CCI dismisses case of alleged cartelization among domestic airlines

By: |
February 22, 2021 10:28 PM

In September 2016, the CCI had directed the director general (DG), its investigation arm, to cause an investigation into the matter on "prima facie" finding that the airlines-- Jet Airways (including Jet Lite), Indigo, Spice Jet, Go Air and Air India--were exhibiting characteristics of anti-competitive conduct.

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The Competition Commission of India (CCI) on Monday dismissed a complaint pertaining to alleged cartelization among various domestic airlines.

The case had emanated upon receipt of a letter from the Lok Sabha secretariat in January 2014 with a request to examine whether there is any evidence of cartelization in the airlines sector.

The data was analyzed for the sample reference period from April 2012 to March 2014 in respect of Jet Airways (including JetLite), Indigo, SpiceJet, GoAir and Air India for certain routes.

In September 2016, the CCI had directed the director general (DG), its investigation arm, to cause an investigation into the matter on “prima facie” finding that the airlines– Jet Airways (including Jet Lite), Indigo, Spice Jet, Go Air and Air India–were exhibiting characteristics of anti-competitive conduct.

The analysis of the four major routes indicated that airlines were maintaining some degree of stability in their market shares in both lean and peak seasons during the examined period.

Further, almost similar cost structure of the airlines also appeared to facilitate collusion on price to be charged in contrast to differentiated cost structure, where low-cost firms usually compete with high-cost firms on prices to capture greater market share.

Also, it was observed that despite differences in base fares and airlines fuel surcharge, the end fares charged by all the airlines for tickets, were almost similar.

The DG had analysed the market share of five airlines on four sectors during the reference period, as well as their air fare and its determination practices in order to detect any sign of stability or parallelism, or any possibility of communication between the airlines to fix prices.

However, as brought out by the investigation, no such pattern of stability or parallelism was noticed between the airlines, rather, a significant variance was seen in the market shares of the airlines, CCI said.

The DG had said that price parallelism has become the natural outcome, but it cannot be said to be the result of any agreement or action in concert.

“The DG concluded that in view of the analysis done with respect to daily bucket wise movement of price, relationship between price and capacity, and in the absence of any evidence suggestive of meeting of minds, the investigation could not find any contravention of the provisions of the Section 3(1) of the Act read with Section 3(3) thereof against the airlines,” as per the order.

Further, the Commission notes that a parallel conduct is actionable under the Competition Act only when the adaptation to the market conditions is not done independently and is attributable to information exchanged between the competitors or through some other collusive conduct, the object of which is to influence the market.

In the present case, no exchange of communication between the airlines could be established, CCI noted.

“There is no evidence on record to establish cartel amongst airlines during the period April 2012 – March 2014 and having examined the material on record, the Commission finds no reason to differ with the findings recorded by the DG,” CCI concluded.

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