The investigation arm of the Competition Commission of India (CCI) has found the two-year-old code share agreement between Jet Airways and Kingfisher Airlines anti-competitive.
CCI sources told FE that the director general’s (DG) office has dismissed the airlines’ claim that the agreement was entered into for improving the overall efficiency of the two companies and save costs. The DG report has found the code share agreement breached sections 3 & 4 of the Competition Act, 2002. These sections deal with anti-competitive pacts regarding production, storage, distribution and supply and abuse of dominant position.
The CCI board headed by Dhanendra Kumar is slated to meet in the first half of January to take a call on DG’s report.
Sources said several clauses of the agreement between then two private airlines would hurt consumers since they enjoy over 60% of the aviation market. An email sent to Kingfisher went unanswered. Despite repeated attempts the Jet Airways spokesperson could not be reached.
If the members of the commission uphold the findings of the DG report, then the CCI has several options. It can order the immediate termination of the code share agreement and fine the two airlines 10% of their turnover.
?If the members find that there are some doubts that need to be clarified then the observations are sent to the DG to have a re-look at some of those issues.? an official said. However if the members accept the findings then the commission would be able to pass its final verdict in less than a month, the official added.
Following the signing of the code-share agreement in October 2008, CCI ordered an investigation into the matter in July 2009 after received a complaint from a consumer. As per the details of the agreement, the two airlines had decided to jointly manage fuel, cross-crew use, ground handling and route rationalization in the backdrop of rising fuel costs and mounting losses. Sources said that route rationalisation could also impact competition in the routes, where the airlines that are party to such a deal, have significant presence.
Over the last 18 months since the commission’s decision to conduct a probe, several issues have been raised by the airline, Kingfisher Airlines in particular. The airline moved the Bombay High Court arguing that since the agreement had come into force prior to the setting up of the CCI, it had no jurisdiction to look into it. Kingfisher also argued that since the matter had already been taken up by the erstwhile Monopoly and Restrictive Trade Practice Commission (MRTPC) the CCI had no business to conduct a parallel probe. The Bombay High Court and later the Supreme Court dismissed Kingfisher’s plea.
In November, the commission had fined Kingfisher Airlines Rs 1 crore under Section 33 of the Competition Act for not furnishing complete details it had sought. The company had moved the Competition Appellate Tribunal (CAT) which however ruled in Kingfisher’s favour.
A Delhi-based competition lawyer said that till the CCI passed a final verdict there would be little Kingfisher and Jet Airways could do. ?The companies cannot merely act on the DG report. Once the commission passes a final verdict the two companies can appeal, not before that,? he said.