The Competition Commission of India has slapped fines on three Indian airlines for colluding in a fuel surcharge cartel. The competition watchdog has found that the three carriers colluded in fixing and revising fuel surcharge rates (FSC) on cargo flights.
The CCI has slapped penalties of Rs 39.81 crore, Rs 9.45 crore and Rs 5.10 crore upon InterGlobe Aviation Limited (IndiGo) , Jet Airways (India) Ltd, and SpiceJet Ltd respectively. The penalties were imposed for “concerted action in fixing and revising fuel surcharge — a component of freight charges”. The CCI passed the final order on the information provided by Express Industry Council of India against the three airlines as Air India Ltd and Go Airlines Ltd alleged cartelisation.
The CCI noted in its order that the “Airlines acted in a concerted manner in fixing and revising the FSC rates and thereby contravened the provisions of Section 3 of the Act which prohibits anti-competitive agreements including cartels.” The CCI also passed a cease and desist order against the airlines.
The penalties were determined on the basis of the principle of relevant turnover and revenue generated by the airlines from air cargo transport services only. The CCI, taking into account the financial situation of the airlines, considered that at the relevant time, FSC was only about 20-30 per cent of total freight revenue and a penalty was thus imposed as 3 per cent of the relevant turnover of the airlines during the last three years. FSC is a tool available to mitigate fuel price volatility and CCI expressly disapproved of its use or misuse as a pricing tool.
Interestingly, this is not the first such rap on these carriers. In 2015, the same three airlines were fined a combined amount of over Rs 250 crore for FSC cartelisation. The commission had said then that indulging in such anti-competitive ways in the air cargo industry undermines the country’s economic development and detriment to end-consumers.
Aviation is not the only industry struggling with cartel, though. The CCI has been dealing with cartels across multiple industry plaguing India’s business environment. In 2015, CCI chairman Ashok Chawla said, according to Bloomberg, the CCI had opened fresh probes into cartel behaviour by airlines and tyre manufactures.
Last month, CCI found in a preliminary investigation that six cement manufacturers had colluded to form a cartel. The inquiry was restricted to the north eastern India. Two years ago, CCI had fined 11 firms and the Cement Manufacturers Association over a billion dollars for similar practices.