CCI introduces Leniency “Plus” regime in India- Will it suffice?
Vide its order dated 3rd June 2021, the Competition Commission of India (CCI) in Ms. Shikha Roy vs. Jet Airways (India) Limited and others has dismissed allegations of suspected cartelization against any of the five airlines i.e., Jet Airways, SpiceJet, Indigo, Go Airlines (India) Limited and Air India Limited.
The Information was filed by Ms Shikha Roy, a Delhi based lawyer alleging that during the period of the Jaat Agitation in the month of February 2016, domestic airlines started charging exorbitant fares, particularly, between Delhi-Chandigarh and Delhi-Amritsar routes. The informant pointed towards an emerging trend in the aviation industry of increase in air ticket prices by airlines to exploit the passengers during extraordinary conditions. The Informant alleged that simultaneous fluctuation in air tickets prices by airlines was violative of the provisions of Section 3 (3) of the Competition Act,2002 (the Act).
The CCI contemplating the possibility of algorithmic collusion with or without the need of human intervention or coordination between competitors., believed that there exists a prima facie case and directed the DG to cause an investigation into the matter with regard to alleged cartelization by the airline companies in contravention of the provisions of Section 3(3) of the Act.
The DG in its investigation report, however, concluded that no contravention of Section 3(3) read with Section 3(1) of the Act was found against Spice Jet, Air India, Go Air and Indigo during the period of Jaat Agitation, i.e. between 18th to 23rd February, 2016. Jet Airways was excluded from the purview of the investigation due to grounding of Jet Airways, and initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code ,2016 (IBC) and the declaration of moratorium under Section 14 of the IBC by the National Company Law Tribunal (NCLT) .The DG found no uniformity in the total revenue, average price per ticket, peak demand being experienced by the airlines in different sectors and deployment of scheduled and additional flights were found, to indicate any form of arrangement/ agreement among the airlines in the aforesaid six sectors during the period of Jaat Agitation. Further, the DG observed that the alternative modes of transport like rail and road transport were not readily available and, therefore, the demand for tickets was high. Moreover, the investigation also analysed the ticket pricing for various buckets prior to 48 hours before the departure of a flight, wherein no price parallelism or identical pricing of tickets by the airlines were registered for any of the aforesaid six sectors.
The DG also investigated whether there is a common algorithm which facilitates collusive behaviour among airlines. It was found by the DG that the algorithm of one airline is different from the algorithm of another airline due to fact that the inputs provided to software companies regarding the historical behaviour of flights are different from airline to airline. This leads to different types of custom-made algorithms suited for the needs of a particular airline. Further, the final call for inventory allocation is taken by the respective route analysts of different airlines .
Commission’s Observation
The CCI noted that existence of an ‘agreement’ is sine qua non before ascertaining whether the same is anti-competitive or not in terms of the scheme of Section 3. Thus, establishment of ‘agreement’ would require some explicit or tacit arrangement amongst the parties to identify a concert between them. This may include exchange of information in the form of communications/ e-mails or in any other form of communication amongst the competitors, whether – explicit or tacit, oral or in writing, formal or informal including through parallel conduct which cannot be otherwise explained etc. However, in the instant case, no such evidence or e-mails were found which could show any exchange of information among the airlines establishing any form of collusion during or after the period of Jaat Agitation. The CCI also observed that the investigation did not reveal any price parallelism or identical pricing of tickets by the airlines for any of the six sectors identified.
Regarding the usage of common algorithms in booking the air tickets the CCI noted that as per the investigation, the algorithms used by the airlines are different from each other as the inputs for the same is provided by the airlines itself, to the software developers, regarding the historical behaviour of flights which vary across airlines. For instance, it was found that Air India uses PROS software whereas RADIX is used by Go Air during the period of Jaat Agitation. Further, both Spice Jet and Indigo use different versions of Navitaire software. This leads to different types of custom-made algorithms suited for the needs of a particular airline. Moreover, the final call for inventory allocation is taken by the respective route analysts of different airlines. CCI also noted that airlines operated additional flights during the period of Jaat Agitation pursuant to an official directive issued by DGCA to all the airlines for reducing congestion of traffic and for bailing out the stranded passengers in the affected areas.
Thus , the CCI finding no evidence on record to establish cartel amongst the airlines during the period of Jaat Agitation, i.e. 18th to 23rd February 2016 found no reason to differ with the findings recorded by the DG and decided to close the case .
Comments – This order assumes some importance because it is perhaps the first time that the CCI has acknowledged the possibility of collusion by widespread use of algorithms without any formal agreement or human interaction. However, in the present case, due to lack of evidence of any such algorithm coordination, CCI had no option but to close the matter. However, with the increasing use algorithms in several sectors, it will be interesting to see how CCI deals with such matters in future.
# AirIndia # Indigo #GoAir #SpiceJet #AI #Algorithms #cartel
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