CCI Orders Detailed Investigation Against GMR Hyderabad International Airport Limited

On October 3, 2019, the CCI directed the DG to investigate the allegations of abuse of dominance by GMR Hyderabad International Airport Limited (‘GHIAL’), made by Air Works India (Engineering) Private Limited (‘Airworks’).[1]

GHIAL is the sole concessionaire, engaged in development, construction, operation and maintenance of Rajiv Gandhi International Airport (‘RGIA’). Airworks is engaged in the business of providing maintenance, repair and overhaul (‘MRO’) services of aircraft to airlines and general aviation. MRO services may be further bifurcated into line maintenance services and the base maintenance services. GMR Aero Technic Limited (‘GAT’) was a group entity of GHIAL, and provided MRO services similar to those of Airworks. Pursuant to execution of a license agreement, Airworks was provided some space within RGIA for setting up, operating and maintaining an airline engineering maintenance office and warehouse in exchange for a license fee, common area maintenance fee and utility charges.

In 2019, GHIAL issued a letter stating that the contract between Airworks and GHIAL will not be renewed since the space erstwhile allotted to Airworks was required by GHIAL for expansion works. Airworks repeatedly wrote to GHIAL requesting it to renew the license agreement, and then to the Ministry of Civil Aviation requesting it to intervene. Thereafter, a writ petition was also filed by Airworks before the Telangana High Court, which was unsuccessful.[2]

Airworks alleged that GHIAL did not renew its licence with the motive to support GAT in its financial hardship. More specifically, Airworks alleged denial of market access, leveraging of dominant position by GHIAL in the upstream market to indulge in exclusionary practices in the downstream market, limiting/restricting provision of services and price discrimination by imposing exorbitant fees.

The CCI assessed the information provided by Airworks and noting that the case was of denial of market access as well that of leveraging, delineated two relevant markets, i.e., the upstream ‘market for provision of access to airport facilities/premises at RGIA’ and the downstream ‘market for the provision of line maintenance services at the RGIA’, to assess the dominance of GHIAL.

The CCI observed that GHIAL was the awardee of consortium bid project of RGIA, and had the exclusive right and privilege to carry out the development, design, financing, construction, commissioning, maintenance, operation and management of RGIA for a period of 30 years (extendable by a further 30 years). This necessarily implied dominance of GHIAL in terms of providing access to the facilities/premises at RGIA to various third-party service providers who wish to provide their services at the airport.

In its prima facie assessment of abuse of dominance by GHIAL, the CCI noted that as a general principle every entity has the freedom to choose its trading partner and every refusal to deal cannot by itself be classified as violation of the Act. Accordingly, the CCI relied on available literature and case law precedents to determine whether GHIAL’s refusal to deal could amount to abuse of dominance. Based on the facts of the case, the CCI concluded that in terms of refused input being essential for the entity to compete in downstream market, elimination of competition and damages caused, GHIAL could be violating its dominant position in the relevant market. It was also seen that GAT and Airworks posed substantive competitive constraint on each other in the downstream market, and therefore, GMR had motive to exclude Airworks in favour of its group entity. After considering the evidence on record, the CCI ordered the DG to conduct detailed investigation.

[1] Case No. 30 of 2019
[2] WP (C) No.13298/ 2019

Published In:Inter Alia Special Edition- Competition Law - January 2020 [ English
Date: January 17, 2020