Competitors or cartel?

The teaming up of Kingfisher and Jet was the outcome of the extremely difficult times the Indian aviation industry is passing through. But, it raises fears of a monopoly. Has the deal created a cartel that will leave passengers in the lurch? If so, which regulatory body is entitled to look into all the aspects of the deal? We try to answer these questions.

Does the Kingfisher-Jet deal have anti-competitive elements?
It cannot be ruled out, since it means fewer options for the public and chances of fares being marked up. Indeed, such airline alliances and mergers have been closely examined by competition authorities globally precisely on these grounds.

Certain elements of the deal may come under regulatory scrutiny. For one, route rationalisation— one of the lynchpins of the alliance agreement—could directly impact competition on routes where both airlines have a significant presence now. The arrangement gives the partners a combined share of over 60 per cent of domestic civil aviation. However, what, perhaps, works in favour of the alliance is the tumultuous phase the aviation industry is passing through with all the airlines bleeding.

Who will probe the arrangement between the two airlines?
At present, the Monopolies & Restrictive Trade Practices Commission (MRTPC) is examining the deal. In India, if an alliance is a joint venture or even an agreement, it can be examined postfacto by MRTPC via its investigating arm, the Director-General of Investigation & Registration (DGIR). The MRTPC has told DGIR to investigate the pact and find out whether it will lead to a monopoly in the aviation industry.

DGIR has to submit its report within 60 days, examining whether the alliance can result in a monopoly or a restrictive business practice. It will also sniff out hints of cartelisation.

The MRTPC is governed by India’s first anti-competitive legislation, the Monopolies & Restrictive Trade Practices Act of 1969. The MRTP Act is still the extant competition law in India, as the Competition Act 2002 has not yet been fully implemented.

What is the role of the Competition Commission of India (CCI)?
In the 1990s, the changing business dynamics globally forced the Union government to take a close look at the MRTP Act. In October 1999, the Raghavan Committee on Competition Policy and Law was appointed to chalk out a blueprint for a modern competition law. Acting on its report,the Government framed the Competition Act, 2002, as the successor to the MRTP Act. Under the Competition Act, the Competition Commission of India is the nodal body for discouraging practices that have an adverse effect on competition, protecting consumers, and ensuring freedom of trade carried on by other participants in India.

But, although CCI was established in October 2003, it could not become functional because of a petition before the Supreme Court challenging some provisions of the Competition Act. The apex court has now disposed off the petition, paving the way for the formal notification of the Act.

What are the powers of CCI?
At present, CCI is a virtual tiger, toothless to boot. First, its powers have not been notified. Secondly, the commission does not have any members. The Justice Altamas Kabir Panel set up by the government to recommend a Chairperson and members of the reworked commission has given its report, and it is now up to the government to operationalise CCI.

It will have a Chairman, and two or a maximum of five members who will be appointed by the Union government. The CCI will not merely be a law enforcement agency, but will be actively involved in the formulation of economic policies.

It will also advise the government on competition policy, take suitable measures for the promotion of competition advocacy and create awareness and impart training on competition issues.

The commission is expected to safeguard the interests of consumers against the misuse of market dominance by large companies. Last year, Parliament passed the Competition (Amendment) Bill, 2007, which clearly lays down that the commission will act as an expert body to prevent and regulate anti-competitive practices, while the judicial functions will be undertaken by a proposed Competition Appellate Tribunal.

—Rishi Joshi