Competition panel dismisses cartelization insinuation against domestic airlines

Competition panel dismisses cartelization insinuation against domestic airlines

Lok Sabha secretariat had requested the Competition Commission of India to look into the alleged cartelizaton by domestic airlines

The Competiton Commission of India (CCI) has given a clean chit to India's five domestic airlines while dismissing allegations about cartelization by them.

CCI had initiated a probe into it based on a letter it received from the Lok Sabha secretariat way back in January 2014 with the request to find out f there was any evidence of cartelizaton in the domestic sectors.

CCI gave the clean chit to Jet Airways, IndiGo, SpiceJet, GoAir and the public sector national aviation company Air India on 22 February 2021. There is, however, no explanation of why it took the CCI seven years to come to this conclusion.

Sample of the data for the period April 2012 to March 2014 was analyzed before the CCI in September 2016 asked the Director General (DG) to investigate the matter against the five airlines and find out if there were any anti-competitive conduct by them.

DG analyzed four major domestic routes and found out that they had maintained some degree of stability during both peak and lean seasons during the investigation period.

The analysis of the four major routes was done to find out if the airlines were maintaining some degree of stability in their market shares in both the lean and peak seasons during the examined period. Further, whether similar cost structure of the airlines was shown to facilitate collusion on the price charged by them in contrast to differentiated cost structure, where budget airlines normally compete with full-fledged airlines (Jet Air and Air India in this case) on prices to capture the market share, were investigated.

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

Besides, the DG also analyzed airfares and the factors that determine it to detect any sign of stability or parallelism, or any possibility of communication between the airlines to fix prices.

However, its investigation failed to get any conclusive evidence about a set pattern of stability or parallelism between the airlines. On the contrary, it found out a significant variance in the market shares of the airlines. The DG had concluded that price parallelism was a natural outcome and it could not be said that it was 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," the CCI said.

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.

"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.