Competition Commission of India Issued Show-Cause Notice to the Parties in Air India-Vistara Merger

Competition Commission of India Issued Show-Cause Notice to the Parties in Air India-Vistara Merger

The Anti-trust regulator Competition Commission of India (CCI) has issued a show cause notice to Air India, seeking clarification on why its proposed merger with Vistara should not be investigated over concerns about competition in the aviation sector.

Vistara and Air India, two full-service airlines, are part of the Tata Group. Singapore Airlines (SIA) holds a 49 percent stake in Vistara.

CCI has granted Air India 30 days to respond. In November 2022, the salt-to-software conglomerate announced the merger of Vistara with Air India under a deal wherein SIA shall hold a 25.1 per cent stake in Air India.

According to the terms of the deal, SIA will contribute Rs 2,000 crore for a 25% stake in the expanded share capital of Air India under the deal. Tata Sons would own the remaining 74.9 percent stake.

In April 2023, the Tata Sons and SIA together filed a merger application with the CCI stating that the proposed merger of Vistara with Air India would not alter the competitive landscape or cause any adverse impact on competition in India. It is expected that the merger deal would be sealed by March 2024.

Notably, the deal will make Air India the country’s largest international carrier and second-largest domestic carrier.

As per the competition law, the regulator can investigate into the matter before giving assent for a merger or acquisition in case there are concerns about possible anti-competitive practices in the deal.

Section 29 of the Competition Act provides the procedures for the probe of combinations. In CCI parlance, combinations refer to mergers and acquisitions.

The provision reads, “Where the Commission is of the opinion that a combination is likely to cause, or has caused an appreciable adverse effect on competition within the relevant market in India, it shall issue a notice to show cause to the parties to combination calling upon them to respond within thirty days of the receipt of the notice, as to why investigation in respect of such combination should not be conducted.”

In the event that the regulator is not satisfied with the responses, it can proceed to the second stage, whereby the parties will be asked to conduct a public presentation of the details of the proposed deal and a request for comments will be made. Besides, CCI is permitted to seek additional information from the parties before taking a final decision on the deal.