Football Fans Have Reason to Thank the SA Competition Commission

(by Bruce Lyons) Six airlines offering internal flights in South Africa have been planning ahead for the World Cup this summer. It seems they have foreseen a couple of ‘problems’. First, some rivals might not have realised this is a once-in-a-lifetime opportunity to raise prices as herds of fans travel from one stadium to the next. Second, it is not clear, even to those executives with this level of foresight, which particular flights will be in most demand. The alleged ‘solution’, now being investigated by the SA CC, was for the airlines to share these thoughts with each other along with a proposed plan of action.

South African Airways has applied for leniency and provided e-mail evidence containing the following suggestions that had been shared by the airlines: “air fares will have to be raised in order to cover various anticipated additional costs”; and “airlines have the option to either not provide any inventory for sale until such time, or price all inventory at peak time rates until such time as they have greater certainty”. In other words, hike prices up and leave them there until it looks like the fans will not be travelling. I can only imagine the airlines getting their IT people in over the weekend to reprogram and coordinate yield management software to exploit the mass migrations of football fans (who are apparently less predictable than wildebeests).

The investigation of this case has only been announced today, so I must be clear that this has the status of an allegation, not a proven cartel. However, if substantiated, it reinforces a number of things we know about cartels: information sharing can provide a powerful signal and focus for collusion; leniency programmes can be effective in uncovering price fixing; a cartel of six firms requires organisation and this often leaves a trail of evidence; and e-mails are a wonderful source of such evidence.

2 Responses to Football Fans Have Reason to Thank the SA Competition Commission

  1. Andreas Stephan says:

    Two weeks on, it is being reported that all the airlines under investigation are continuing to deny wrongdoing, except for South African Airways, who are cooperating under leniency and reportedly providing email evidence.
    It is unusual for others not to follow suit once the first firm has started to blow the whistle. On the one hand, the other airlines may be confident that the email evidence will not prove the alleged misconduct; perhaps SAA are being overly cautious. On the other hand, it could reflect the relative inexperience of the other (smaller) airlines in compliance matters; in which case they would be well advised to find better lawyers and fast.

  2. Andreas Stephan says:

    SAA’s cooperation with South African competition officials, may also have been the result of a seperate investigation into alleged abuse of dominance.
    On 17 Feb 2010, the South African Competition Tribunal found SAA had abused its dominanat position, in its use of incentive schemes agreed with travel agents between 2001-2005.
    Perhaps SAA are keen to clean up their poor record of competition law compliance, by being first through the door in the alleged World Cup price fixing case?

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