South African Airways (Pty) Ltd and Air Chefs (Pty) Ltd (77/LM/Oct02) [2002] ZACT 63 (12 November 2002)

South African Airways (Pty) Ltd and Air Chefs (Pty) Ltd (77/LM/Oct02) [2002] ZACT 63 (12 November 2002)

The Tribunal found that although the in-flight catering market is highly concentrated at major airports, there are sufficient alternative suppliers and a real threat of entry from niche players and food companies. Entry into the market is not unduly difficult, as demonstrated by recent entrants and the ability to secure premises near airports. The Tribunal accepted that backward integration is common and that a foreclosure strategy would be irrational, as it would increase SAA's own costs. Furthermore, airline customers possess significant countervailing power and can switch suppliers easily, mitigating any potential anti-competitive effects. The merger does not raise public interest...

Citation
[2002] ZACT 63
Parties
Applicant: South African Airways (Pty) Ltd; Respondent: Air Chefs (Pty) Ltd
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
12 November 2002
Case Number
77/LM/Oct02
Procedural Posture
Large Merger / Merger Approval
Outcome
Merger approved without conditions.
Judges
N. Manoim, D. Lewis, U. Bhoola
Legal Topics
Vertical Merger, Foreclosure, Barriers to Entry, Countervailing Power, Market Definition
Competition Law Commercial and Corporate Vertical Merger Foreclosure Barriers to Entry Countervailing Power Market Definition

Case Brief

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Parties

South African Airways (Pty) Ltd

Applicant

Air Chefs (Pty) Ltd

Respondent

Procedural Posture

Large Merger / Merger Approval

Legal Issues

  1. 1 Whether the vertical merger between SAA and Air Chefs will substantially prevent or lessen competition in the relevant markets.
  2. 2 Whether the merger will facilitate foreclosure or raise barriers to entry for competitors.
  3. 3 Whether the transaction raises any public interest concerns.

Ratio Decidendi

The Tribunal found that although the in-flight catering market is highly concentrated at major airports, there are sufficient alternative suppliers and a real threat of entry from niche players and food companies. Entry into the market is not unduly difficult, as demonstrated by recent entrants and the ability to secure premises near airports. The Tribunal accepted that backward integration is common and that a foreclosure strategy would be irrational, as it would increase SAA's own costs. Furthermore, airline customers possess significant countervailing power and can switch suppliers easily, mitigating any potential anti-competitive effects. The merger does not raise public interest...

Court Disposition

Merger approved without conditions.

Orders

  • The merger between South African Airways (Pty) Ltd and Air Chefs (Pty) Ltd is approved unconditionally.
  • No public interest concerns arise from the transaction.