The entire SAS Board of Directors has resigned

The entire SAS Board of Directors resigned today - as a result of the Report by the Review Commission about the role of the SAS Board of Directors due to the Affair concerning Scandinavian Airlines and Maersk Air, which was published yesterday, Sunday 16 September 2001.

On October 8, 1998, SAS and the Danish airline Maersk Air signed a cooperation agreement. The agreement was to apply from March 1999. The cooperation agreement was submitted to the European Commission on March 9, 1999, for examination from the perspective of competition.

In mid-June 2000, the European Commission conducted an unannounced investigation ('dawn raid') at the offices of SAS and Maersk Air, during which a large number of documents were confiscated. After the Commission accused the companies in January 2001 of a breach of EU competition rules and the companies admitted these breaches, the Commission decided on July 18, 2001 to fine SAS EUR 39,375,000 (approximately SEK 360m) and to fine Maersk a total of EUR 13,125,000 (approximately DKK 100m).

The reason for the penalties was that the Commission found that the companies, in addition to the reported cooperation, had come to a secret agreement regarding market division. SAS would not operate on Maersk Air’s routes from Jutland, while Maersk Air would not be allowed to start flights on routes from Copenhagen, which SAS already operated or wanted to operate. In accordance with this agreement, Maersk would cease its flights on the Copenhagen-Stockholm route; and SAS, as compensation for this, would cease operating between Copenhagen and Venice and on the Billund-Frankfurt route.

The Review Commission had the assignment of investigating whether the information that the Board of Directors of SAS and its individual members received regarding the SAS/Maersk Air agreement was prompt, relevant and sufficient, whether the Board and the members of the Board, on the basis of this information, tried independently to acquire insight into the detailed contents of the cooperation agreement, and whether the Board acted adequately in relation to the information it had or should have acquired.

In Chapter 3, the Review Commission gives a brief account of the applicable rules contained in the EU regulations and the European Commission’s measures and decisions in the matter of the SAS/Maersk Air cooperation agreement. In Chapter 4, EU describes the assignment of the SAS Board of Directors. Thereafter, the Review Commission provides a more detailed account of the course of events in Chapter 5.

The Commission's assessment is reported in Chapter 6. In this, the members of the Commission state that most major airlines enter into cooperation agreements and more or less far-reaching alliances. The fact that SAS and Maersk Air, in accordance with this agreement, which was reported to the European Commission in the customary manner, agreed on a limited amount of cooperation was not remarkable in this context.

Regarding the information received by the Board of Directors and its individual members concerning the SAS/Maersk Air agreement during the time prior to the dawn raid, the Review Commission finds that the SAS Board was in no way informed that SAS and Maersk Air had negotiated a secret agreement in addition to the official agreement, nor had it been informed that such an agreement was subsequently made.

'Against the wall'

Furthermore, the Review Commission says:

'We discuss certain individual formulations in the information that the SAS Board actually received during this time. Our assessment is that these pieces of information did not give the SAS Board reason to take into account the possibility that a prohibited agreement had been reached. Nor did the information give the Board members reason to try to acquire further insight into the detailed content of the cooperation.

Regarding the Board’s actions after the dawn raid and prior to the Statement of Objections from the European Commission, we consider that the Board did not receive prompt, relevant and sufficient information, particularly with regard to the fact that the Board was not made aware of the results of an investigation conducted at the request of SAS by a Danish competition law expert, which proved without doubt that a secret agreement with prohibited content had been reached.

Even after taking into consideration that the Board did not receive information about this investigation, we believe that criticism must be directed at the Board for inadequate activity. A dawn raid, combined with the confiscation of documents, can partially be compared with intervention by the police or public prosecutor. The President and CEO had admitted that, in the documentation to which the European Commission had received access, there were formulations that could possibly confirm the Commission’s suspicions. The natural reaction for a Board of Directors in such a situation is to put the Management Team up against the wall and get to the bottom of the suspicions that have caused the actions by the authorities. It cannot be said that the Board did this.

It must be emphasized that action by the Board at this point could, naturally, not have undone the breaches of competition rules. However, if action had led to clarity about what had happened, this could have had an effect on the strategy towards the Commission and an impact on the evaluation of the Company.
Finally, we review certain measures by the Board after the Statement of Objections by the Commission. We believe that the SAS Board must be criticized for the fact that the SAS/Maersk Air Affair is not mentioned in the SAS Annual Report for the 2000 fiscal year. In addition, we find it questionable that, at its meeting on 7-8 August 2001, and without further investigation, the Board decided not to appeal against the Commission’s decision on penalties. Naturally, SAS would not have been acquitted – this would have been impossible – but the penalties could have been considerably reduced for several reasons.'

The Review Commission adds that it is unanimous in its findings. Monday morning the Board of Directors informed that all the members have resigned immediately.