CCI introduces Leniency “Plus” regime in India- Will it suffice?
CCI fails to notice competition concerns in exclusivity granted to only two travel agents for travel bookings by government employees for the second time
By way of order dated 08.05.2020, the Competition Commission of India (“CCI/Commission”) has dismissed the allegations of exclusivity created by the Department of Expenditure, Ministry of Finance (“MOF”) in favour of only two travel agents in the public sector-Balmer Lawrie & Co. Ltd (“Balmer Lawrie”) and Ashok Travels and Tours (“Ashok Travels”) for booking of air tickets by all government and PSU employees throughout India .
Interestingly, it was the second time that the informant- Travel Agents Association of India (“TAAI”) had approached CCI against this exclusivity (after almost a decade) which, allegedly foreclosed the private travel agents from a substantial market for the market for government bookings . The information was against this apparent self-favouritism towards the two travel agents Balmer Lawrie and Ashok Travels, by the MOF to grave prejudice against the other private travel agents across India. In its first attempt, made in 2010 by the same Informant -TAAI, the CCI had closed the case on two primary grounds: (i) MOF was not determined to be an ‘enterprise’ under Section 2(h) of the Competition Act, 2002 (“the Act”); (ii) MOF or the government was held to be a ‘consumer’ whose choice was sacrosanct and could not be construed as anti-competitive.
TAAI’ submissions
About a decade later, TAAI once again approached the CCI pleading the Commission to analyse the allegations in the light of the evolved competition jurisprudence. Although, the allegations pertained to exactly the same conduct of MOF and the two travel agents, which was alleged to be a continuous violation of the Act, this time TAAI pleaded with arguments backed by established jurisprudence on subjects such as ‘enterprise’, ‘consumer’, ‘independent application of Section 3(1) of the Act etc. evolved in India since 2010.
It was brought to the notice of the Commission that MOF had issued an Office Memorandum on 24.03.2006 (“OM 1”) with the subject – “Guidelines on Air Travel on Official Tours-Purchase of Air Ticket from Authorised Agents” by which, it was mandated that while utilizing air transport and the services of travel agents for booking air tickets either for official tours or for even personal travels on leave etc including, while availing the Leave Travel Concessions (LTC) , all Government employees need to exclusively utilize the services of either Balmer Lawrie or Ashok Travels to the exclusion of other travel agents across the nation.
It was also stated in the information that this restriction on the government employees to only approach these two agents in the public sector for booking of air tickets was also opposed by the many government employees themselves and instances of many departments of the government and PSUs making written complaints against these two travel agents to their nodal ministry of tourism were also brought to the notice of MOF. It was emphasized that the government employees were the end consumers and that the government itself was not a “consumer” as held in the earlier order of 2010. In fact, clause 2 of the new Office Memorandum dated 19.07.2017 (“OM 2”) revealed the desire of a large number of actual consumers i.e. the Government officials/employees for relaxation of the prescribed procedure for purchase of air tickets from these two authorised agents only. It was informed that MOF rejected the choice of the actual consumers and directed the ministries and departments of the Government to continue to restrict the choice of the government employees to only Balmer Lawrie and Ashok Travels and stated that non-compliance with the extant guidelines would result in the rejection of the travel claims of the concerned employee.
TAAI pleaded that due to such arbitrary decision of MOF which mandated procurement of services of booking of air tickets only through Balmer Lawrie and Ashok Travels, the competition in the market for travel agent services for booking air tickets in India continued to be adversely affected since 2006 as it foreclosed the market for the private travel agents.
Aware that the CCI in TAAI’s first attempt, a decade ago, did not consider MOF as an “enterprise” under Section 2(h) of the Act, it was submitted that the definition of the term ‘enterprise’ has evolved with time and there are were judicial decisions , including Commission’s own orders in subsequent cases , which should be considered by the Commission for fresh assessment of the case. Reliance was placed upon several judgments of the Hon’ble Supreme Court and Hon’ble High Courts and COMPAT and CCI own orders to convince CCI that MOF was an enterprise. It was submitted that MOF is an enterprise which is undertaking economic activity in the procurement of air ticket services.
Further, it was submitted that the MOF is not the consumer, as established by the CCI in its previous decision 10 years ago, and the actual consumer was the government employee who had expressed disregard and disappointment to the MOF’s action of granting exclusivity to Balmer Lawrie and Ashok Travels. It was submitted that MOF could not be considered as a consumer as it does not avail the services or pay consideration for the same, rather it restricts the actual consumer, i.e. government employees who avail the services and pay consideration.
It was submitted that the CCI may consider the conduct of MOF under Section 3(4) and in absence of such finding, in the alternative, it may consider such conduct in violation of Section 3 (1) of the Act independently as has been the practice followed by CCI in some of the cases such as the Hiranandani Hospital Case[1].
CCI’s prima facie Analysis
In addition to the above submissions , TAAI also requested CCI for grant of additional time to produce material to prove extent of market foreclosure due to the monopsonist market power of Balmer Lawrie and Ashok Travels, in view of the ongoing nationwide lockdown due to COVID -19 pandemic . But, surprisingly, CCI felt it unnecessary to grant such request. Similarly, the request for a preliminary conference was also denied by the CCI.
As regards the submission of TAAI that MOF is an enterprise, the CCI placed reliance (surprisingly) on what was present on the website of MOF and held that it oversees the public financial management system in the Central Government and matters connected with state finances and is responsible for the implementation of the recommendations of the Finance Commission and Central Pay Commission. The Commission observed that MOF’s principal activities appear to be in realm of policy making and interface with various ministries and not commercial in nature. Accordingly, it was held that MOF could not be regarded as an ‘enterprise’ in terms of Section 2(h) of the Act especially in relation to circulars which were impugned, which is nothing but manifestation of a government policy in relation to its availing of particular services as a consumer.
With respect to the allegation of the vertical arrangement between the MOF and the two travel agents having adverse effect on competition in the relevant market under Section 3(4) of the Act , CCI observed that there did not seem to be any vertical relationship between them as MOF cannot be said to be part of the production chain in a market.
Lastly, the Commission noted that the decision of the MOF to grant exclusivity to Balmer Lawrie and Ashok Travels is an internal administrative decision of the Government to deal with a particular agency in the matter of securing air tickets and such policy decisions of the Government emanating through circulars cannot be termed as an agreement under Section 2(b) of the Act. Accordingly, the CCI held that such a decision by the MOF cannot be brought under the purview of Section 3(1) of the Act.
Comment: The Commission seems to have adopted a “form based” approach while deciding this case since the allegation that the vertical arrangement made by the Government of India in favour of only two public sector travel agents , which , (despite the opposition by the actual users of their services, the government employees ) , was going on for last 14 years and was causing appreciable adverse effect on competition under section 3(4) of the Act read with Section 3(1) of the Act or not , was not sent for investigation on perfunctory grounds . Moreover, by not allowing the Informant’s request for producing data to provide evidence of extent of market foreclosure , particularly , during the current situation of COVID-19 pandemic, the Commission seems to have apparently violated principles of fairness and natural justice, in my view.
[1] https://www.cci.gov.in/sites/default/files/392012_0.pdf
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