Competition Commission only following laid down procedures in Air India-Vistara merger

Even as the country’s fair-trade regulator Competition Commission of India (CCI)’s notice to Air India over the ongoing process to merge Vistara with itself has caused a considerable flutter, legal experts feel that it may not have any negative bearing on the process.

“With such a large-scale merger happening, it is fairly common and natural for the CCI to take this to the next level of scrutiny,” Nitin Sarin, managing partner Sarin & Co., told Business Today.

At best, the notice may only slightly prolong the merger of the two full-service carriers (FSCs) under Tata group ownership.

“But it is fairly certain that being [run by] experienced professionals, both Air India and Vistara would have already factored this in,” added Sarin.

Media reports quoting sources had said the CCI had sought an explanation from the national flag carrier on why an investigation into its merger with Vistara should not be conducted. However, a CCI official told BT that the reports were “highly speculative”.

Air India has been given 30 days to reply to the notice.

While the regulatory process of the merger had been initiated in December 2022, the approval of the merger was filed before the CCI by Air India only in April 2023.

“In light of the same, the CCI has called upon Air India to furnish cogent and convincing reasons as to why the merger between Air India and Vistara will not hurt competition in the Indian aviation sector,” observed Suvigya Awasthy, associate partner at PSL Advocates & Solicitors.

After functioning as a state-run company for 69 years, Air India returned to the salt-to-software Tata group’s fold in January 2022. Vistara, meanwhile, is a 51:49 JV between Tata Sons and Singapore Airlines. In May, Air India and Vistara collectively had a market share of 18.4 per cent, per the aviation regulator Directorate General of Civil Aviation (DGCA) data, which is marginal compared to the 61.4 per cent share held by the market leader IndiGo.

“In view of the collective market share held by Air India and Vistara, there may not be any adverse effect on competition in India. However, as per the CCI’s approach, market share in the aviation sector may only be one of the determinative factors,” averred Awasthy.

The CCI will be ascertaining the possibility of discriminatory practices arising out of the merger and the creation of a duopoly that will ultimately not be beneficial for domestic passengers.

“The merger puts Air India in a dominant position, prompting the CCI to ask for proof that it won’t abuse its power. If Air India fails to convince the CCI, they may have to adopt guidelines regulating their behaviour,” observed partner MVAC Advocates & Consultants, Pratyush Miglani.

Air India has to, therefore, provide sound justification for the merger.

No impact on merger

Sarin & Co.’s Sarin felt that the commission would be led purely by the prima facie merits of the merger.

“The commission would already be well aware of the facts. We don’t see any of the prevailing market conditions or news reports swaying the commission. They are guided by the Competition Act and they will follow the given procedure.”

The Competition Act, 2002, was enacted by the Parliament to prevent the formation of monopolies that endanger consumer interest.

Former executive director of Air India, Jitender Bhargava, said the CCI action may have been prompted by a complaint urging it to examine the merger. “It may have been an inspired complaint. Air India and Vistara are consolidating because they are under common ownership. The case won’t last very long once the arguments are given.”

Sarin was of the view the CCI action had attracted attention due to the profile of the companies concerned.

“The only reason this is getting a lot of attention is because of the parties involved as the CCI would have followed this procedure anyway. When the stakes are so high, the commission is bound to scrutinise the merger closely,” he declared.

Air India declined to comment on the story.