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August 09 2018
By way of a 7 March 2018 order,(1) the Competition Commission of India (CCI) has imposed a cumulative penalty of approximately Rs540 million on Jet Airways (India) Ltd, InterGlobe Aviation Limited (IndiGo Airlines) and SpiceJet Limited for fixing fuel surcharge (FSC) rates for cargo transport.
In a previous 17 November 2015 order in the same case and over the same allegation, the CCI had imposed a cumulative penalty of approximately Rs2.6 billion on the airlines.
However, on appeal, the Competition Appellate Tribunal issued a common order dated 18 April 2016 which overturned the CCI's decision and remanded the matter back for reconsideration on the technical grounds that the CCI, while disagreeing with the director general's report, had failed to notify the parties or allow them to file their replies and objections.
Subsequently, the CCI reconsidered the director general's report and issued an order on 8 February 2017 directing the airlines to give reasons as to why they should not be held in contravention of Section 3(1), read with Section 3(3)(a), of the act.
The crux of the allegations was that the airlines had conspired to introduce an FSC with effect from 15 May 2008 for the transport of cargo between 2008 and 2013. It was further alleged that:
It was alleged that even when fuel prices declined substantially, the airlines – acting in concert – had uniformly increased the FSC.
The CCI observed that in 2008, Jet Airways, Indigo Airlines and SpiceJet had implemented the FSC on the same date and at the uniform rate of Rs5 per kilogram (kg). Further, between April and June 2011, the airlines had increased the FSC rate by the same amount (ie, Rs9 per kg). It was also noted that Indigo and SpiceJet had effected the increased FSC on the very same day. Likewise, in June 2012 and September 2012, there were only a few days between the implementation of the revised FSC. Again in November 2012, it was noted that Jet Airways and Indigo had increased the FSC on the very same day.
The CCI reasoned that the increase in the FSC on the same or nearly the same day indicated that the airlines had an understanding. As the fixing of the FSC had indirectly determined the rates of air cargo transport, the parties were held to have violated Section 3(3)(a) of the act. However, in a departure from its previous order, the CCI imposed a penalty on only the relevant turnover, which was considered as the revenue generated from air cargo transport services.(2)
For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4249 2525) or email (email@example.com). The Vaish Associates website can be accessed at www.vaishlaw.com.
(1) CCI decision dated 7 March 2018; for the full text, please see the CCI's website.
(2) For further details please see http://competitionlawyer.in/861-2/.
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