Tribunal and was heard and decided on 13 August 2014, when the Tribunal confirmed it as an order.

The dispute concerned alleged prohibited cartel conduct in the market for international passenger airline services (including services into and from South Africa), specifically the alleged coordination of fuel surcharge pricing on the United Kingdom–South Africa routes and vice versa, alleged to contravene section 4(1)(b)(i) of the Competition Act 89 of 1998.

2. Material Facts

The Tribunal’s order confirmed a settlement agreement; accordingly, the material facts were those recorded in the settlement agreement and relied upon as the basis for the agreed relief.

It was recorded that the Commissioner initiated a complaint alleging a contravention of the Competition Act involving a component of price, namely fuel surcharges, in the relevant international passenger airline services market that included flights into and from South Africa.

Upon completion of its investigation, the Commission recorded as its finding (and British Airways Plc admitted for purposes of settlement) that, during the period August 2004 to January 2006, British Airways Plc and Virgin Atlantic participated in an agreement and/or concerted practice to coordinate pricing in relation to their respective fuel surcharge rates charged to passengers travelling on the United Kingdom to South Africa routes and vice versa. The coordination was said to have occurred through the exchange of pricing and other commercially sensitive information.

British Airways Plc expressly admitted in the settlement agreement that this conduct contravened section 4(1)(b)(i) of the Act.

As part of agreed future conduct, British Airways Plc recorded that it had fully cooperated with the Commission’s investigation and had provided information assisting the Commission in concluding its investigation. It further agreed to refrain in future from engaging in conduct that was the subject of the complaint referral and that may constitute a contravention of section 4(1)(b)(i). It also recorded that it had initiated a competition law compliance programme, and undertook to submit a copy of this programme to the Commission within 10 days of signature of the agreement.

For purposes of penalty, the parties agreed that British Airways Plc would pay an administrative penalty of R21 765 207.00, recorded as not exceeding 10% of British Airways Plc’s annual turnover into or from South Africa in its 2011 financial year. The agreed payment period was within 30 calendar days from the date of confirmation of the agreement as a Tribunal order, into the Commission’s nominated bank account, with the Commission to pay over the amount to the National Revenue Fund as contemplated in the Act.

The agreement further recorded that, once confirmed as an order, it would constitute full and final settlement of the proceedings between the Commission and British Airways Plc in relation to the alleged contraventions that were the subject of the Commission’s investigation and referral under the cited case numbers.

3. Legal Issues

The central legal question before the Tribunal, as reflected by the order granted, was whether the Tribunal should confirm the parties’ settlement agreement as an order of the Tribunal, in terms of the Tribunal’s statutory powers.

Although the settlement agreement included an admission by British Airways Plc of a contravention of section 4(1)(b)(i), the Tribunal proceedings reflected in the short order were directed to the procedural and remedial consequence of that admission—namely, confirmation of agreed relief—rather than the adjudication of contested evidence.

The dispute, as it came before the Tribunal on 13 August 2014, therefore concerned primarily the application of statutory provisions empowering the Tribunal to make a consent agreement an order of the Tribunal, and the consequent confirmation of the agreed administrative penalty and ancillary undertakings.

4. Court’s Reasoning

The Tribunal’s reasoning is contained in a brief order. The Tribunal recorded that it was confirming “the order as agreed to and proposed by the Competition Commission and British Airways Plc”, attached as annexure “A”. The settlement agreement itself recorded that the parties agreed that application be made to the Tribunal to have the agreement confirmed as an order in terms of section 27(1)(d) read with section 58(1)(a)(iii) of the Competition Act.

On the basis that the agreement had been concluded between the Commission and British Airways Plc, and that it was presented to the Tribunal for confirmation in accordance with the cited statutory provisions, the Tribunal confirmed the agreement as an order. The confirmation carried with it the agreed consequences recorded in the settlement, including the admission of contravention, the undertaking regarding future conduct and compliance, and the payment of the agreed administrative penalty within the agreed period.

No additional reasoning on the merits of the prohibited practice allegation or on penalty assessment was set out in the Tribunal’s order beyond confirming the settlement reached between the parties.

5. Outcome and Relief

The Tribunal confirmed the settlement agreement between the Competition Commission and British Airways Plc as a Tribunal order on 13 August 2014.

As confirmed, the order incorporated the substantive terms of the settlement agreement, including British Airways Plc’s admission of conduct contravening section 4(1)(b)(i) of the Competition Act, its undertaking to refrain from similar conduct in future, its compliance programme undertaking, and the obligation to pay an administrative penalty of R21 765 207.00 within 30 calendar days of confirmation.

The Tribunal’s order, as provided, did not record any costs order.

Cases Cited

No reported cases were cited in the text provided.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 4(1)(b)(i), 19, 22, 26, 27(1)(d), 50(1), 58(1)(a)(iii), 59(1)(a), 59(2), 59(3), and 59(4).

Rules of Court Cited

Rules for the Conduct of Proceedings in the Competition Tribunal, Rule 14(1)(a).

Held

The Competition Tribunal confirmed, as an order of the Tribunal, the settlement agreement concluded between the Competition Commission and British Airways Plc in relation to the Commission’s complaint and referral concerning coordinated fuel surcharge pricing on United Kingdom–South Africa routes during August 2004 to January 2006, as admitted by British Airways Plc to be in contravention of section 4(1)(b)(i) of the Competition Act. The confirmed order required payment of an administrative penalty of R21 765 207.00 and included undertakings relating to future conduct and competition law compliance, with the settlement operating as full and final settlement between the Commission and British Airways Plc regarding the conduct investigated and referred under the stated case numbers.

LEGAL PRINCIPLES

The Tribunal may, in terms of the Competition Act provisions invoked by the parties, confirm a settlement agreement (consent agreement) as an order of the Tribunal, thereby making the agreed terms enforceable as an order.

An agreement and/or concerted practice between competitors involving the coordination of pricing, including through the exchange of pricing and other commercially sensitive information, may constitute a contravention of section 4(1)(b)(i) of the Competition Act, and such contravention may be resolved by settlement incorporating an admission and agreed remedial terms.

An administrative penalty agreed in settlement and confirmed by the Tribunal is constrained by the statutory framework referenced in the agreement, including the limitation that the penalty not exceed the applicable statutory maximum calculated by reference to turnover into or from the Republic, and the statutory direction that penalties are paid over to the National Revenue Fund as provided for in the Act.