COMPETITION LAW: AN ANALYSIS OF MEHROTRA V. KINGFISHER AIRLINES

FORUM
Competition Commission of India

FACTS OF THE CASE
MP Mehrotra is the informant in this case who filed the complaint on 26 th July 2009 U/s 9 of the
Competition Act 2002. The complainant MP Mehrotra had alleged in his complaint that the Jet
Airways Ltd. and Kingfisher Airlines had entered into an exclusive agreement which gave them
a hold over more than 60% of the total Air Passengers in India thereby causing an appreciable
adverse effect on the competition. He alleged that the dominant position held by both the airlines
is undermining the ability of the other players in the market to compete in a level playing field.
He further alleged that both these airlines have entered into a cartel which is in violation of
Section 3 of the act. The Commission considered this information in its meeting dated 4.8.2009
and after considering the entire material on record and relevant facts and circumstances relating
to this matter which were brought to the notice of the. Commission in the meeting, and formed
an opinion that there exists a prima facie case and referred the matter to the Director General for
conducting investigation into the matter and to submit a report within 45 days of the receipt of
the order of the Commission.
The Director General vide his note dated 21.7.2010 informed the Commission that on receipt of
the case from the Commission, notices were sent to two respondents — Jet Airways India
Limited, and Kingfisher Airlines Ltd. on 11.8.2009, under section 36 (2) read with section 41(2)
of the Act to furnish the certain information in the office of the DG on 19.08.2009 at 12.30 PM
either in person or through an authorized representative under section 35 of the Act. In the said
notice, the opposite parties were also informed that in case the required information is not
submitted they may be liable to pay a fine as per provisions of Section 43 of the Act.

ISSUES FRAMED
1. Whether there is an Existing Alliance between the Airlines ?
The arguments from the Airlines were that there is no formal agreement between them
but only a proposed cooperation to rationalize/reduce costs and to uplift their standard of
services. They further argued that there was no intention on their part to function as a
group. Also, they further advanced that cannot be taken as a decision U/s 3 of the Act
construed. Moreover the parties also argued that the said section i.e. section 3 has
prospective nature and will only apply to those contracts which will continue to operate
after 20.05.09. Airlines in their argument further stated that the said contracts can only
be penalized if the contracts continue to operate after 20.05.09 since section 3 and 4 do
not have a retrospective effect and therefore no penalization for the same can be
implemented. However, DG argued that the agreement entered into by both the airlines
still subsists as there is no evidence to prove otherwise thereby indicating that the
strategic alliance is still preset between the abovementioned parties.
2. Whether the agreement reflects any commercial intent between the parties, resulting in a
Cartel ?
The arguments that was presented by both the parties was that there was not Cartel
agreement between the same, but in fact it was only an interline agreement for the smooth
flow of services and such agreements are standard. Jet Airways Ltd. had stated that it has
Multilateral Interline Agreements (MITA) with more that 140 International Air Transport
Association (IATA) carriers and it is a commercial practice of common parlance in the
Aviation industry. They further argued that prices of other parts of the industry are not
controlled by the airlines hence there was no cartel like behavior. The Interline Electronic
Ticketing agreement (IET) is of a technical nature and does not involve any commercial
benefits.

LAWS APPLICABLE
1. Section 2(b) “agreement”
2. Section 2(h) “enterprise”
3. Section 2(I) “person
4. Section 3- “Anti-competitive agreements”
5. Section 4- “Abuse of Dominant Position”

ANALYSIS
The complainant claimed that the opposite parties being two predominant undertakings in the
aeronautics business in India, had gone into a key collusion or game plan with respect to various
components or areas of passenger air transport services that was anticompetitive according to
section 3 of the Act and may have an appreciable adverse effect on the competition. The CCI
opined for conducting an investigation into the matter. Subsequent to scrutinizing the whole
material and proof accessible on record, the CCI on 11 August 2011 passed an order by which it
was held that exercises being performed by the opposite parties were secured inside the meaning
of ‘enterprise’ under section 2(h) and as separately they were not in a dominant position and
did not shape part of a gathering as imagined in section 4 of the Act, there was no abuse of
predominance. It was additionally held that the agreements went into between the gatherings (ie,

the Special Re-security Agreement was in truth useful to shoppers), the Interline Traffic
Agreement was normal industry practice, the Interline Electronic Ticketing game plan did not
include business benefits and a specialized MOU was again a typical practice in the aircraft
business. Hence, areas 3(3)(a), (b) and (c) were not pulled in. The CCI held that no infringement
of either section 3 or 4 was found to have been set up and the issue was shut forthwith.

CONCLUSION
The agreement which was entered between the Opposite Parties on 29th October, 2008 is
Interline Electronic Ticketing (IET) arrangement is only a technical requirement following ITA.
Both Jet and Kingfisher have such agreements with 65 – 80 airlines including Air India. This
agreement only facilitates issuance of Interline E-Ticket document and does not involve any
commercial benefits. The DG in his report has mentioned that if such kind of arrangement is not
there a passenger will end up paying more for his tickets and it will be inconvenient and tedious
for him. Quite obviously this arrangement also cannot be said to be fixing price or limiting
output or allocating the market.
The fourth agreement is a technical MOU signed by the Opposite Parties on 25th May, 2009 and
is also a common practice in airline industry. As per the submissions of the Kingfisher Airlines it
has 25 similar arrangements with various airlines including Air India. Both the parties have
claimed that it is nothing but ground handling arrangement and the purpose behind such
agreement is optimum utilization of manpower resources. Such agreements enable the airlines to
cut down their operating costs which in turn results into better fares for passengers. There is
nothing in DG report to contradict such claim made by the Opposite Parties. In this case also
clause a, b & c of section 3(3) are not attracted.

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