Wednesday, September 12, 2012
Posted by D. Daniel Sokol
Giulio Federico, Chief Economist Team, DG Competition, European Commission, IESE Business School of the University of Navarra analyzes SAA II: Abuse of Dominance in the South African Skies.
ABSTRACT: This article reviews a recent abuse of dominance decision against the incumbent domestic airline in South Africa (SAA). This case placed significant emphasis on the economic impact of the abusive conduct, and it represents a clear example of the adoption of an effects-based approach to assess exclusionary behavior by a dominant firm. As this paper sets out, given the features of SAA’s conduct and of the relevant market context, it is also possible to identify a coherent economic framework which can explain why SAA’s rivals could not profitably match its incentive schemes and were therefore foreclosed. The conceptual issues raised by the SAA case are similar to the ones at stake in the landmark judgments on British Airways. The lessons from this case are therefore relevant to ongoing antitrust debate on loyalty discounts.