13 April 2016 by Competition Alert

Competition Commission rejects exemption applications

The Competition Act, No 89 of 1998 (Act) empowers the Competition Commission (Commission) to exempt certain agreements and practices of firms from the application of the Act’s prohibited practice provisions.

Alitalia Societa Aerea Italiana S.p.A (New Alitalia) and Etihad Airways PJSC (Etihad) both sought an exemption to allow them to jointly price, schedule and market their flights to enable them to compete more effectively against the larger global airlines.

In their application for an exemption, New Alitalia and Etihad alleged that the market for passenger airline services between Italy and South Africa was in decline and motivated for the exemption on the basis that it would stimulate significant volumes of new traffic to South Africa.

The inability to convince the Commission, as per s10 of the Act that the exemption would lead to the maintenance or promotion of exports or that a change in productive capacity was necessary to stop a decline in an industry, resulted in the Commission declining to grant the exemption.

Other criteria set out in s10 of the Act that may be relied on in applying for an exemption are the promotion of the competitiveness of small businesses or firms controlled or owned by historically disadvantaged persons and/or advancing the economic stability of a designated industry.

Where existing measures are sufficient to achieve the aims of the exemption sought, the Commission is not likely to grant the exemption. This was the case in the instance of the exemption applications filed by the Council for the Built Environment (CBE). Five of the six exemption applications by the CBE were rejected by the Commission in January this year for that reason among others.

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