2013 (1) TMI 532 - AT - Companies Law

Competition Act termination of commission payable to agents by the Airlines - appellant were travel agents to whom foreign airlines used to pay commission on sale of tickets - airlines discontinued commission by forming a cartel and were abusing their dominant position - Competition Commission of India rejected the argument of the informant that on a particular route, a particular airlines operating thereupon should be the relevant market - Whether foreign airlines had abused their dominant position in terminating commission payable to travel agents ? Held that - CCI has rightly observed that as long as the consumer is transported to his ultimate destination, the route taken hardly matters. The airlines which provide international flight services to the consumers of India for travel to various destinations outside India and those routes are not necessarily fixed. The CCI had rightly observed that these routes are substitutable. The selection by the consumer for a particular airline would be on the basis of various factors namely the timing, quality of service and also air fare charged by the airlines. It is not necessary that the route taken by one airlines operating would be the same in case of other Airline operating on that route. It could be via some other city. It will make no difference to the consumer so long as airline reaches the consumer to his destination. Therefore, it would be wrong to hold one route as the relevant market for that particular airlines. CCI is right in holding that the relevant market for the respondents was the international routes reaching from and to India from the foreign destinations and not a particular route of being operated by a particular airline. Director General had concluded on the basis of his investigation that it was not proved that foreign airlines hold about 90 per cent market share in the relevant market of international flying to and fro from India. The appellant was unable to give any specific statistics before the CCI or even before the Court. On the other hand, from the documents on record, it is clear that none of the nine foreign airlines has substantial market share in the relevant market of international flight services in India. Thus Director General referring to the information available to the DGCA has come to the conclusion that individually none of the opposite parties has a market share of more than 5 per cent or 6 per cent of the International traffic. Again as per the study conducted by the CAPA most of the opposite parties do not have any meaningful share in the international flying market based on the seat strength. Therefore, the CCI has committed no error in coming to the conclusion that individually speaking none of the opponent could be said to be in a dominant position. Joint decision to terminate the commission system is not accepted as individual foreign airlines cannot be clubbed together and held to be enterprise. They are all independent companies. There is no evidence of enmity of these airlines with the travelling agents nor is there any support to suggest that there was any meeting of minds among them. There was no joint decision to terminate the commission system as there is no agreement spelling out a cartel or any meetings of mind between these independently operating foreign airlines. The decision by these airlines was an independent decision and as such there could be no question of violation of section 3(3). There is no evidence that the travel agents have suffered. On the other hand in the line of world trend, the system has been substituted with Net Fare Model all over the world and not only in India.

Issues Involved:
1. Relevant Market Determination
2. Alleged Cartel Formation
3. Abuse of Dominant Position
4. Procedural Discipline in Investigation
5. Impact on Competition and Consumers

Issue-wise Detailed Analysis:

1. Relevant Market Determination:
The appellant argued that the relevant market should be based on specific routes operated by individual airlines. However, the CCI concluded that the relevant market was the international routes to and from India, not specific routes. The CCI reasoned that routes are substitutable as long as the consumer reaches the destination, making the whole of India the relevant geographic market. The Tribunal upheld this view, stating that it would be incorrect to consider a single route as the relevant market for a particular airline.

2. Alleged Cartel Formation:
The appellant claimed that the airlines had formed a cartel to stop paying commissions to travel agents. The Director General's investigation found no evidence of cartelization. It was noted that cartels are usually formed among competing enterprises, but the respondents were not competitors as they served different destinations. There was no meeting of minds to form a cartel, as decisions to reduce commissions were made independently and on different dates. The Tribunal agreed with this finding, noting the lack of evidence for any interaction or agreement among the airlines to form a cartel.

3. Abuse of Dominant Position:
The appellant alleged that the airlines, collectively holding 90% market share, were in a dominant position and abused it by imposing unfair conditions. The Director General found that none of the respondents individually held a market share exceeding 5-6% in the international traffic. The CCI upheld this finding, stating that dominance under Section 4 pertains to a single enterprise or group of enterprises, and there was no evidence of any single airline or group holding a dominant position. The Tribunal concurred, emphasizing the lack of substantial market share by any individual airline.

4. Procedural Discipline in Investigation:
The appellant contended that the investigation process lacked procedural discipline. However, the CCI and the Tribunal found that the Director General conducted an extensive investigation, considering data from credible sources like DGCA and CAPA. The Tribunal noted that the appellant failed to provide specific statistics to counter the findings of the Director General. The investigation was deemed thorough and procedurally sound.

5. Impact on Competition and Consumers:
The appellant argued that the abolition of commissions had an appreciable adverse effect on competition and harmed consumers. The Director General's report, supported by the CCI, found no evidence of increased air ticket prices or reduced competition. It was noted that the number of IATA travel agents had increased, and the transition to the Net Fare Model was in line with global trends. The Tribunal agreed, stating that consumers were not harmed, and the market remained competitive.

Conclusion:
The Tribunal dismissed the appeal, affirming the CCI's findings:
1. The relevant market was correctly determined as the international routes to and from India.
2. There was no evidence of cartel formation among the airlines.
3. None of the airlines held a dominant position in the relevant market.
4. The investigation was procedurally sound.
5. There was no adverse impact on competition or consumers.

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