CCI Dismisses Allegations of Cartelization and Abuse of Dominance against International Air Transport Association and International Air Transport Association (India) Pvt. Ltd.

On March 31, 2021, CCI dismissed allegations of cartelization and abuse of dominance against the IATA and International Air Transport Association (India) Pvt. Ltd. (‘IATA India’). [1]

The informant, the national association of air cargo agents in India, alleged that IATA India unilaterally assumed to itself the regulatory power for registering, accrediting and regulating the engagement of cargo agents by the airlines in India and thereby, ran the licensing system for the IATA registered cargo agents by enforcing many financial terms and conditions on cargo agents in India who are members of the Informant. The informant further alleged that upon an increase in price of aviation fuel, IATA deliberately mandated the cargo agents to collect the increased or extra prices under the head of ‘surcharge’ from the consumers causing losses of commission to the cargo agents. Additionally, the unilateral introduction of Cargo Accounts Settlement System (‘CASS’) (a billing and settlement system of accounts between airlines and cargo agents) by IATA and IATA India facilitating payment for freight and other dues to all airlines in India led to violation of two orders issued by the Ministry of Civil Aviation and Air India respectively prescribing a different system and rate of commission to be paid to the cargo agents. Lastly, the informant pleaded a scrutiny of the alleged conduct under provisions governing cartels under the Act.

Earlier, in this case, after the DG’s investigation, CCI passed an order dated 4 June 2015 where neither IATA nor IATA India were found to have formed a cartel. Subsequently, the case was appealed before the Competition Appellate Tribunal, which remanded the matter on procedural grounds and directed the DG to re-investigate whether IATA and IATA India’s conduct had also amounted to an abuse of dominant position.

On the preliminary objection of IATA and IATA India that they should not be considered an ‘enterprise’ under the Act, CCI noted that IATA reports income under three heads- (i) sales of products and services, (ii) interest income and (iii) share of profit in a joint venture. It also derived income from its member airlines under the Billing and Settlement Plan. Further, IATA India’s revenue comprised reimbursement of expenses on activities performed on behalf of IATA and interest accrued on the surplus funds invested by IATA. Accordingly, CCI held IATA and IATA India to be enterprises because (i) some of the services provided by them were based on payment of fees; and (ii) they perform economic activities.

While delineating the appropriate relevant market, CCI noted that relevant market should comprise all services available to air cargo agents for settling their bills or invoices by the airlines for air cargo and accordingly, delineated the relevant market as ‘the market for account settlement services in respect of air cargo segment in India’.

In its assessment of IATA’s dominance, CCI noted that during the relevant period of investigation i.e., 2009-2010 to 2013-2014, no airline used CASS. Therefore, IATA’s market share was nil. After CASS was adopted in 2013-2014, only 7 out of 76 airlines used CASS. Out of those 7 airlines, some continued to use their account settlement services. Even during subsequent years, the share of airlines using CASS was less than 22%. Further, CASS was not mandatory but an option for air cargo agents. Accordingly, IATA and IATA India were not found to be dominant in the relevant market. In the absence of IATA’s dominance, CCI did not examine any abuse of dominance by IATA.

With respect to the Informant’s allegations on reinvestigating a cartel infringement under Section 3, CCI dismissed the same noting that (i) the Competition Appellate Tribunal had set aside the earlier CCI order in this case on the ground that a Section 4 violation of abuse of dominance was not dealt with by the DG; (ii) no fresh evidence was put forward by the Informant and the DG was correct in adopting its first investigation report of 2014 (which had held that IATA did not violate Section 3 of the Act).

Accordingly, CCI closed the case under Section 26(6) of the Act.

 

[1] Case No. 79 of 2020, Order dated March 31, 2021

Published In:Inter Alia Special Edition - Competition Law - May 2021 [ English
Date: May 31, 2021